Amend 1992 Constitution to include borrowing cap
Dr Richmond Atuahene

Building back better post IMF: Amend 1992 Constitution to include borrowing cap —Dr Richmond Atuahene

Banking Expert and Consultant, Dr Richmond Atuahene, has called for the need to amend the 1992 Constitution to include a cap on borrowing.

He noted that the main challenge of the economy had always been over borrowing and hence to sustain economic growth and build back better post the IMF programme, the country would have to introduce a cap on borrowing.

“For Ghana to build back better post-IMF we must be prepared to amend certain aspects of the 1992 constitution; especially in the area of a Debt Cap or Debt Limit. 

“For instance, setting a Debt to GDP ratio cap of 50 per cent would help us prevent future debt crises, as the current domestic debt exchange has essentially harmed both the entire financial sector and the Bank of Ghana,” he stated.

To achieve this, he said the country could take some guidance from the Organisation for Economic Cooperation and Development (OECD), who recommend that emerging economies such as Ghana maintain a lower threshold of 30 to 50 per cent of debt relative to GDP due to their vulnerability to capital flow reversals.

Dr Atuahene was speaking at the Ghana Economic Forum which was organised by the Business and Financial Times.

Aggressive agriculture 

He also urged the country to pursue aggressive agricultural development strategies in partnership with the private sector. 

“The goal is to accelerate the modernisation of agriculture and establish robust linkages, thereby creating a much-needed value chain system that integrates with industry.

“This transformation should be driven by the application of science, technology and innovation,” he stated.

He pointed out that agriculture currently contributed 54 per cent of Ghana’s GDP, accounting for over 40 per cent of export earnings while simultaneously fulfilling over 90 per cent of the country’s food requirements.

Change in investment pattern 

The Managing Director of the Ghana Stock Exchange (GSE), Abena Amoah, also speaking at the forum, raised concerns over a shift of banks investment from the private sector.

She said available data indicated almost a 40 per cent decrease in banks investments in private businesses, with the banks now focusing more on government treasury bills.

She noted that while the banking sector seemed to be bouncing back post DDEP, the shift in investment pattern was a major worry for everyone.

Ms Amoah said despite the recent challenges in the country’s financial sector as a result of the DDEP, the stock market was still beaming with opportunities, mainly driven by strong performances from listed banks, telecom companies and agro-processing firms.

She noted that the benchmark GSE Composite Index (GSE-CI) had gained 2.12 per cent over the last four weeks and an overall year-to-date gain of 28.35 per cent. 

Likewise, the GSE-Financial index has surged by 9.82 per cent in the past four weeks – indicating a potential turnaround in financial stocks despite a year-to-date loss of 5.58 per cent.

“There are still opportunities on the market; we have seen strong financial performances from the listed banks, telecom companies as well as certain agro-processing companies.” 

“So, the overall view we are seeing on the market is that the companies are posting strong financial results. We have also seen increased activities on the market by pension funds,” she stated. 

High interest rates

For her part, a former Vice-President of the Bank of America, Dr Joyce Afriyie, said to tackle the high interest rates in the country, inflation should be viewed more as a cost-push inflation rather than a demand-pull inflation. 

She explained that in a demand-pull inflation scenario, excess demand was the issue, and in such cases, interest rate policy hikes could help mitigate some of that excess demand. 

“However, when it’s a cost-push inflation, we face a different challenge. Rising interest rates under these circumstances will only escalate production costs because higher interest rates translate to increased borrowing costs.”

“As a result, these producers, when borrowing at higher rates, will inevitably increase their production expenses, she said.

Connect With Us : 0242202447 | 0551484843 | 0266361755 | 059 199 7513 |