Build up sinking fund to ensure sufficient repayment of restructured debts – ISSER
The Institute of Statistical, Social and Economic Research (ISSER) has emphasized the importance of reinforcing Ghana’s Sinking Fund to adequately manage the repayment of restructured domestic and international debts.
This recommendation comes from ISSER’s 2024 Mid-Year Budget Review, titled “A Critical Assessment of the 2024 Mid-Year Budget by ISSER.”
The review highlights the alarming increase in Ghana’s debt stock.
By the end of June 2024, the provisional total central government debt stood at GH¢742.0 billion (US$50.9 billion), equivalent to 70.6 per cent of GDP, up from GH¢608.4 billion at the end of December 2023.
This increase of 22.0 per cent is attributed mainly to continued exchange rate depreciation since 2022.
The debt comprises GH¢452.0 billion in external debt and GH¢290.0 billion in domestic debt, representing 60.9 per cent and 39.1 per cent of the total debt stock, respectively.
To address this growing debt burden, ISSER recommends several fiscal measures, with a particular focus on building up the existing Sinking Fund.
The review states, “Build up the existing Sinking Fund to ensure sufficient for repaying restructured domestic and international debts when they fall due.”
This measure is aimed at ensuring that the government has adequate resources to meet its debt obligations and avoid default.
Additionally, ISSER underscores the need for the government to support banks and other private-sector corporate institutions adversely affected by the Domestic Debt Exchange Programme (DDEP).
“The government should fulfil its promise to support banks and other private sector corporate institutions adversely affected by the DDEP to minimize its costs,” the review advises.
ISSER also recommends engaging with bilateral and multilateral institutions to access cheaper funds, reducing reliance on expensive capital market funds.
The review suggests establishing guidelines to clearly state the optimal proportions or ceiling on each type of debt.
“The government should engage with bilateral and multilateral institutions to access cheaper funds while reducing reliance on expensive capital market funds. Guidelines should be established to clearly state the optimal proportions or ceiling on each type of debt,” the review states.
Moreover, ISSER calls for a review of the fiscal responsibility law to include legislation of a debt ceiling to ensure deficits and debt are contained within sustainable thresholds.
“Review the fiscal responsibility law to include legislation of a debt ceiling to ensure deficits and debt are contained within sustainable thresholds,” the review recommends.
These recommendations aim to enhance Ghana’s fiscal discipline and ensure the country’s debt remains within manageable limits.
By building up the Sinking Fund and implementing these fiscal measures, ISSER believes Ghana can improve its financial stability and maintain investor confidence.