A Ghanaian Economist in the United States of America, Dr. Sa-ad Iddrisu, is calling for a new article in the 1992 constitution that will put a limit on how much any government in power can borrow. This, he believes will curb the excessive and reckless borrowing by various governments over the past years, many of which have ended up as consumption expenditures with nothing to show up for it.
Dr. Iddrisu made this assertion during a zoom lecture on the state of the Ghanaian economy. According to him, the Ghanaian economy is broke and currently facing huge debts with a high debt to GDP ratio.
“Over the years, various governments have borrowed funds through both domestic and external sources for development. However, much of what is borrowed ends up in consumption expenditures to the neglect of capital expenditures.
Thus, there hasn’t been much capital expenditures taking place in the country, which will be able to yield returns and back these loan interests and principals. Therefore, we end up finding ourselves in constant debts as a country”, he said.
He also said that “any government that comes into power in 2025, will be confronted with loan interest payments from past governments thereby leaving such government with little to no funds for developmental projects. The end result will be continues borrowing upon borrowing”.
To further explain his call for a limit to be placed on borrowing, Dr. Iddrisu made a debt comparison. “According to the Bank of Ghana Monetary Policy Report for January 2022 and January 2017, total stock of Ghana’s public debts stood at GH¢344.6 billion at November 2021 and GH¢127.3 billion as at November 2016, respectively.
That is a dollar equivalent of $58.2 billion as at November 2021 and $30.1 billion as at November 2016, using past and present exchange rates. This means that the current government under Nana Addo in 6 years has increased our public debt by 93.4%, using the dollar equivalent for comparison.
That is to say, “Nana Addo government in six years has borrowed almost doubled of what all governments borrowed since independence in dollars. Yet, there hasn’t been much capital expenditures that can generate much returns to pay off all these loan interests and principals. These huge debts will be a milestone around the neck of generation upon generation”, he said.
Dr. Iddrisu stated that scenarios of this nature puts a burden of debt on present and future generations. Thus, amending the constitution to put a limit on how much any government can borrow whilst in power, will go a long way to curb reckless and excessive borrowings.
To this, Dr. Iddrisu suggested amending the constitution to limit successive governments to not borrow more than 50% of current total debts as a nation, in dollar equivalent, and also to use 80% of borrowed funds for capital expenditures. This will protect future generations from the sins of current leaders.