National debt accumulation is a very serious issue to any patriotic citizen of a civilize nation and for those with the memories Gleneagles Summit in 2005 fresh in mind, everything is done to resist toxic debt. The Italians, Greece, Portuguese and the Spanish public are currently fighting tooth and nail not to have themselves committed to the IMF/World Bank poisonous debt relief but with my beloved Ghana, borrowing regardless to whatever consequence is accompanying such debt, is the most humble way out of our economic imbroglio.
There have been occasions when the issue of committing the state of Ghana to debt has generated public outcry. On normal circumstances, government finance ministers take it as a duty to defend the position of the Head of State, in justifying why the nation must incur such debt. Citizens by right have also defended their stake in the state, which has resulted in counter debate. Heated as the debates have been, taxation has never been allowed to have a direct connection with government borrowing.
The argument on why Ghana government should commit the state of Ghana into debt has always been around the viability of project for which the money is going to be borrowed for. The project's expected income march against its expenditure has always been the basis. By this, the social and economic expected cost of the project is compared directly with the expected revenue to decide whether the government of Ghana should go into the project or not.
The past two weeks saw an unprecedented aggression of a government minister in the person of Hon. Fifi Fiavi Franklin Kwetey, defending the need to increase taxation in Ghana, mainly to service debt. The minister was heard advising Ghanaians to stop being lazy thinking they will be getting things freely from the state and start understanding that they have to pay more tax to develop Ghana. The minister questions anyone who tries to exercise his/her right as a citizen, on whether the individual is against taxation or government borrowing, to manage the ailing economy.
The authority by which Hon. Fifi Kwetey speaks and the passion behind his sense of conviction push one into asking certain vital personal questions. The first set of questions are, why is the young minister so passionate about introducing and increasing tax on Ghanaians to incur more debts as a solution to the economic transformation of the nation? Is the minister truly doing this in the interest of Ghana or against the interest of Ghana? Is it not important for us to explore further the contents and composition of this debt? Could this knowledge enable us have an idea of whose interest these debt and interest, truly serve?
In the minister's own words, Ghana's current deficit is at GHC8.7 billion (US$5 billion), which is about 12.1% of the nation's GDP (Gross Domestic Product). The term deficit in this case means, higher expenditure of the Ghana government than its revenue. The Ghana government is borrowing more to meet up with its obligations than it is earnings. The national debt of Ghana consist of Domestic Debt which are debt to the Government of Ghana (GoG) by Ghanaian investors and Foreign Debts, which are the money Ghana government borrowed from people who are not Ghanaians. It is not without doubt that Fifi Kwetey left a lot of us confuse on exactly what the GoG wants more money for and what it is spending the deficit on. On one front, Fifi appeared to be advocating for more money to finance capital project. On other fronts, the argument seems to be more money to pay interest on government borrowings to finance capital projects or payment of salaries to government employees.
Whatever be the case, the ratio of the domestic debt against the foreign debt on the state of Ghana is 10:90, which means for every GHC1 as interest paid by the government of Ghana to the Ghanaian on the loan, the non Ghanaian gets an equivalent of GHC9. The Ghanaian investor is normally domiciling in Ghana, employing Ghanaians, pay tax to GoG and receives his/her interest in Cedis. The foreign investor, whom our Minister seems to be so obsessed with, is not only a non resident in Ghana in addition to the high proportion of interest on loan paid to him/her but also does not pay local tax. He/she receive a return on his/her investment in the hard earned US Dollar from GoG.
It is worthy of note that a foreign investor can operate in a country without the government ending up a debtor and some good cases are Coca-Cola, Uni-lever, Cadbury, etc. These kinds of investors do also pay tax to the state of Ghana because they are operating domestically and earn their income in local currency. The state of Ghana indeed embarks on similar projects in the past that resulted in national debt and interest burden. The challenges in the past were around capital intensive project but less attractive to private investors. This is no more the case these days. The relatively small, disperse population and less sophisticated nature of the Ghanaian consumer behaviour made investment less attractive, forcing the state to embark on borrowing to provide for the citizens. The population today is not only huge and concentrated but highly sophisticated; enough to attract any form of investment without having any government official committing its citizen to draconian taxation, only to have the same citizen paying for the services whose capital was finance by their tax. In this case, the citizens of Ghana are paying tax twice (Double Taxation). The most painful part is, while the ratio of debt or state deficit in the UK is 90:10, with the UK nationals owning 90% as against 10% to foreigners, the Ghanaian situation is the extreme opposite. So using the European model of taxation and debt for Economic growth in Ghana is absolutely misplaced. The UK keep 90% of interest at home to British citizens in Pound Starling and pay non British investors just 10% in the currency of the investors choice. The ultimate objective of Economic growth from investment is easily actualized and the standard of living of the citizens improved. Taxation, investment and national debt in this instance works. The story in Ghana is a form of slavery sustain through the domestic foreign debt ratio.
It is important to remind Ghanaians by ending this article with the fact that, every man made product today is designed to have a limited life span. From fridge to bridge and from cars to houses, everything is produce to be reproduced again. Five to ten years are the average age these days and the same thing has to be built again. If people like Hon. Fifi Kwetey are not thinking of putting talented Ghanaian youths together and nurturing them into inventors whose work is harness by the state into finish goods, then the Ghanaian tax payer is doomed forever. By the way, is Fifi Kwetey as a Minister for Allied and Financial Institutions, a tax payer? How much in tax does he pay annually from his income to the coffers of the state?
