The government needs to allocate a greater share of new loans to­wards productive and self-sustain­ing capital expenditures in order to enhance revenue generation for the timely repayment of the nation’s debt, Deloitte Ghana has stated.

According to the firm, “That is the most feasible option for achieving the optimal debt to Gross Domestic Product ratio.”

Deloitte Ghana in an analysis of the 2024 mid-year budget review said the resumption of debt service commitment post International Monetary Fund (IMF) presented some risk to the economy and targets sets under the programme.

“Given that the debt will most likely continue to increase overtime, the most feasible option for achieving the optimal debt to Gross Domestic Prod­uct ratio is to direct increasing portions of additional loans into productive and self-financing capital expenditure to expand the economy whilst generating inflows to pay down these loans,” Deloitte Ghana emphasised.

Ghana is currently enjoying a freeze on debt payment to its official and bilateral creditors as a result of the country’s debt restructuring programme and will resume payment in 2026.

The country’s external debt restructuring has resulted in debt relief of $4.4 billion and debt cancellation of $4.7 billion over the course of the IMF Pro­gramme and is expected to slow down the extent of debt accu­mulation and the rise in Ghana’s debt to GDP ratio, which is projected at 55 per cent by end of 2028, from the current which is above 70 per cent.

As of the end of June 2024, total public debt stood at GH¢741.95 billion, which represents 70.6 per cent of GDP and an increase of 22 per cent from the previous year’s GH¢608.4 billion as of Decem­ber-end 2023, constituting 72.3 per cent of GDP.

On the cut in budget expen­diture and increase allocation to capital expenditure, the Deloitte Ghana noted that the govern­ment should invest in critical sec­tors of the economy in order to promote growth of the economy.

“Allocation of such spending to priority sectors can spur strong economic performance in the medium to long term,” it said.

The Finance Minister, Dr Mo­hammed Amin Adam, presenting the mid-year budget review high­lighted that government intended to increase capital expenditure investments from 2.5 per cent of GDP in 2023 to 2.8 per cent of GDP in 2024.

Deloitte Ghana on tax ex­plained that it was encouraging the government did not intro­duce new taxes and announced tax incentives for the private sector to spur the growth of the sector.

“The proposed extension of tax incentives to cover private sector players partnering govern­ment in road construction project will be a novelty if implemented on a national scale,” it said.

The auditing and accounting firm indicated that the proposal to extend tax incentives to man­ufacturers of two-wheeled and three-wheeled electric vehicles as an indication of government’s continuing agenda of incentiv­ising eco-friendly transportation in Ghana to help meet Ghana’s Nationally Determined Contribu­tions under the Paris Agreement.