Gov’t will maintain fiscal discipline despite return to domestic borrowing – Kwakye Ofosu

The Minister for Government Communications, Mr Felix Kwakye Ofosu, has assured that the government will maintain fiscal discipline even after the expiration of restrictions on new domestic bond issuance.

His comments follow an announcement by the Minister for Finance, Cassiel Ato Forson, that limitations placed on Ghana’s domestic bond market have expired, allowing the government to return to the market to raise funds if necessary.

The announcement was made through a statement issued by the Finance Minister.

Speaking on Newsfil on Saturday, March 7, Mr. Kwakye Ofosu said borrowing remains a normal aspect of economic management and should not be viewed as inherently problematic.

“Borrowing is a long-standing part of economic management. Every country does that. There’s nothing wrong with borrowing,” he said.

However, he argued that Ghana’s economic challenges in recent years were not caused by borrowing alone but by excessive borrowing and poor economic management under the previous administration led by the New Patriotic Party (NPP).

According to him, the country’s economic programme with the International Monetary Fund placed temporary restrictions on the government’s ability to issue new domestic bonds.

He explained that the three-year restriction has now expired, meaning the government is legally permitted to access the domestic market again if the need arises.

“As part of the IMF programme, a ban — for want of a better expression — was placed on the ability to borrow domestically for three years.

That period elapsed some time last week, and therefore the government can return to the domestic market,” he said.

Mr. Kwakye Ofosu emphasised, however, that the development should not be interpreted as an indication that the government intends to borrow aggressively.

“It does not mean that there will be a mad rush to the domestic market to borrow left, right and centre to imperil the economy,” he stated.

He stressed that any borrowing undertaken would be consistent with the government’s commitment to fiscal discipline and prudent economic management.

The Minister also highlighted the importance of ensuring that borrowed funds are directed towards productive investments rather than recurrent expenditure.

“When you go and borrow, what is it for really? Are you borrowing just to meet recurrent expenditure, or are you borrowing to invest in capital expenditure and the productivity of the economy?” he asked.

According to him, borrowing used to support productive sectors can stimulate economic growth and generate the resources needed to sustain development.

Mr. Kwakye Ofosu further outlined several fiscal reforms introduced by the government to control spending and strengthen oversight of public expenditure.

Among these measures is the introduction of commitment controls to ensure that funding requests from government agencies undergo strict scrutiny before approval.

“What that simply means is that if you are an agency of government and you bring any request for funding, it will be scrutinised and gone through with a fine comb,” he explained.

He added that the Ministry of Finance also plans to introduce a new oversight mechanism known as the Value for Money Office, which will be presented to Parliament for approval.

The proposed office, he said, will complement the work of the Public Procurement Authority by assessing whether government procurement delivers genuine value for the state.

According to Mr. Kwakye Ofosu, the initiative is intended to reduce the cost of government spending and ensure that public resources are used efficiently.

He noted that Ghana’s recurring fiscal challenges have largely been driven by overspending relative to national revenue.

“Every analyst of this economy will tell you that the biggest problem we’ve had cyclically has been overspending. #

We spend far more than we earn as a country, so we are always in debt,” he said.

The Minister also rejected suggestions that the country’s economic difficulties were solely caused by the global impact of the COVID-19 pandemic, arguing that election-year spending in 2020 significantly worsened the fiscal situation.

He said the widening fiscal deficit at the time eventually forced the country to seek financial assistance from the IMF and undertake a debt restructuring programme that affected domestic bondholders.

Mr. Kwakye Ofosu added that the government has already taken steps to reduce the cost of governance, including cutting the number of ministerial appointments compared with the previous administration.

According to him, the reduction in ministers has resulted in significant savings in salaries, vehicles, accommodation and other operational costs.

He also revealed that several expenditure practices within government offices have been curtailed, including the use of satellite television services at the presidency.

Additionally, he said the President has scrapped fuel allocations previously granted to ministers and other senior officials as part of broader efforts to reduce public spending.

“These are widespread across government and represent significant savings,” he said.

Mr. Kwakye Ofosu maintained that with these cost-control measures in place, the resumption of domestic borrowing will not jeopardise the country’s economic recovery.

“Borrowing itself is not a problem,” he added. “It is the extent to which you borrow and how prudently you manage the resources.”

Source: Classfmonline.com/Cecil Mnesah