Despite heavy borrowing, Ghana fails to achieve expected investment and growth, with funds largely used for salaries and interest payments. Prof. Quartey calls for a 60% debt ceiling and a framework to connect loans to productive investments. He emphasizes the need for rigorous project appraisal and proper allocation of resources to enhance economic outcomes.
Professor Peter Quartey, an economist and Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, highlighted that Ghana’s significant borrowing over the last two decades has not translated into expected investment or economic growth. He explained that borrowed funds have primarily been allocated to wages and interest repayments rather than to productive sectors, which are essential for stimulating growth.
During his inaugural lecture at the Ghana Academy of Arts and Sciences, Prof. Quartey advocated for urgent legislation for a 60% debt ceiling and the creation of a framework connecting loans to investments, aiming to ensure that borrowing leads to tangible returns. He asserted, “Empirical analysis shows that public investment has limited impact on long-term growth due to weak or circumvented project appraisal selection and management.”
He pointed out the increase in Ghana’s debt from 42.9% in 2013 to 82.9% in 2023. Although it is projected to decrease to 61.8% by the end of 2024 due to debt restructuring, the capital spending has dropped significantly—from 6.9% of GDP in 2010 to 2.4% in 2023, slightly improving to 2.5% in 2024. Capital expenditure, essential for infrastructure development, is crucial for long-term economic benefits.
Prof. Quartey linked the disparity between Ghana’s high debt and low investment growth to ineffective project selection, appraisal, and weak monitoring frameworks. He criticized historical government debt-driven programs, often yielding little in growth or investment returns.
He referred to the Pwalugu multi-purpose Dam project, which, despite receiving US$12 million, has yet to commence after six years. He concluded that there is a need for rigorous evaluation processes and better project management to ensure efficiency in the use of funds and timely completion of projects.
He urged the government to carefully select capital projects based on a national development plan rather than partisan interests. This strategic approach is necessary to align medium-term goals with effective investment outcomes, ensuring that borrowed resources produce tangible improvements in the economy.
In summary, Professor Quartey’s analysis of Ghana’s borrowing practices reveals a critical gap between debt acquisition and actual economic development. His recommendations for a legislative debt ceiling and improved project evaluation frameworks outline clear steps to enhance the productivity of investments. Without focusing on effective management and strategic allocation, Ghana risks perpetuating a cycle of unproductive debt with little growth or benefit to its citizens.
Original Source: gna.org.gh
