The First Deputy Governor of the Bank of Ghana (BoG), Dr Maxwell Opoku-Afari has urged the country to turn the concerns around the rising public debt into an opportunity.
He said the rising public debt was not just a concern in Ghana but the sub Saharan region as a whole, as countries who had low risks of debt distress were now beginning to move into moderate and high risks.
He therefore urged the country to focus on how to turn this concern into an opportunity.
Speaking at the launch of the regional economic outlook report by the International Monetary Fund (IMF), he said “clearly we have to turn this rising debt into sustained broadbased growth underpinned by macro-economic stability to control the debt dynamics in our favour.”
“There is a huge infrastructural gap that has to be closed in the country so we need to use the new debt we are creating now to invest in growth analytic projects that will eventually be able to pay for themselves,” he stated.
“We need to turn the rising vulnerabilities into an opportunity,” he added.
He, however pointed out that debt financing alone could not support the agenda of closing the huge infrastructural gap in the country and the sub region, hence the need to focus on domestic revenue mobilization.
“We are preparing the financial sector and make it well positioned to be able to help in mobilizing savings as we need to both raise enough tax revenue and domestic savings to support the transformation agenda that is so much needed across the sub region,” he explained.
Leveraging e-payment system
The Second Deputy Governor called for the need to leverage on the e-payment revolution to transform and broaden the tax base.
He said the recently launched interoperability platform and yet to be launched national identifications system were clear ingredients the country could leverage to reduce the informalities in the sector.
“We can learn lessons from India who introduced an identification system that created a payment system that helped them to bring as many as 300 million people into the formal economy. It is estimated that we have about six million people in the formal sector but only about 1.5 million pay taxes and at the same time we have over 10 million mobile money subscribers who are economically active he pointed out.
“Mobile money transactions alone grew by 177 per cent between 2013 and 2017, reaching a value of US$36 billion by 2017. This clearly presents a huge opportunity to bring most of these economically active people into the formal sector and create a great opportunity for domestic revenue mobilization,” he noted.
Debt vulnerabilities in the sub region
The IMF report highlighted debt vulnerabilities which continued to build up as one the challenges and risks that was still confronting the sub Saharan region.
It said public debt continued to rise, despite the growth pickup and improved external environment, as 40 per cent low income developing countries in the region were now in debt distress or high risk of debt distress.
Looking ahead, the report indicated that debt dynamics were susceptible to fiscal slippages, subdued growth outcomes, exchange rate depreciations, and tighter financing conditions.
The median level of public debt in the region at the end of 2017 exceeded 50 per cent of GDP.
With rising debt stocks, interest payments have also been increasing, eating up a growing share of revenues in the region. — GB