Independent Debt Office Needed to Curtail Ghana’s Ballooning Public Debt

To curtail Ghana’s growing public debt stock, an economist proposes an independent debt office decoupled from the Ministry of Finance to ensure independence.

The Dean of the University of Cape Coast Business School, Prof. John Gatsi, noted that there is a Public Debt Office as provided by the Public Financial Management Act.

However, the current arrangement where the office is under the supervision of the Chief Director of the Ministry of Finance does not ensure its independence.

Prof. John Gatsi in an interview with The High Street Journal questioned why the people who decide on the government’s borrowing should be the same people managing the country’s debt.

With the current arrangement, the economist believes the office cannot give a fair assessment of the economy and halt or limit any that can be harmful to it. He noted that, with the office’s dual role in deciding on borrowing while managing the country’s debt, there is no independence to set a debt ceiling that is in the interest of the general economic health.

“That public debt office is under the supervision of the Chief Director of the Ministry. So those who come together to decide to borrow are the same people who are managing the debt office therefore they cannot analyse the economy and give the ceiling of debt that is supposed to be carried by the economy per each financial year.

“They cannot assess the debt situation, say that where we have reached is risky, and make a firm decision that the nation cannot go beyond this level of debt ceiling. They do not have that independence,” the Dean of UCC Business School argued.

It is against this background that Prof. Gatsi has called for an independent debt office that is not under the influence of the Ministry of Finance as done elsewhere like the United Kingdom.

The proposed arrangement, Prof. Gatsi is convinced, will enable the office to carry out its mandate in a manner without fear or favour that will ensure that the country’s ever-rising debt levels are controlled.

He stated that “Independence of the Debt Office should be separate from the Finance Ministry to work independently and can dictate what should be the debt ceiling, can present reports about the debt management situation, which debt is risky, which debt is less risky, the risk exposure of the economy to debt.

All those things will come from the debt management office it’s done in the UK. The UK has a separate debt management office, separate from the Minister in Charge of Finance.

Despite efforts to manage the country’s debt liabilities through the debt exchange program, Ghana’s public debt stock continues to rise. Currently, the total debt stock has climbed steadily from GH¢633.3 billion in January to GH¢761.1 billion by July.

This surge is also accompanied by an escalating debt-to-GDP ratio, which increased from 62.3% in January to 75.7% by July, signalling heightened concerns over the sustainability of the debt levels.

Considering the current situation, the Economist believes complementing efforts with an Independent Debt Office can provide the results of putting debt under control.

Source:thehighstreetjournal.com