Renowned development economist, Senior Research Fellow at the Centre for Social Policy Studies, University of Ghana, and Founding President of Africa Policy Lens (APL), Dr George Domfe, has weighed in on the ongoing public discourse surrounding Ghana's public debt stock and fiscal policy direction.

Reacting to comments by the Minister for Finance, Dr Cassiel Ato Forson, who suggested that prudent fiscal management has directly led to a reduction in public debt, Dr Domfe clarified that while fiscal discipline is fundamental to economic stability, confusing the rate of debt accumulation with a reduction in the nominal debt stock is an economic fallacy.

Dr Domfe explained that public debt is governed by two distinct financial concepts:

Debt stock: The total outstanding principal and interest owed by the government at any given time. Fiscal deficit: The annual shortfall that occurs when government expenditure exceeds revenue, requiring new borrowing to bridge the gap.

“Prudent fiscal management, such as cutting wasteful spending, plugging revenue leakages and narrowing primary deficits, ensures that a government stops borrowing aggressively,” Dr Domfe said. “However, stopping or reducing new borrowing is not the same as shrinking the debt you already owe.”

To illustrate the misconception, Dr Domfe offered a simple analogy:

“Confusing debt accumulation with debt stock is like claiming you've lost weight simply because you've stopped adding more food to your plate. Refusing a second serving stops you from gaining additional weight, but it does not magically melt away the pounds already on the scale.”

Dr Domfe emphasised that the nominal debt stock declines through specific structural mechanisms rather than fiscal discipline alone. According to him, these include:

Debt relief and haircuts – Programmes such as HIPC or bilateral debt cancellation, where creditors write off part of the principal. Debt restructuring – Negotiating reductions in the original principal through domestic or international debt exchange programmes. Actual repayment (amortisation) – Using cash surpluses to repay maturing principal without refinancing the obligations through new borrowing.

While acknowledging that slowing debt growth through fiscal discipline is an essential prerequisite for long-term fiscal stability, Dr Domfe urged policymakers and public officials to communicate economic concepts more precisely.

“When government officials tell the public that prudent fiscal management will 'reduce debt', citizens expect the absolute national debt figures to decline. When those figures remain flat or continue to grow marginally due to interest accumulation and exchange rate fluctuations, public trust erodes,” he said.

Dr Domfe concluded that for fiscal management to translate into an actual reduction in public debt, fiscal discipline must be accompanied by sustained primary surpluses, where total government revenue exceeds non-interest expenditure, with the surplus specifically earmarked for retiring maturing principal obligations.