Despite significant borrowing, Ghana has not experienced the expected economic growth or investment. The funds have primarily gone towards salaries and loan interest instead of productive sectors. Professor Quartey urges the establishment of a debt ceiling and better project selection frameworks to enhance economic growth.
Professor Peter Quartey, an economist and Director at the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, has highlighted the disparity between Ghana’s significant borrowing over the past twenty years and the lack of corresponding investment and economic growth. He noted that much of the borrowed funds have been allocated toward salaries and interest payments rather than towards sectors that would foster productivity.
During his inaugural lecture as a Fellow of the Ghana Academy of Arts and Sciences, Professor Quartey advocated for urgent legislation to impose a 60 percent debt ceiling and create a framework that aligns loans with productive investments, aiming to enhance economic growth and improve the welfare of citizens. He questioned whether the borrowing was primarily for consumption rather than productive investment.
Professor Quartey’s analysis indicated that public investments have had a minimal effect on long-term economic growth. He attributed this to ineffective project appraisal and management processes, which often result in poorly selected investments. He cited the rise in Ghana’s national debt from 42.9 percent of GDP in 2013 to 82.9 percent in 2023, followed by a decrease to an expected 61.8 percent by the end of 2024 due to ongoing debt restructuring efforts.
Additionally, he pointed out the decline in capital spending, which dropped from 6.9 percent of GDP in 2010 to 2.4 percent in 2023, with a slight anticipated increase to 2.5 percent in 2024. Capital spending is crucial for infrastructure and long-term economic benefits, such as job creation and enhanced productivity. Unfortunately, he noted that Ghana’s high levels of debt have not translated into effective investments due to inadequate project selection and weak oversight mechanisms.
The professor further discussed failed projects like the Pwalugu multi-purpose Dam, where US$12 million disbursed over six years did not yield any tangible progress on the irrigation scheme intended for the Upper East Region. He criticized the lack of rigor in project approval processes, which delay execution and diminish the effectiveness of investments.
Moreover, he emphasized the inefficiency of funds due to non-competitive bidding and substandard procurement practices, leading to a frail monitoring framework after project completion. He called for a national development planning process to prioritize capital projects based on strategic national interests rather than partisan considerations, urging a focus on medium-term goals before initiating projects.
In summary, Professor Quartey’s analysis reveals that Ghana’s substantial borrowing has not resulted in effective investment or economic growth. He advocates for a restructuring of debt management and project selection processes to ensure funds are used strategically for public benefit. With recommendations for establishing a debt ceiling and improving project evaluation practices, he stresses the importance of aligning investments with long-term economic objectives to enhance the nation’s wellbeing.
Original Source: gna.org.gh
