Dr. Williams Peprah
Associate Professor of Finance at Andrews University in Michigan has advised government to significantly slow down its expenditure in order to address the liquidity challenges in the Ghanaian economy.
According to Williams Peprah, the country cannot continue along the same spending pattern as witnessed in 2020 and 2021, since such expenditure will be disastrous to the economy.
Speaking in an interview with Joy Business, Professor Peprah said if the government fails to slowdown expenditure, it might further worsen Ghana’s financing position.
Government debt has been projected to hit about 104% of Gross Domestic Product (GDP) by the end of 2022. This will put the nation into debt distress.
The International Monetary Fund gives an indication that in an emerging economy like Ghana, the moment your debt-to-GDP moves above 64%, it means you’ll face some debt burden in terms of high-risk debt distress.
“With this projection of 104%, if you put the country in the capacity of an individual it means that Ghana would be bankrupt by December ”, Professor Peprah said.
“In the discussion ongoing with the IMF, this report will give a signal as to how IMF position itself to help Ghana”, he added.
On the country’s debt, he said, 57% is external and therefore the discussion on a potential debt restructuring is for the nation to push for some debt relief from the IMF and the World Bank
“If you look at our debt composition, about 57% of our debt is external. International institutions like IMF/World Bank also hold about 23.6 %. So the discussion will be whether such institutions will also give some debt relief to Ghana”.
“Indeed, we have a lot of liquidity challenges at the moment. Government needs to slow down its expenditure. The country cannot continue along the same spending trend as 2020 and 2021”, he concluded.