Business News of 2014-04-08

No new loans or more new loans - Minority leader asks

The Minority Leader Osei Kyei-Mensah-Bonsu is accusing the president and his Finance Minister of blowing hot and cold on the controversial issue on whether or not the country is ready to contract more loans.
Describing President John Mahama and the Finance Minister Seth Terkper as a "team of confusionists leading Ghana," the vocal Minority Leader said the contradictory information being put out by the president and his economic team on the thorny loan issue is incredible.
Ghana's rising debt has been a source of worry to well meaning Ghanaians.
According to the Minority Leader, Ghana's debt now stands at 55.6 billion cedis equivalent to about 58 percent of GDP. He warned the country’s debt may soon become unsustainable if the threshold reaches 60 percent.
The impact of the increasing debt portfolio and its corresponding debt servicing have not been lost on the Finance Minister.
Addressing Parliament in the 2014 Budget Statement, the Finance Minister Seth Terkper hinted of government's plans to put a moratorium on the acquisition of new loans in order to keep the rising debt within acceptable limits.
He said no new loans would be contracted for major projects. The Finance Minister again reiterated the point when he presented another statement on the floor about the state of the economy.
The Minister having announced government's decision not to procure new loans for major projects, presented to Parliament a $300 million loan agreement for the purchase of logistics for Ghana's military troops.
That agreement is still before Parliament pending a final approval by the House.
Shortly after the Finance Minister had announced a moratorium on new loans and new projects, the President at a durbar of chiefs and people in Kyebi said his government would continue borrowing for more infrastructural projects.
He said no country has developed without borrowing insisting major government projects including electricity and water have been possible because of loans taken from development partners.
He said once the loans taken are not wasted on drinks and food, his government will borrow more for purposes of development.
Addressing the press in the minority’s state of the economy, the Minority Leader Osei Kyei-Mensah-Bonsu said the president and his economic team do not seem to appreciate the impact the ballooning debt burden on the country.
He said the palpable confusion of thoughts and statement by the president and his Finance Minister on whether or not the country would contract more loans are incredulous.
"It is clear that the president and his economic management team simply do not understand the repercussions of their unbridled appetite for borrowing. Whilst the president insists that he will continue to borrow, his Finance Minister on April 1 came to tell Parliament that there will be freeze or moratorium on new loans.”
Even more shocking, he noted was the conduct of the Finance Minister. He said it sounded more of an "April Fools'" prank for Seth Terkper to announce a $300 million loan agreement for consideration by the House, when he had only hours before the announcement also publicised government's decision to put a moratorium on loan acquisition.
"...Or was it an April Fool's Day joke? Perhaps Yes. Otherwise is it not paradoxical that on the same day that the minister was promising a freeze on new loans, on that same day the minister himself was seeking approval for a $300million loan for military logistics and another huge amount for the construction of new port. Are we to call them a team of confusionists leading this country?" he questioned.
He said while the Minority does not disapprove of the government's intention to equip the military, he said intentions should not be at the detriment of the country.
According to him, if the current loan agreement were to be approved as it is, the state will end up paying an average cost of $120m dollars per year in three years.
Such an arrangement, he noted cannot be said to be in the interest of the country.
He challenged the president and his finance team to come clean on government's position on loan acquisition