Legislators in Ghana urged to check excessive domestic borrowing

The Association of Ghana Industries, which is advocating for the legislation, argues that parliament must urgently initiate steps to check government’s domestic borrowing in order to create avenues for private sector to access more capital.  Contributing to the Canadian Chamber of Commerce, Ghana’s (CCCG), Power Breakfast meeting in Accra on Tuesday, Kwasi Ayim Darke, an official from the association, said if local businesses were to grow, the government must be financially disciplined.

He said a law limiting the extent of government domestic borrowing, would help to reduce the country’s huge current deficit and regulate external influences on local businesses.  The West Africa country’s domestic debt grew by 30 per cent between 2011 and 2012 constituting 53 per cent of the total public debt, compared to 47 percent for external debt. Domestic debt stock stood at US$12,569.83 million at the end of August 2013.

Darke attributed government excessive borrowing and overspending to high prime reserves of banks, which he noted have wider negative impact on the growth and expansion of local business to create employment opportunities for the teeming unemployed youth.  The country’s domestic borrowing currently attracts between 20 and 25 percent interest rate and this, Darke said, did not augur well for the private sector, which is compelled to borrow at over 30 percent.

Commenting on Ghana’s currency deprecation, Herbert Morrision, president of the Canadian Chamber of Commerce said, the decline in the value of the Ghanaian cedi, coupled with a significant drop in government revenue, had created “fear and panic” among the business community.  Small and medium enterprises, he said, played crucial role in national economic development, but access to credit continues to pose serious problems to their growth in Ghana.