The Institute of Economic Affairs (IEA) has raised concern about governments repeating past mistakes that have rendered the Ghanaian economy unstable throughout the years.
According to the economic think tank, the country’s financial indiscipline has resulted in significant budget deficits and, as a result, high inflation and currency instability, forcing innocent Ghanaians and businesses to pay for the mismanagement.
In a paper on “Institutionalising Fiscal Discipline and Macroeconomic Stability for Sustained Growth in Ghana: The Constitutional Pathway”, Lead Researcher, Dr. John Kwakye said Ghana has a long history of fiscal indiscipline and this is evident in its fiscal deficits being almost consistently higher than those of its peers in Africa.
“Our deficits tend to escalate in election years when we elevate election-related spending. Then we borrow to finance the deficits and cause our public debt to escalate to unsustainable levels. We have been in that situation numerous times. Our debt reached the first crisis situation around 2004, when it ballooned to over 100% of GDP”.
“We had to seek relief under the HIPC Initiative, which caused the debt-to-GDP ratio to drop to a sustainable level of 26% in 2006. Thereafter, we returned to our culture of fiscal indiscipline, which caused the debt to rise yet again. And today, the debt-to-GDP ratio is back to an unsustainable level of over 100%”, he explained.
Dr. Kwakye expressed worry again that the current and past government have not learnt from their past mistakes after almost 20 years of HIPC.
“We are back to where we were almost twenty years ago! We do not seem to learn from our mistakes! We hear the two leading parties blaming each other about who has increased the debt the most. It is not about who has decreased the debt the most, as far as the only direction for the debt is upwards!”
He added that the country must do everything possible to safeguard or institutionalize fiscal discipline under the constitution, else it will always record macroeconomic instability.