<abstract xmlns="http://www.w3.org/1999/xhtml"><p> This paper explores the dynamics of public and private debt in Ghana for the past 32 years. Ghana’s total public debt stock to Gross Domestic Product (GDP) ratio has remained above the 60.0% sustainability threshold recommended by the West Africa Monetary Zone (WAMZ) since 2013. Implemented bank reforms in the country show an upward trend for domestic credit to private sector by banks as a percentage of GDP. Using exploratory review approach, the paper identified fiscal dominance, cost of borrowing, deterioration in export earnings, ineffective fiscal, monetary and debt management policies coordination as factors responsible for changes in total public debt stock. On the other hand, increased domestic borrowings by government from the banks, and Deposit Money Banks’ (DMBs)’ adverse selection in private sector credit allocation affect changes in domestic credit to the private sector by banks. Of these causes, fiscal dominance is the major determinant of public and private debt in Ghana. The study, therefore, recommends that government should pursue fiscal operations that are necessary to put public debt on a declining path. In addition, effective coordination of fiscal, monetary and debt management policies need to be strengthened together with the autonomy of the Bank of Ghana in the use of its monetary policy instruments.</p></abstract>

This paper explores the dynamics of public and private debt in Ghana for the past 32 years. Ghana’s total public debt stock to Gross Domestic Product (GDP) ratio has remained above the 60.0% sustainability threshold recommended by the West Africa Monetary Zone (WAMZ) since 2013. Implemented bank reforms in the country show an upward trend for domestic credit to private sector by banks as a percentage of GDP. Using exploratory review approach, the paper identified fiscal dominance, cost of borrowing, deterioration in export earnings, ineffective fiscal, monetary and debt management policies coordination as factors responsible for changes in total public debt stock. On the other hand, increased domestic borrowings by government from the banks, and Deposit Money Banks’ (DMBs)’ adverse selection in private sector credit allocation affect changes in domestic credit to the private sector by banks. Of these causes, fiscal dominance is the major determinant of public and private debt in Ghana. The study, therefore, recommends that government should pursue fiscal operations that are necessary to put public debt on a declining path. In addition, effective coordination of fiscal, monetary and debt management policies need to be strengthened together with the autonomy of the Bank of Ghana in the use of its monetary policy instruments.

The Dynamics of Public and Private Debt in Ghana

Studia Universitatis „Vasile Goldis” Arad – Economics Series

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"The Dynamics of Public and Private Debt in Ghana"}

This paper explores the dynamics of public and private debt in Ghana for the past 32 years. Ghana’s total public debt stock to Gross Domestic Product (GDP)...

The Dynamics of Public and Private Debt in Ghana

Publicado en línea: 06 dic 2018

Páginas: 24 - 44

Recibido: 01 jul 2018

Aceptado: 01 sept 2018

DOI: https://doi.org/10.2478/sues-2018-0018

Palabras clave
Ghana, public debt, private debt, fiscal dominance, policy coordination

© 2018 Akingbade Urungbodi Aimola, Nicholas M. Odhiambo, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The Dynamics of Public and Private Debt in Ghana

Publicado en línea: 06 dic 2018

Páginas: 24 - 44

Recibido: 01 jul 2018

Aceptado: 01 sept 2018

DOI: https://doi.org/10.2478/sues-2018-0018

Palabras claveGhana, public debt, private debt, fiscal dominance, policy coordination

© 2018 Akingbade Urungbodi Aimola, Nicholas M. Odhiambo, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Palabras clave
Ghana, public debt, private debt, fiscal dominance, policy coordination