Professor Peter Quartey has highlighted the inadequate investment and growth in Ghana despite heavy borrowing over the past two decades. He attributes this to misallocation of funds towards salaries and debt servicing instead of productive investment. He advocates for a 60 percent debt ceiling and improved project selection frameworks to ensure effective use of borrowed funds. Quartey stresses the need for aligning debt with strategic investments for better economic outcomes.
Professor Peter Quartey, an economist and Director of the Institute of Statistical, Social, and Economic Research at the University of Ghana, has expressed concerns regarding Ghana’s heavy borrowing over the past two decades. He noted that rather than fostering investment and economic growth, the majority of borrowed funds have been allocated to salaries and the servicing of debts. Quartey emphasized the necessity for a legal debt ceiling of 60 percent and for a framework that aligns loans with investments to create returns that can stimulate economic growth and benefit citizens.
During his inaugural lecture as a Fellow of the Ghana Academy of Arts and Sciences, Quartey presented an analysis on the impact of debts on growth in Ghana, questioning whether borrowing has served more to finance consumption rather than productive investment. He reported an increase in Ghana’s public debt from 42.9 percent in 2013 to 82.9 percent in 2023, with a projected decrease to 61.8 percent by the end of 2024, attributed to a debt restructuring program.
Capital spending in Ghana, which is crucial for public infrastructure and long-term economic development, has seen a notable decline. In 2010, capital expenditure constituted 6.9 percent of GDP, but fell to 2.4 percent by 2023, with only a slight recovery to 2.5 percent expected in 2024. Quartey stated that this downturn is primarily due to ineffective project management and a lack of rigorous evaluation processes.
He pointed out specific instances where debt contracts have yielded minimal investment and growth outcomes, such as the Pwalugu multi-purpose Dam project, which has received US$12 million yet remains uninitiated after six years. Quartey criticized the absence of stringent project approval processes, which generate significant delays and diminish project execution quality.
In closing, Professor Quartey urged the establishment of a strategic framework that ensures debt is matched with significant investments in productive sectors. He called for capital projects to be selected based on a coherent national development plan, emphasizing that partisan interests should not dictate investment priorities. It is imperative to align any project selection with a clear medium-term strategy to enhance economic growth.
Professor Quartey’s analysis highlights a critical disconnect in Ghana’s borrowing practices, revealing that excessive debt has not translated into meaningful investment or economic growth. With a proposal for improved legislative measures and project management frameworks, he advocates for a strategic alignment between debt incurred and productive investments, emphasizing the need for a solid planning process to enhance future outcomes. His insights underpin the urgency for systemic changes to better utilize public funds for sustainable development.
Original Source: gna.org.gh
