Challenging as Ghana’s economic difficulties are, the country is not near becoming HIPC all over again, Razia Khan, Managing Director, Head, Africa Macro Research, Standard Chartered Bank, declared here on Thursday.
She said the West African country however needed to adhere strictly to the conditions and measures in the International Monetary Fund (IMF) country program to arrest the fiscal deficit that has plagued its economy.
Khan said these during the 2015 Standard Chartered Bank African Summit under the theme: “Africa is Rising”.
Delivering her paper on the performance and prospects of the economies of Africa, the Stanchart official said Ghana had some things to be celebrated in the sub-region.
“For example, in the Millennium Development Goals (MDGs), Ghana has done far better than some of its peers and better results to show for some of the spending it embarked upon than other peers in the region,” she stated.
She however said the attempt by the country to embark on economic transformation would be short-circuited by the rising debt and deficits in the running of the budget.
The economist diagnosed the cause of Ghana’s rising debts and deficits as the resort to domestic borrowing which is problematic because much of the domestic borrowing is short-term.
“These Treasury Bills have to be rolled over frequently and the kind of interests to be paid on such debts is even higher than the growth of Gross Domestic Product,” Khan noted.
She added; “If the interest rate you pay on your borrowing is higher than your GDP growth rate, then there is no way you can reduce deficit.”
“The IMF deal gives Ghana the opportunity to make the difference,” she noted, adding that Ghana was not yet in debt crisis.
She said efforts at consolidating fiscal balance needed to be intensified else the country risked worsening the IMF deal since depreciation would worsen.
The Extended Credit Facility (ECF) granted by the IMF Executive Board for Ghana on April 1 expects the country to achieve fiscal and structural balances in the economy as well as achieve budget credibility.
“Ghana is making progress, and is in the right direction but there is no easy way out for the country out of the fiscal challenges,” Khan cautioned, pointing out that there was no single country which achieved economic transformation with a high fiscal deficit. Enditem
Source: Xinhua
