Home Politics Borrowing Is Good If … -Adu Boahen

Borrowing Is Good If … -Adu Boahen

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The Deputy Finance Minister Charles Adu Boahen has said borrowing and debt could be good for Ghana as long as the money is not used to finance existing debts.

According to him, borrowing is good as long as it is used for investment.

Speaking on the Citi Breakfast Show, he stated that countries that borrow to invest in capital expenditure, which eventually generates commercial returns, benefit from the borrowing.

“It is funny how Ghanaians seem to be allergic to borrowing. As a banker I have always been of the opinion that borrowing is good, so long as it used for investment when you start borrowing to pay recurrent expenditure,” he said.

The deputy finance minister stated that if the government is to limit itself to the revenue it generates, the country will not be able to grow because the revenue generated will only be used to cover the country’s expenditure.

He also mentioned that most countries that have been able to sustain their growth run on a manageable deficit, which can be covered by the country’s cash flow.

Charles Adu Boahene explained that borrowing only becomes a problem for a country if the country’s debt starts becoming unsustainable.

“Most countries that are growing run a deficit. The question is how much? A small deficit which you can cover with your cash flow is fine, but when you start running a deficit which is 10% and yours is constantly piling up, then you run the risk of getting into a situation where you have debt unsustainability then you begin to start borrowing just to pay your debt or pay interest on your debt, then you know it is time to call in the Doctor,” he said.

The Vice President, Dr Bawumia, while speaking at the closing ceremony of the two-day National Policy Summit on Trade and Industry last year August, said Ghana would continue to borrow responsibly in order to grow Ghana’s economy.

But when Dr Bawumia and his party NPP were in opposition, they criticised the Mahama government of having a voracious appetite for foreign loans which they claimed catapulted the country’s debt stock to unsustainable levels.

In defence of the NPP government’s borrowing, the Veep last year maintained that the debt stock is rather going down due to restructuring.

“Last year the deficit was 9.4 percent of GDP that was where it ended. Thanks to the Asempa Budget it has gone back on a path of fiscal consolidation to bring back the deficit this year to 6.5 percent of GDP,” he said.

Some economists have described the NPP government’s debt management strategy within the first year of its administration as unsuccessful.

In their view, the government has not done much to address the country’s debt, which has left the country in a..

The comments follow the latest figures released by the Bank of Ghana (BoG) after its Monetary Policy Committee (MPC) meeting show that Ghana’s public debt reached 142.5 billion cedis as at December 2017, representing 69.8 percent of GDP.

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