Former Minister of Finance Dr. Kwabena Duffuor, has issued a warning that the Domestic Debt Exchange Programme (DDEP) being implemented by the government is not a magic fix for getting the “broken economy” back on track.
He maintained that debt management was only one tool in the fiscal toolbox and that it could not be utilized to stimulate the economy unless it was coupled with a sharp decline in inflation, bank lending, and the size of the government.
“The debt management program is but one instrument in the financial toolbox. If you don’t link the debt exchange program up to a significant decline in inflation, link this up to bank lending, and link it up to a drastic reduction in the size of government, you can’t use it to spur economic recovery, he insisted.
In an interview with the Ghanaian Times yesterday in his office in Accra, Dr. Duffour claimed that the country’s problem was the excessive spending on interest payments brought on by the high amount of government borrowing.
“Because of interest payments, we spend too much on servicing debt; if we don’t take steps to ensure that the interest rate doesn’t increase again, we’ll be back,”
Dr. Duffuor, a presidential candidate for the National Democratic Congress (NDC) in the 2024 elections, stated that while debt relief would offer the nation breathing room, immediate action was still required to ensure that the economic fundamentals improved to enable economic growth.
As he stressed that “As economists, it is not like we were against the debt treatment since we saw it coming, but how the whole exercise was carried out was not correct,” he claimed that the government had made its condition worse. The investing community’s confidence has been harmed, which will have an effect on economic growth.
According to the former governor of the Bank of Ghana, if the government had not gone on the type of borrowing binge seen between 2013 and 2021 on the domestic and foreign bond market, it might have been able to escape the scenario it found itself in.
In his view, any attempt to restart the economy would have to address the country’s massive problems of high expenditure growth, poor domestic tax mobilization, and a massive debt service crisis.
Regrettably, he stated that it was difficult for people who caused the problem to contribute to the solution unless they had a high level of awareness.
He said that because those responsible for the disaster could not be trusted to fix it, it would take a new generation of people with a high level of consciousness to handle the current economic issues.
The current crop of economic managers, according to Dr. Duffour, should have learned from the fact that the country’s financial crisis was caused by the borrowing binge that was started between 2013 and 2021.
