Analysing the performance of public debt sustainability: A case of Ghana

Analysing the Performance of Public Debt Sustainability: A Case of Ghana This work assesses performance of Ghana's public debt sustainability by evaluating a fiscal reaction function using the time series analysis. The development of the parameters of the fiscal reaction shows the move towards positive state which correlate to the transformation towards sustainable debt. This approach enables researchers to examine factors including the primary balance, GDP growth, debt-to-GDP ratio, inflation, exchange rate and interest rates over extended periods. It helps to determine whether these variables are stationary or trending, and exhibit short-term fluctuations long-term equilibrium relationships (cointegration), which are vital for sustainable fiscal policy. This study uses the dataset for the time span of 1990 2023 in its analysis. Additionally, time series analysis use in this work helps to facilitate the use of advanced econometric models like Autoregressive Distributed Lag (ARDL) and Error Correction Models (ECM). These models are essential in assessing equilibrium relationship among variables both in the short and long-run, impacting debt sustainability while addressing non-stationarity, autocorrelation, and structural breaks, thereby enhance forecast accuracy and reliability of policy simulations. The empirical findings of this work suggest the continuous trajectory rise in Ghana's public debt which has unprecedented skyrocketing in the recent time. Associated with the worsening of the country growth, interest rate and high inflation, the recent performance of government regarding the downturn of fiscal reaction emits risks of an increasing debt crisis whose adverse effects has impacted all sectors of the country's economy. Based on the findings, it is recommended by the study that fiscal consolidation need to be strengthen and boost fiscal discipline through tax reforms by widen tax base at the same time ensuring tax compliance and reduce excessive tax exemption. It is also essential for all public holders as well as policymakers to avail themselves to public scrutiny as the perception index of the country's corruption is significantly low so that transparency and accountability would be enhanced as one of the fundamental tools of debt management