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Ignore appetite for borrowing after rebasing economy – Osei Assibey

Dr. Eric Osei Assibey, Economist - University of Ghana

Some economists have impressed on government not to add unto the country’s debt even as it prepares to rebase the economy.

Though they explain that the incentive to borrow more may be inevitable, the possibility that it will worsen the repayment burden, must be considered.

The Ghana Statistical Service is hoping to complete the process of rebasing Ghana’s economy by May this year.

This means the current 2006 base year for calculating Ghana’s GDP referring to the monetary value of all the finished goods and services produced within a particular period, will move to 2013.

The exercise is in fulfillment of international practice which requires countries to rebase their economies at least after every ten years.

For instance, Ghana’s GDP which stood at about 127 billion cedis in September last year, will increase to an extent.

This is because, the economic managers would have taken into consideration other economic activities such as oil exploration and associated businesses which had taken place between 2006 and 2013.

Economist, Dr. Eric Osei Assibey highlights some benefits of a rebased economy including a reduced debt to GDP ratio which is at 68.7 percent.

“Somehow it is good because once your GDP has increased, your debt to GDP ratio is going to reduce significantly and that appears to give you some kind of fiscal space to be able to borrow more to finance it. It is also going to propel us from one level such as lower to upper middle income. It also have the ability to attract concessionary loans,” he stated.

But considering that the country’s debt levels and interest payments are of concern to industry watchers, it may not be prudent to go in for an additional loan perhaps.

“When that happens it means that your revenue to GDP is going to fall significantly and what that means is that although your economy is expanding, it is not generating enough revenue and that is quite dangerous. So if you base your borrowing on your debt to GDP, you might get it wrong,” he added.

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

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