The Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye, has called on Parliament to consider a cap on government borrowing anytime it exceeds the budget estimate for the country.
This issue became necessary as a result of the current economic crises in the country due to rising debt, inflation hikes and depreciation of the local currency.
According to Dr Kwakye, “the IEA observed that the Appropriations Act, which approved the government’s annual total spending, would ensure that borrowing implied by budget deficits would not be breached with impunity”.
Dr Kwakye further suggested that a borrowing limit should be introduced as a rule in the Fiscal Responsibility Act in addition to what it described as the “deficit rule”, which, all put together, will help to reduce the rate of borrowing in the country.
“Thus, it was necessary to tie the hands of the Finance Minister and insist that any additional borrowing by him beyond the budget estimates or the new ceiling should be subjected to the approval of Parliament just as it pertains in the United States of America”.
Dr Kwakye further explained in a press release that an Appropriations Act by Parliament would be the surest way to “rein in our debt and keep it at a sustainable level on a durable basis to avoid the debt service, which currently absorbs over 40 per cent of tax revenue, from overwhelming the budget”.
He lauded the Bank of Ghana (BoG) on the proposal to cap government borrowing to help protect the public debt and to revive the economy.
The decision of the Bank of Ghana to cap government borrowing also became necessary when the World Bank realised a report stating that Ghana’s debt-to-gross domestic product (GDP) ratio could hit 104.6 per cent by the end of the year.