You are responsible for your debt – IMF

The International Monetary Fund (IMF) has stated emphatically that Ghanaians are collectively responsible for the country’s growing debt.

The Fund said it can only advise and provide support within its programme with Ghana but the country must take responsibility for its debt.

“Ultimately, Ghana is responsible for the management of its debt. While we can advise and support by creating space for more borrowing within the context of the Extended Credit Facility (ECF), at the end of the day, it is Ghanaians that will approve the borrowing or not,” an IMF spokesperson told this paper in an email communication.

The Fund further cautioned that Ghana will have to be very selective with regard to new non-concessional borrowing, “as such borrowing can escalate debt vulnerabilities.”

The Bretton Woods Institution recently approved Ghana’s request for an increase in the ceiling on non-concessional borrowing to finance development projects, much to the surprise of analysts who are themselves getting increasingly worried over the country’s escalating debt.

The spokesperson explained that IMF’s policies are structured in such a way that they can accommodate some non-concessional borrowing if it is intended to finance critical and profitable projects for which concessional financing is unavailable.

Further, the fund allows non-concessional borrowing if it is aimed at improving the country’s debt profile, say, by paying off expensive short-term debt and by lengthening debt maturities, such borrowing can also be allowed under the programme, the spokesperson pointed out.

He, however, cautioned that in spite of the leeway given for more non-concessional borrowing, “it is important to remember that Ghana is still at high risk of debt distress.”

Ghana’s public debt, now GH¢94 billion has elicited calls from Parliamentarians, Think Tanks and other economic experts including the World Bank and the IMF itself for government to reduce its appetite for borrowing.

“For countries at a high risk of debt distress like Ghana, reducing the debt burden and associated vulnerabilities is a priority,” the IMF spokesperson stated.

Some experts fear the ballooning debt could force the Bretton Woods Institution to set limits on further government borrowing.

According to them, Ghana’s debt was reaching unsustainable levels and has to be checked.

“One has to be concerned because the debt stock presents challenges in our efforts to stabilize the debt to GDP ratio,” said Senior Economist and Lecturer with the University of Ghana Business School, Dr Godfred Bokpin.

Ghana’s debt level was indeed one of the main factors that determined investor response to last week’s Eurobond roadshow which was to precede the issuing of Ghana’s fourth bond on the international securities market.

Prior to the commencement of the roadshow, some ratings agencies cautioned Ghana over its debt level in relation to the Eurobond Issue, pointing out that investors were likely to be keen on the ability of the country to repay its debts on time as well as the likelihood of frivolous expenditure in run-up to election 2016.