Economic Challenges: Gov’t admits responsibility of debt unsustainability – Alfred Thompson

According to Alfred Thompson, a former deputy managing director of the National Investment Bank, the administration has admitted that the country’s debt levels are unsustainable and taken responsibility for the problems the nation is currently facing.

His response came when Big Issue on TV3 host Berla Mundi questioned him on Tuesday, December 6, about whether the government is accountable for the difficulties that led to the start of the Debt Exchange program.

If I tell you that our debt is unsustainable, that means I’ve admitted responsibility, the member of the NPP’s media team remarked.

When the debt swap scheme was introduced, Finance Minister Ken Ofori-Atta stated that the Debt Sustainability Analysis (DSA) clearly showed that Ghana’s governmental debt is unsustainable.

In the future, he warned, if nothing is done, the government could not be able to fully service its debt.

In fact, he claimed, debt servicing now consumes approximately 70% of tax revenues and more than half of all government spending, even though our total public debt stock—which includes all state-owned enterprises—exceeds 100% of our GDP. For this reason, we’re announcing the debt exchange today, which will aid in restoring our ability to pay off debt.

When introducing the Debt Exchange program, he said, “This is the road towards resetting the economy to a more stable one capable of addressing the development challenges of the country.”

The causes are pretty obvious. The Covid-19 pandemic, rising food and energy costs globally, the Russia-Ukraine war, and rising crude oil and energy prices all had a negative impact on Ghana’s macroeconomy, with financial sector repercussions. A spike in inflation, a significant loss in the value of the currency, and pressure on budget finance were all brought on by a confluence of unfavorable external shocks that have set Ghana’s public debt on an unsustainable trajectory.

He noted that in order to handle the growing economic crisis, the government has asked the IMF for financial assistance.

“We anticipate quickly coming to a Staff-Level Agreement on an IMF program designed to reestablish macroeconomic stability and safeguard the most vulnerable.

The Finance Minister emphasized, “To this end, as a Government, we are resolved to execute extensive structural and fiscal reforms to restore fiscal and debt sustainability and boost growth.

Source: Ekow Coffie