The IEA observed that the Appropriations Act, which approved the government's annual total spending, would ensure that borrowing implied by budget deficits would not be breached with impunity.

The Director of Research, IEA, Dr John Kwakye, who made the call in a press release, further suggested that the cap should be introduced as a rule in the Fiscal Responsibility Act in addition to what it described as the “deficit rule”.

“Thus, it was necessary to tie the hands of the Finance Minister and insist that any additional borrowing by him beyond the budget estimates or the new ceiling should be subjected to the approval of Parliament just as it pertains in the United States of America," it stated.

This, the statement explained, was the only way to “rein in our debt and keep it at a sustainable level on a durable basis so as to avoid the debt service, which currently absorbs over 40 per cent of tax revenue, from overwhelming the budget”.

The IEA, therefore, welcomed the Bank of Ghana BoG’s endorsement of its proposal to cap government borrowing to help rein in the public debt.

The statement noted that as part of his press briefing on Thursday, October, 6, 2022 on the decision of the Monetary Policy Committee, the Governor of the central bank, Dr Ernest Addison, reportedly said that he "supports discussions on capping borrowing".

This is in view of the deep concerns about the country's public debt after the World Bank released a report stating that Ghana's debt-to-gross domestic product (GDP) ratio could hit 104.6 per cent by the end of the year.

Flashback

The IEA first made the call for the imposition by Parliament of a cap on borrowing in the institute's comments in the 2022 Budget in November 2021. The cap, the IEA suggested, could be the only way to keep the country's debt at a sustainable level on a durable basis.

Since first making the suggestion in November 2021, the IEA has repeated the call on various platforms.

The statement said as part of the Civil Society Organisation Economic Governance Platform, the IEA had made that suggestion available for consideration by the International Monetary Fund (IMF) Team currently negotiating a possible financial programme with the Ghanaian authorities.

The IEA also called for the strict enforcement of both the ceiling of five per cent of GDP on the fiscal deficit, as well as the ceiling of five per cent of the previous year's revenue on BoG's lending to the government, both of which had debt implications.