The Head of Finance at UMB Capital, Nelson Cudjoe Kuagbedzi, has stressed the importance of fiscal discipline, warning that Ghana should not rush back to the international capital market.
His remarks follow the World Bank’s caution to the current government to refrain from a hasty return to the Eurobond market, which will be interpreted by international investors as the easy way out.
Speaking on JoyNews’ AM Show on Monday, September 29, Mr. Kuagbedzi said, “Going back to an international capital market should not be an option for now. One must seal the leakages in revenue, mobilise enough domestic revenue, and control one’s expenditure.”
He explained that fiscal prudence is critical to sound economic management.
“In fact, I was saying on another television station that fiscal prudence is key in managing an economy, because if your total revenue is 10 Ghana cedis and you are spending 15 Ghana cedis, where are you getting the money from? And always you will realise that every year we keep on outweighing or surpassing our revenue target, but we continue registering fiscal deficit every year.”
Mr. Kuagbedzi added, “I think that this is not the time to go back to the international capital market; we need to manage our debt to the extent that our debt-to-GDP ratio should be within the internationally accepted framework.”
He also commented on developments in the local financial market. “Now treasury bill rates are coming down, which is good for the government but bad for you and me, because now if you have 100,000 and you want to invest in the 91-day treasury bill, you will be getting a little, about 10 percent. But that will also cut down significantly government borrowing costs.”
Concluding, he said the focus must remain on the domestic economy.
“What the statement means is that we shouldn’t go back to borrow from the international capital market for now. Let’s concentrate within the domestic economy, mobilise enough domestic revenue, and if there is a need, we continue to mobilise our debt in the Ghana cedi.”
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