Ghana borrows $10.6bn to pay for consumption - Adongo
Bolgatanga Central Member of Parliament, Isaac Adongo has revealed that Ghana borrows $10.6 billion yearly to pay for the consumption of goods and services.
According to Mr. Adongo, it is a worrying thing that should be addressed else the Akufo-Addo-led government will plunge the country into doom leaving huge debts behind for the future generation.
Speaking on the floor of Parliament on Thursday after the Finance Minister addressed legislators on the depreciation of the cedi and the Eurobond, the Bolga Central MP said government shouldn’t have gone for the Eurobond in the first place because it is a complete waste of time since it’s not utilised well.
The NDC MP explained that it is appalling to know the current government only borrows to pay for goods and services.
“What is worrying is the fact that there’s nothing now left to pay for goods and services and we go to borrow to pay for goods and services. So if we take goods and services together, you take the difference in wages and salaries, we are borrowing 10.6 billion every year to pay for our consumption...We are leaving a debt for our children without an asset and you’re still celebrating it,” he quizzed.
“It is so serious that if we look at the utilisation of the last two Eurobonds, it is better we didn’t go to the Eurobond in 2017 because if this is what we are going to be doing then this country is doomed...You go to the capital market to borrow and spend on consumption. 630 million of our Eurobond of 750 million was spent on consumption and the Minister of Finance should be worried,” he warned.
The government of Ghana on 19th March 2019 issued its seventh Eurobond after its maiden appearance on the international capital market in 2007.
An amount of US$ 3 billion was raised in 3 tranches thus 7, 12 and 31 years after the bond was oversubscribed by 7 times.
The proceeds of the bond as stipulated in the 2019 budget is for budgetary support and liability management similar to previous bonds. Issuance of Eurobonds has become an essential source of external financing for successive governments but this is not devoid of risks.
The Finance Minister, Ken Ofori-Atta whilst addressing legislators on 28th March reiterated that the high participation of foreign investors in Ghana’s recent issue of three billion dollars Eurobond confirms investor confidence in Ghana.
Comparing the three-billion-dollar bond to the last bond of 750 million dollars raised under the Mahama administration, Mr. Ofori-Atta argued that government got a better coupon rate, a positive sign at a time Ghana was exiting an IMF programme.
“The last Eurobond of the previous government of 750 million dollars was issued in 2016, the order book was four billion dollars over five times larger. But this came at a high cost of 9.25 percent for six years,” Mr. Ofori-Atta recalled.
He pointed out that compared to this year’s bond of 7.785 percent for a seven-year bond, the government has done well in pricing its bonds.
Mr. Ofori-Atta noted that with about 20 percent oversubscription, the international investment community was telling the government that it is safe to invest in Ghana.