Ghana 'debt-distressed' but planning US$5 billion 'junk' Eurobond – Isaac Adongo

Despite being a debt-distressed country, according to the Economist Intelligence Unit (EIU), the government of President Nana Akufo-Addo intends to do a $5 billion “junk” Eurobond spearheaded by Vice-President Dr Mahamudu Bawumia, Bolgatanga Central MP Isaac Adongo has said.

In a short write-up, the opposition MP quotes the EIU as saying: “The country is currently estimated to be in default, following a rise in principal arrears owed to external official creditors in 2018. Arrears will remain substantial, raising the perceived risk of a prolonged default among investors”.

In Mr Adongo’s view, this shows that “Ghana is no longer at risk of debt distress as claimed by the World Bank; we are actually in debt distress, as we have defaulted and cannot pay maturing loans owed to official external creditors and are now accumulating arrears of unpaid official external debts under”.

He said Ghana is “now facing frightening rising fiscal risks, external vulnerabilities and in debt distress but still looking to do $5 billion junk Eurobonds in 2021 under Dr Bawumia”.

About a week ago, following the reading of the 2021 budget, Mr Adongo came out to say that Ghana’s budget deficit for 2020 was more than 18 per cent contrary to what the government says it is.

According to him, the 11.7 per cent quoted by caretaker Finance Minister Osei Kyei-Mensah-Bonsu when he presented the 2021 budget and economic statement on the floor of Parliament on Friday, 12 March, is a cooked figure.

Mr Kyei-Mensah-Bonsu told the house in his presentation that “even though complete 2020 Gross Domestic Product (GDP) data have not yet been released by the Ghana Statistical Service, provisional data for the first three quarters of 2020” showed that the “targets for most of the macroeconomic indicators are largely on track”.

The Majority Leader of Parliament presented the following as the summary of the domestic macroeconomic performance for 2020:

a. Average overall real GDP growth for the first three quarters of 2020 was 0.2 per cent, compared with 6.0 per cent for the same period in 2019. The projected outlook for 2020 is 0.9 per cent, reflecting the impact of the COVID-19 pandemic;

b. Non-oil real GDP grew at an average of 0.4 per cent in the first three quarters of 2020. The projected outlook for 2020 is 1.6 per cent;

c. End-period inflation was 10.4 per cent in December, 2020 compared to the revised target of 11.0 per cent;

d. The overall budget deficit on cash basis was 11.7 per cent of GDP, excluding financial sector clean-up cost, against a revised target of 11.4 per cent of GDP;

e. The primary balance recorded a deficit of 5.3 per cent of GDP against a target deficit of 4.6 per cent of GDP;

f. Gross international reserves accumulated to US$8.6 billion, the equivalent of 4.1 months of import cover, slightly above target.

However, Mr Adongo, who expressed his wish of being future Finance Minister to steer Ghana out of her economic doldrums, disputed the figures of the Minister of Parliamentary Affairs when he spoke to Eugene Bawelle on Class91.3FM’s current affairs programme ‘The Watchdog’ on Saturday, 13 March 2021.

In the opposition lawmaker’s view, “the Ghanaian economy had very severe underlying conditions before COVID-19 arrived”, insisting that the pandemic “just exploited the severe underlying conditions of our economy and collapsed” it.

“You could not be running an economy at a deficit of 7 per cent all the way up to 9-point-something per cent and come to the people of Ghana and hide this and be telling us it is 4 per cent and when you now go to the IMF to look for money, you went saying that in 2018, you did a deficit of 7 per cent, which was the first time we were hearing that Ghana had 7 per cent deficit even though on the floor [of Parliament], when we were debating those budgets, some of us raised the point that the deficit had been cooked and that it is more than that”.

“Now, they agree that it was 7 per cent. Then they said in 2019, they did 7.3 per cent and then they said in 2020 they were anticipating something around 9.5 per cent and, as we speak, they reported 11.7 per cent but I can demonstrate to you that the deficit is over 18 per cent”.

As far as he is concerned, the weak economic fundamentals which, according to him, were being hidden by the government, provided a fertile ground for the pandemic to sink its teeth in.

“So, you can’t have an economy like that and survive COVID-19. Obviously, that is a very severe underlying condition that is tantamount to having diabetes and seriously, your economy will collapse”, he noted, stressing: “You can’t have an economy that started growing; when you inherited it, you said the economy was terrible and yet that terrible economy gave you about 7 per cent growth. It declined in 2018 to 6.3 per cent and then by 2019, you were doing 6.1 per cent and now you are doing 0.2 per cent growth”.

That, he emphasised, “should tell you that you didn’t have the kind of economy you painted, yet the president tells us that he’s been growing the economy at an average of 7 per cent”.

“The data available doesn’t support that. If you read the data that we submitted to the IMF, we said that in 2018, we did 6.3 per cent, 2019 we did 6.1 per cent and we are expecting to do 1.5 per cent in 2020. In fact, 2020 ends up at 0.2 per cent. So, how can you put all these together and get an average of 7 per cent? Clearly, the President was not speaking the truth to us and that is the nature of the economy we’ve been running”, Mr Adongo said.

Further, Mr Adongo said the deception of the government vis-à-vis the performance of the economy, has been exposed.

“They keep telling us the primary balance has been consistently positive for three years. Now, what that means is that they were indicating to us that they have been able to raise so much revenue that they don’t borrow to pay the interest cost on the loans that Ghana has contracted. That is what a positive primary balance means. But it turned out, when they now reported to the IMF, that they said in 2018, the primary balance was not positive after all. It was a -1.4 per cent. What it means is that we were now borrowing to pay our interest cost and when you borrow to pay your interest cost, what you do is that you are compounding your loan portfolio, you’re compounding your public debt and your public debt will grow at a faster rate. Then they said in 2019, they got another -1.8 per cent. Then they said now they are expecting a -4.1 per cent and it ended up at a -5.3 per cent”.

“So, it means that we are now compounding our debt portfolio at a faster rate than we should and those are the underlying conditions that COVID hates and then decided to collapse the economy”, he said.

Asked if he relished being at the helm of affairs under the gloomy conditions he had painted, Mr Adongo answered: “To be honest with you, the NDC is the only political party that is able to take the most difficult decisions to turn around the economy”.

He recalled: “What we experienced in 2014, 2015, I can’t imagine these people managing that difficulty. In 1983, Ghana experienced its worst-ever economic meltdown. As a child, I queued several kilometres to buy bread and milk for the family. Not even COVID will let you queue several kilometres to get basic essentials like soap, sugar, milk and bread so you can get food to eat in the house. And, yet, His Excellency Jerry John Rawlings undertook some of the most difficult policy measures at the time to turn around the economy”.

“You’ll recall that he introduced the Structural Adjustment Programme with the Economic Recovery Programme, which was accompanied by the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD) and all the difficulties that we had”, he recounted.

“And, so, we are the masters of turning around difficult economies and I would have really really [relished] the opportunity to be the star in the room”, he declared.