The Tentative Public Debt Impact on Economic Growth in Ghana : Trend Analysis

We examine the effects of fiscal and monetary policy effect on key debt management variables and provide empirical evidence supporting the agenda of a strict separation of economic policy from the debt management policy using the trend analysis. We find that, a tighter monetary policy coupled with fiscal expansion increases the risk of government debt which has to be rolled over at unusually high cost into presiding year coursing debt distress. Debt is always financed by borrowing or using unbudgeted funds to service it. This is seriously causing the country its advancement since fiscal budget years don’t support the realities of spending. This is especially the case in a downturn, where low or even negative interest rates often provide incentives for debt managers to invest predominantly in short-term bonds. Our findings articulate the crisis environment of low or even negative interest rates, where many debt management of the economy altered their portfolios’ structure in favor of short-term bonds. In this respect, we argue debt managers to use a longer optimization horizon and base their strategy on the medium- and long-term economic outlook.In this study, we investigate the impact of public debt on the economic growth of Ghana, the simple Ordinary Least Squares with data spanning from 1990 to 2018. Ghana for more than a decade has not been able to raise enough revenue to finance its ever-rising expenditure, as a result, the country has been bedeviled with huge fiscal deficits and high levels of debt to GDP ratios. The question is, as a country what are we doing to overcome debt distress and how are we to manage the economy in more prudent manner considering the macro and micro indicators