Stop the reckless borrowing – Dr Domfeh to NPP, NDC govts

A Development Economist, Dr. George Domfeh, has described as reckless the rate of borrowing by both the New Patriotic Party (NPP) and National Democratic Congress (NDC) administrations.

According to him, the effects are felt after every elections.

Dr Domfeh’s comments come on the back of the Finance Minister’s presentation of the transitional budget to Parliament on Wednesday.

A Senior Research Fellow at the University of Ghana, Dr Domfeh said: “I always want to use the word reckless because they don’t care. All they need to do is that let me go and take something to do something little and Ghanaians will point to those things I have done, and because we always praise them without asking them how they got that money.”

Statistics indicate that about 46 per cent of the country’s total income goes into debt repayment.

The International Monetary Fund (IMF) on Tuesday, October 27 clarified that Ghana has not been reinstated into the Highly Indebted Poor Countries (HIPC) Initiative as was being speculated.

Speaking with host Alfred Ocansey on the Sunrise morning show on 3FM, Dr Domfeh said the HIPC status and HIPC should not be confused.

“When we were entering this new millennium, the developed countries partnered with IMF to provide debts packages for Ghana. 51% of our tax revenue was being used to service debt in the year 2000 and at the time, debt to GDP ratio was 182% using 2006 constant prices. Now if you use 2006 constant prices, the year 2000, our debt to GDP ratio stood at 182% way above the maximum 70 percent threshold.”

He further explained that by the year 2006, when the country exited HIPC, Ghana’s debt to GDP ratio fell to 26%, describing it as one of the best things to happen to Ghana.

He, however, regretted that “having left HIPC in the next two years, former President Kufour increased our debt to GDP ratio from 26 to 32% and that is where my brother Fiifi Kwetey had a programme called Setting the Records Straight [and] will always hit back at President Kufuor because he had a problem with it”.

“Anytime they go for the debt, they take more when they are in power because they don’t pay immediately. Mostly they will give you a five-year moratorium. This year we have taken $1 billion for the Covid-19 relief from the International Monetary Fund and they gave us five and half year’s moratorium. And so, when you begin to pay that is where the problem comes.”

According to him, this year the Finance Minister led Ghana for €3-billion bonds but a third of that would be going into debt re-profiling.

“What does that mean? It means that when the economy was in bad state especially 2015 and 2016 when we were rated by Standards and Poor as B- with negative outlook, and anytime we went to the European markets for borrowing, we were taking it at 15% and 11%. Today because our rating is better (B) with positive outlook, they give it to us around 7% to pay what we took in 2014 and 2015.”

This is not good for the country at all, he bemoaned.