The Institute of Economic Affairs (IEA) has warned the Ghanaian government that the current rate at which it is borrowing could lead to a total collapse of the national economy. The IEA is Ghana’s Public Policy Institute with the aim of promoting good governance, democracy and a free and fair market economy for sustainable economic and human development. A statement from the institute said Ghana’s national debt is rising at an unprecedented rate. That the statement said is a signal that the country’s economy would collapse if emergency measures are not implemented in the short term.
It predicted that Ghana’s national debt could rise to about 70% to Gross Domestic Product (GDP) by 2016 and by 100% by 2020. Ghana’s current national debt to GDP ratio stands at 65%. ``Our national debt will grow to about 70% of GDP by 2016 and close to 100% by 2020, returning our nation to where it was some thirty years ago, at the brink of financial collapse’’, the report said. Ghana’s economy came to a stand-still in the early 1980s and the then military government had to seek help from the International Monetary Fund (IMF).The report blamed politicians for mismanaging the economy. It said when the IMF intervene in the 1980s, Ghana’s economy came back on track but politicians who took over thereafter destroyed everything the IMF had built for the country. ``With the economy now stabilized and the mission accomplished, the IMF passed the baton to our political leaders to carry on with the race. We had been given a new lease of life and it was our responsibility to manage our fiscal affairs prudently and with the utmost care’’. ``Not long after the departure of the IMF, our political leadership squandered the opportunity created for economic growth and went back to their old culture’’, the report continued.
The IEA proposed in the report that Ghana should have a non-partisan law that forbids any government from borrowing excessively. ``Under the circumstances, the question that faces us as citizens is: how do we inculcate the culture of financial discipline among our elected leaders knowing very well that their inability to manage the country's fiscal affairs has been the bane of our problems and the cause of our poverty and underdevelopment? The IEA proposes that Ghanaians should require the adoption of fiscal policy rules with ceilings on annual fiscal deficits’’, the report added.
This damaging report comes as Ghana is preparing to agree a deal with the IMF. This makes it the fourth time in 30 years the IMF is intervening in the Ghanaian economy. Last year, Ghana’s currency performed poorly against the major trading currencies. It was the worst performing currency in Africa. Inflation rose to an unprecedented level, compelling the government to write to the IMF for bailout. The IMF has said that it would soon complete the documentation procedure need for the takeover of the Ghanaian economy from the government.