Ghana’s Heavy Borrowing Fails to Deliver Expected Growth

KEY POINTS

• Ghana’s heavy borrowing has not resulted in expected economic growth.
• Professor Quartey urges a 60% debt ceiling and investment reforms.
• Weak project appraisal and monitoring hinder effective fund utilization.

Professor Peter Quartey, Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, claims that after two decades of heavy borrowing, Ghana has not attained the expected levels of investment and economic growth.

Ghana’s heavy borrowing not translating into economic growth

Quartey claimed that instead of going toward productive industries that may spur economic growth, a large portion of the borrowed money has been used for salaries and loan interest payments.

Quartey pushed for immediate legislation to impose a 60% debt cap in his first speech as a Fellow of the Ghana Academy of Arts and Sciences on Thursday. He also underlined the necessity of a strong framework to guarantee that borrowed money is linked with profitable ventures that boost economic expansion, produce returns, and improve the welfare of the populace.

“Capital projects should be carefully selected through a national development planning process and not based on partisan interest,” he stated. “We must consider our medium-term strategy and what we want to achieve before we start.”

Quartey emphasized that the influence of public investment on long-term growth has been constrained by inadequate or evaded project analysis, selection, and administration. He pointed to Ghana’s debt, which rose from 42.9% in 2013 to 82.9% in 2023 before restructuring efforts are expected to lower it to 61.8% by the end of 2024.

From 6.9% of GDP in 2010 to 2.4% in 2023, capital expenditure—which funds the construction of roads, airports, and technological advancements—also saw a sharp drop, with a slight increase to 2.5% anticipated in 2024.

Weak project selection and monitoring hinder Ghana’s growth

According to Joy news, Quartey pointed out that inadequate procurement procedures, a lack of competitive bidding, and subpar project selection procedures are the main causes of Ghana’s problems. He cited projects such as the Pwalugu multipurpose dam, where $12 million has been distributed over six years with no development on the anticipated 60MW power plant or the 25,000-hectare irrigation system.

“The project approval procedure lacks rigor, particularly when it comes to huge projects. According to Quartey, these difficulties result in significant project execution delays, which ultimately lead to subpar results.

In order to guarantee that funds are used effectively and that initiatives produce the desired economic advantages, he emphasized the necessity of better monitoring and assessment systems.