The Danquah Institute is calling for a critical national dialogue on
Ghana’s spiralling public debt stock, which, according to the latest
report from Monetary Policy Committee of the Bank of Ghana, has jumped
to nearly 50% of Ghana’s rebased economy.
Over the last four years our policy think tank has been vocal in
raising concerns about what we consider to be a “mad rush for loans” by
Government, and the disturbing absence of real transparency and
value-for-money component in several of these loans.
Today, it has become evidently clear that Ghana is fast-forwarding
backwards to its 2000 status of a poorly-indebted, and with very little
to show for this high level of unprecedented borrowing and spending.
What Government is effectively doing is building a future of debts
for the youth of Ghana to inherit and struggle with, when ironically,
over the last four years alone official records show that GH¢950 million
has been spent directly in the name of creating youth employment, but
with evidentially very minimal impact in the lives of the youth of this
country.
GH¢43.9 billion Debt
The Bank of Ghana on Wednesday, 18th September, 2013, revealed that
total public debt stock at the end of August 2013 stood at GH¢43.9
billion (US$20.90 billion), up from GH¢35.1 billion at the end of
December 2012. Indeed, barely five years ago, at the end of 2008,
Ghana’s total debt stock stood at a comparatively minimal GH¢9.5 billion (or US$8 billion then), which translated into 31.5% of the 2008 GDP, as compared to the current debt/GDP ration of 49.5%.
Thus, Ghana, under the NDC administration, is adding an average of GH¢6.88billion
every year to its public debt. This is simply not sustainable.
Government cannot continue depending on borrowing as the only ‘creative’
solution to every problem.
Indeed, without the 2009 rebasing of the economic
indicators, the country would have been reclassified as a Highly
Indebted Poor Country by now, as current debt stock would have equalled
the size of the economy.
It is worth noting that rebasing did not change the size of the
existing economy. It was only done to better reflect the size of the
economy. It always, therefore, had the risk of giving the managers of
the economy but an obvious false sense of comfort with the debt/GDP
ratio, since rebasing only further exposed the low level of revenues the
state is able to squeeze from economic operators and workers.
Equally worrying is the fact that government is stifling real private
sector growth by squeezing out economic actors from the credit market.
Government’s willingness to borrow at interest rates as high as 27% is
rather discouraging any downward movements in the cost of credit.
Government is, therefore, actively suppressing business and the capacity
of business to create jobs.
Election Year Spending
Linked to this is the fact that a greater chunk of our current total
debt, 54.6%, is from public sector domestic borrowing. Our checks show
that an unusual share of this domestic debt portfolio was incurred in
election year.
In 2012 alone, government borrowed in excess of GH¢7.1 billion from
the domestic market, against a projected borrowing of GH¢2.7 billion.
Instructively, Government did not even meet its capital-spending target
for last year. So, subtracting what went into the wage bill and some
notable road projects, what did Government do with the large amount of
funds it received, which led to Ghana recording the highest ever annual
fiscal deficit of 12.1% in 2012?
The GYEEDA Report, which details how nearly GH¢1
billion was spent ostensibly to create jobs for the youth but much of it
cannot be traced, tells only part of this worrying story of how the
public purse is being abused under this unsustainable culture of borrow
and spend.
We have to ask, how was all these billions spent, considering the
continued labour agitations over unpaid remunerations; rising arrears
owed to contractors, schools, SSNIT, utility providers, GETFund, NHIS,
DACF and, the partial freeze on infrastructural development by this same
Government?
Low Tax Yields
Domestic revenue totalled GH¢9.8 billion, below the
target of GH¢11.6 billion. Total tax revenue amounted to GH¢7.7 billion,
lower than the target of GH¢9.1 billion. Grant disbursements were
GH¢542 million, falling short of its target by 41.7 percent. Non-tax
revenues amounting to GH¢2.1 billion for the period also missed the
target by 12.4 per cent.
So far this year, the economy has taken another negative turn,
registering a larger than projected budget deficit when Government has
not even been able to spend close to its target! The consequence of the
decline in both tax yields and grants this year is that Government is
unlikely to achieve its budget deficit target of 9% as contained in the
2013 budget deficit. According to a staff team from the International
Monetary Fund which visited Ghana during the week of September 11-17
2013, led by Christina Daseking, Ghana is set to achieve a budget
deficit of 13%, breaking the record of 2012.
The Danquah Institute does not detect from Government policy the
application of any alternative solution to the current economic crisis,
which, if not resolved, could trigger social crisis next year.
For these reasons, we are calling for a critical national dialogue on
the nation’s fast-racing debt, with the hope of finding a workable
solution to ease the economic hardships of Ghanaians today and better
secure the future of the youth of Ghana.
We are by this call inviting civil society and other stakeholders to join us to make this happen.
Suggestions can be forwarded to
info@danquahinstitute.org
Source:DanquahInstitute
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