Former Finance Minister Warns of Impending Debt Crisis for Next Government

Former Finance Minister Seth Terkper has sounded an alarm over the heavy debt burden that awaits the next government in 2024.

Speaking at a recent media briefing on Ghana’s International Monetary Fund (IMF) programme and debt restructuring, Terkper expressed concerns about the depletion of the nation's financial reserves and buffers, which are crucial for economic stability.

"The next administration will be saddled with a significant debt burden," Terkper stated.

"Our reserves and financial buffers, which provide essential leverage for economic management, have been nearly exhausted. This situation has been exacerbated by our reliance on the Primary Balance, which, given the IMF's data, will only lead to complacency again."

Terkper highlighted several critical issues that the current fiscal framework fails to address adequately.

He pointed out that the criteria based on non-interest expenditure exclude vital components of Ghana’s economic challenges, such as interest payments, arrears, and amortization.

"Using the Primary Balance as a measure of fiscal health excludes critical elements like interest payments, arrears, and debt repayments," Terkper explained. "For example, arrears, including those in the energy and banking sectors, were estimated to be GHC 53 billion in 2021. A portion of this has been added to the public debt, yet it is not reflected in the fiscal framework's 'financing' section."

Terkper also warned against premature jubilation over perceived economic progress, noting that it is primarily based on the sacrifices of domestic and external lenders who have suffered and will continue to suffer haircuts.

"There is no need to be jubilant," Terkper cautioned. "The view that we have made progress is premised on the sacrifices and largesse of domestic and external lenders. Our legacy may not make us third-time lucky. After HIPC (forgiveness), we should not have defaulted again. We should have continued on the PRMA path, managing crises with significant inflows from our oilfields and the recent IMF tranches and donor support."

As the next election approaches, Terkper's warnings serve as a stark reminder of the economic challenges that lie ahead and the critical need for prudent fiscal management and robust economic policies.

Ghana’s primary fiscal balance improved by over 4 per cent of GDP last year (IMF).