Debt swallowing Ghana – Minority

Ghana is at a high risk of debt distress, the Minority in Parliament has said.

The opposition lawmakers said this is due to the fact that the debt-to-GDP ratio and debt service ratio have both breached their required limits.

A statement signed by Mr Cassiel Ato Forson, Ranking Member, Finance Committee of Parliament, on the scheduled presentation of a Mid-Year Review of the 2019 Budget Statement and Financial Policy of the Akufo-Addo government by the Finance Minister on Monday, 22 July 2019, said Ghanaians expect the government of President Nana Addo Dankwa Akufo-Addo to halt expenses that are shooting up the debt.

The Minority is also asking the government to withdraw what they described as the economically inefficient luxury vehicle tax.

The statement said: “Ghana is currently at a high risk of debt distress because our debt-to-GDP ratio and debt service ratio have both breached their required limits. Ghana’s debt stock in the last two and half years has increased significantly. Surprisingly, all the additional borrowed funds have been used for consumption which is posing a serious liquidity constraint for capital expenditure. In the face of this obvious challenge, the Minority cautions government to exercise restraint and curb its voracious appetite for borrowing.”

“The weak performance of revenue has created further problems for the government and undermining its ability to meet critical expenditure and commitments. This liquidity crisis is largely self-inflicted as it arises from populist and unrealistic fiscal measures adopted by the Akuffo-Addo government. The Minority is cautioning government to quickly restore policy credibility because our investors are keenly observing and will soon react should economy continuously show signs of distressed revenue position."

“Off-budgeted transactions is yet another serious problem that can throw the entire 2019 Budget off-gear. The Minority is certain that this has resulted from the rushed implementation of populist and unsustainable campaign promises. If this practice should continue, the whole Budgetary process from now till the end of the year will be compromised. The Minority is cautioning government not to adopt the practice of replacing critical government expenditure with ill-advised spending on frivolous campaign promises."

“A high level of fiscal risk from the energy sector has become a problem due to the Akuffo-Addo government’s heavy indebtedness to independent power producers (IPPs). The additional expenditure pressures from the IPP’s will significantly distort the fiscal deficit and may deteriorate the macroeconomic gains and derail market confident. The Minority is cautioning government to refrain from adopting an unconventional treatment of these liabilities in the fiscal as has always been their practice because we will closely monitor same from the books of government both at the Ministry of Finance and the Bank of Ghana. We call on the government to act professionally and technically to avoid the accumulation of debt."

“Last mid-year review saw a blatant breaking of the campaign promise not to heap additional taxes on the people of Ghana. The NPP government used the back door to increase VAT by 5%- a move which has heaped additional hardship on the people. It is the expectation of the people of Ghana, that such subterfuge and shenanigan will not be repeated in this mid-year review."

“Our position still remains. You can do all the propaganda about cosmetic deficit numbers, but the public debt will expose you. Ghanaians are expecting a realistic Mid-year Budget that will address the hardships they are currently facing and not the announcement of populist, vote-buying gimmicks."

“Finally, Ghanaians expect the outright withdrawal/removal of the economically inefficient luxury vehicle tax.”