Suspension of external debts: Ghana should learn lessons from excessive borrowings – Prof. Peter Quartey

Economist, Prof. Peter Quartey says government’s suspension of external debt payments presents an opportunity for managers of the economy to reflect on the country’s excessive borrowings. 

“I think we should learn and take lessons from this; that we shouldn’t continue borrowing as if there is no tomorrow. Anytime we hit the 50 to 60 percent threshold to GDP ratio, we need to pull a break. We need a buffer so that, anytime there is a shock, you can still borrow and cushion yourself and get out of the mess”, he said on Eyewitness News.

Government has put on hold, all payments of external debts pending an orderly restructuring of the affected obligations.

In a statement, the Finance Ministry on Monday, December 19, said the suspension will include the payments on the country’s Eurobonds; commercial term loans; and most of the country’s bilateral debt.

The suspension, according to the statement will, however, not affect the payments of Ghana’s multilateral debt, new debts (whether multilateral or otherwise) contracted after 19th December 2022 or debts related to certain short-term trade facilities.

But, Prof. Quartey, who is also the Director of the Institute of Statistical, Social and Economic Research (ISSER), feels the current situation should be a learning platform given its rippling effect on currency depreciation and inflation.

“We borrow to the brim and when we were hit with this triple shock, there was no way out. That is why we saw our currency tumbling and inflation escalating. Lessons have to be learnt from this.”

He further advises that, the suspension of all external debt service payments if handled properly, however, could boost Ghana’s creditworthiness on the international market.

“For the International market, it will take some time for Ghana to get the credibility it was prior to COVID-19. If we are able to get to the IMF program and do the right things – manage our debt threshold and  not overspend like we have done, we will be able to get more funds going forward.”