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2022 Budget: IEA Calls For Bill To Cap Gov’t Borrowing

Ahead of the 2022 Budget Statement and Economic Policy presentation on November 17, the Institute of Economic Affairs (IEA), a public policy think-tank, has called for a financial prudence mechanism, limiting government borrowing.

The policy think tank has proposed a debt-ceiling in the annual Appropriations Bill to curtail the country’s increasing debt stock and guard the public purse.

“We are inclined to suggest that Parliament considers introducing a borrowing- or debt-ceiling in the annual Appropriations Bill, the IEA proposed in its expectations for the upcoming budget.

IEA explained that the bill would be in addition to the existing expenditure ceiling that was imposed by Parliament for every budget, “which more often than not is breached with impunity.”

“If the government wants to borrow beyond the initial borrowing – or debt- ceiling, it will have to come back to Parliament for approval, as prevails in the US. This suggestion is to rein-in the debt, which otherwise risks ballooning and overwhelming the budget in the form of escalating interest payments,” IEA noted.

Already, the Finance Ministry has indicated in the 2022-2025 Budget Preparation Guidelines that the total expenditure (including payments for the clearance of arrears) is projected at GH¢128.3 billion (25.8% of GDP) in 2022.

This expenditure is expected to further expand to GH₵135.6 billion (24.1% of GDP) in 2023 and GH₵157.1 billion (22.1% of GDP) in 2025.

The government explained that it was aware of the need to be at the forefront to promote the building blocks for an inclusive and sustainable recovery post Covid-19.

Hence, the focus for the 2022 budget and the medium term is to create opportunities and provide solutions towards achieving sustainable and broad-based economic growth without harming the climate or leaving families in poverty.

The approach is to catalyse the private sector in targeted areas to fast-track industrialisation, competitive import substitution, digitisation, export expansion, and decent jobs, particularly for youth.

Meanwhile, figures provided by the Bank of Ghana has indicated that Ghana’s public debt stock increased to GH₵332.4 billion after it saw an additional debt of GH₵27.8 billion in April and May 2021.

According to figures from the recent Summary of Economic and Financial Data by the Bank of Ghana (BoG), the increase has brought the debt to Gross Domestic Product (GDP) ratio to 76.6%.

Also, per the 2021 mid-year budget review, the country’s public debt stock had risen, as of the end-June 2021 stood at GHȼ334,560.4 million (US$58,041.1 million), representing 77.1% of GDP. This was up from GHȼ291.6 billion (US$50.8 billion) at the end of December 2020.

Against this background, IEA has said, it was crucial to reengineer current debt stock to reduce the service burden, remarking, “where possible, the opportunity should also be seized to negotiate discounted debt buybacks with creditors.”

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