The best way the government can reduce the overreliance on loans and also reduce the public sector debt is to increase domestic revenue mobilization, Director of the Institute of Social, Statistical and Economic Research (ISSER) of the University of Ghana, Professor Peter Quartey, has said.
He has therefore welcomed efforts by Ghana Revenue Authority (GRA) to used digitalization to increase domestic revenue collection.
Prof Quartey was cautiously optimistic that Ghana will be able to reduce its debt in the next two to three years owing to the measures introduced by the GRA.
He explained on the Business Focus Programme on TV3 Monday April 19 that this is due to the measures introduced by the Ghana Revenue Authority (GRA) to maximize domestic revenue mobilization.
“I believe if we are able to raise more revenue domestically then we can then we can reduce our dependence on loans,” he said while speaking on the debt situation in the country on the Business Focus on TV3 Monday April 19.
He told host Alfred Ocansey that “At the moment our revenue to GDP ratio is below the threshold. Unless we show commitment to enhance our revenue generation we will continue to be in this kind of situation.
“I have seen efforts on the part of GRA to do what I call digitization to minimize the human interface in terms of revenue generation. If we are able to sustain that and are successful then I am very sure that in the medium term, in the next two to three years, we will enhance our revenue generation and reduce our dependency on loans and our debt to GDP ratio will certainly come down.
“Debt to GDP is a combination of two factors, total debt stock and as well as gross domestic product. If we grow our GDP, the projection is that we are going to grow by 5 per cent. If we are able to do that as well as continually reduce our debt levels GDP ratio is likely to come down.
“So, I am cautiously optimistic that we might be able to reduce our debt to GDP ratio in the next two to three years.”
The 2021 budget statement presented to parliament by leader of government business Osei Kyei-Mensah-Bonsu said the total debt rose from 122billion in 2019 to 291.6billion as at the end of December 2020.
This deficit, according to the budget, includes the cost of the financial sector cleanup up.
Dr Lord Mensah, a senior lecturer at the University of Ghana Business School, has said a critical analysis of the budget statement for the 2021 fiscal year shows that Ghana’s debt situation has gone beyond the 76 per cent to record 85 per cent of Gross Domestic Product (GDP).
Speaking on the Key Points on TV3 Saturday March 27 in relation to the vetting of Finance Minister-designate Ken Ofori Atta, Dr Lord Mensah said “If you go through the interest payment that we are supposed to have , the financing gap we have created out of the budget is about 41billion and over which we are going to finance and then in the same budget it was stated that our debt stock was around 240 plus billion.
“If you put all these together and then you relate it to our GDP which is about 440plus billion , you will realize that we are heading towards about 85 per cent for more than the 76 per cent that has been put out.
“If you look at the budget we are hitting around 85 per cent. If you look at the recent statement that came from the World Bank they are projecting our debt by 2023 to be about 81 per cent of our GDP. I was not surprised.”
“If you underreport and in the end you turn around and tell them to pay something it will be difficult to explain that to them.
“So, reporting and fully reporting discourse is very important. When it comes to public service there is nothing like mandatory disclosure and then disclosure that you can hold on. For me, the more information you give out to the public the better it is for them to understand you when you are going out with your fiscal policies by introducing taxes. I think we should better in reporting.
“But I understand where the Finance Minister is coming from because , these are information that when it get out there people will be saying even our debt level is now 80 to 85 per cent but implicitly if you take the budget critically and you analyze , you will realize that the debt that we have in there as expected by end of the year is even more than 85 per cent of our GDP.”
