Professor Peter Quartey, Director of the Institute of Statistical, Social and Economic Research (ISSER), has advised the Ghanaian government to exercise caution before re-entering the international capital markets following the nation's recent debt restructuring. He emphasized that relying heavily on external debt, especially through Eurobonds, is unsustainable for long-term economic growth.
During his inaugural lecture at the Ghana Academy of Arts and Sciences, titled "Debt, Investment, and Growth in Ghana: Did We Borrow to Consume?", Professor Quartey highlighted Ghana's fiscal position. He noted that the country's deficit financing was 3.2% of GDP in 2023, with projections indicating a rise to 5.2% in 2024. He underscored the need for effective debt management and sustainable financing strategies to bolster economic growth while minimizing financial risks.
In line with an International Monetary Fund (IMF)-supported program, Ghana recently undertook a debt restructuring exercise aimed at alleviating its financial burden and restoring macroeconomic stability. Despite these efforts, concerns about the nation's long-term debt sustainability persist. Professor Quartey urged the government to explore domestic financing options to reduce external vulnerabilities.
"I want to sound this caution. Borrow less from the capital market and at reasonable interest rates," he stated. "After the restructuring, you hear we are hoping very soon we will finish the restructuring and be able to go to the capital market. Why the rush to go to the capital market? That is where we went to and we are having these problems, and you still want to quickly finish giving people a haircut and go to the capital market. I think we should tread cautiously when it comes to borrowing, especially Eurobonds and those capital market funds. They are too expensive and unsustainable. We ought to shy away from them. Let us get more multilateral and domestic sources of funding. They are cheaper."
This perspective aligns with previous warnings about Ghana's borrowing practices. In December 2022, reports indicated that Ghana's aggressive approach to tapping Eurobond markets had raised concerns among investors, leading to a reassessment of the country's credit ratings.
Professor Quartey's cautionary advice comes at a critical time as Ghana seeks to balance its development needs with sustainable debt levels. His emphasis on prudent borrowing and exploring more affordable financing options reflects a broader call for fiscal responsibility and strategic financial planning.