A professor of Finance at the University of Ghana Business School, Prof Godfred Bokpin has disagreed with Dr. Bawumia's  'prudent debt management' comment over the weekend.
Vice President Dr Mahamudu Bawumia over the weekend said despite the rising public debt level, prudent management of the economy has meant key indicators remain favourable.
He said inflation and exchange rates have gone down due to prudent management of the economy.
“I want to let you think about one thing; you hear the NDC saying, the debt level has gone up. Sure, the debt level has gone up, but economic levels have not gone down. The debt level has increased yes, but why do we want to maintain prudent debt level? When you teach economics, you have to ask your students that question; why is it that we want the debt levels maintained at prudent levels?
“The reason is that if you do not manage your debt levels properly, it will affect your exchange rate, it will affect your interest rate, it will affect your inflation and it will affect your growth. You’re managing the economy in a way to look at its impact on these variables; exchange rate, interest rate, inflation and growth rate. That is the issue.
“When the NDC was in government, well way before, they took us to HIPC. They had mismanaged the debt levels such that we had very high inflation, very high exchange rate depreciation, very high interest rate and low growth. That was the legacy they left us,†he said.
He made the remarks at a TESCON conference in Cape Coast on Saturday August 7, 2021.
He said towards 2016 under the NDC, the debt levels had increased such that inflation, interest rate, exchange rate depreciation were all rising but growth was declining forcing the John Mahama administration to run to the IMF for a bailout.
Wasn’t that the case? That was NDC economic management. Our debt levels have gone up, but what has happened to inflation? It has come down. What has happened to exchange rate depreciation? Depreciation has come down. What has happened to interest rate? It has come down. What has happened to growth? It is going up,†he touted.
But Prof Godfred Bokpin said he respectfully disagrees because Ghana cannot describe where they are now as prudent debt management.
He said the country is not doing well in terms of its potential and in relation to its peers.
" I respectfully disagree with that assertion. You cannot totally with all respect looking at all the indicators described where we find ourselves as prudent debt management. Of course, if we look at it in relation to other macro variables we have seen some improvement but I think we should not set a trap for yourselves with all these comparisons we should also be looking at it in terms of Ghana's potential and our peers. When doing that you will realise that we have not made significant progress."
 Prof Godfred Bokpin added that 50% of the country's non-oil tax revenue is being used to service debt and that is unacceptable.
"When you even look at the debt levels and here I'm not going to celebrate the debt to GDP ratio because we do know that it doesn't tell us the entire story. We also want to look at the implication of raising debt, you want to look at debt service to revenue ratio and we want to find out from government has that improved? will that constitute prudent debt management?. The answer will be no because we are spending more than 50% of our non-oil tax revenue just to service our debt and that is unacceptable by any definition any day any time because when you look at how much we are setting aside just to service the debt it leaves very little or nothing for the country to spend on..."
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