That, Deloittesaid would help reduce the country’s growing debt, which had currently crossed internationally accepted threshold.

Ghana’s debt as of the end of June this year, stood at GH¢33.4 billion, representing 78.3 per cent of Gross Domestic Product (GDP), compared with GH¢35.8 billion representing 76.6 per cent of GDP at the end of December 2021.

In view of the country’s growing debt, the government is pursuing an International Monetary Fund (IMF) programme for a balance of payment support.

In Deloitte’s assessment of the 2022 Mid-Year budget review, it said the increased domestic debt issuance highlighted the existing competition between the government and businesses for funds available in the domestic market.

Given the lower risks involved in lending to the government versus the private sector, it said that had resulted in increased lending to the government since the beginning of 2022 at the expense of the private sector.

The crowding out’ of funds available to the private sector, Deloitte said  resulted in increased borrowing cost for private sector businesses due to their higher default risk, which ultimately also increased the likelihood of private businesses defaulting on their loans in the medium to long-term.

“The government should focus on containing inflation and stabilising the exchange rate to help reduce the default risks in the private sector and incentivise commercial banks to increase private sector lending. Rising external debt will lead to increased demand for foreign currency for debt repayment and further depreciation of the Cedi,” Deloitte said.

On the revision of the initial Gross Domestic Product (GDP) growth projections, the Tax Advisory Firm said the decision was in the right direction, given the uncertainties surrounding the global economy which is expected to aggravate the country’s current situation.

Government in the Mid-Year budget reviewed the GDP figure for 2022 from 5.8 per cent to 3.7 per cent and inflation from eight per cent to 28.5 per cent.

Deloitte said Ghana like other developing countries on the continent, had suffered severely from the impact of the general global economic slowdown caused predominantly by the Russian-Ukraine tensions and the COVID-19 pandemic.

It said the implementation of the Enhanced DomesticProgramme supported by the IMF was expected to improve the government’s fiscal situation and re-instill investor confidence.