The Minority in Parliament is projecting Ghana’s public debt to hit GH¢173 billion by the end of December 2018, moving the country’s debt to GDP ratio well beyond the 70 percent HIPC threshold.
As at May this year, according to the Minority, Ghana’s public debt had ballooned to GH¢154 billion from GH¢122 billion in January, 2017 –excluding the Energy bond of GH¢4.7 billion.
Speaking Monday at a roundtable breakfast dialogue organized by the Minority Caucus on the Mid-year Economic Performance and Projections of the government to be presented in Parliament Thursday July 19, 2018 by Finance Minister Ken Ofori Atta, Cassiel Ato Forson, Minority’s spokesperson on Finance accused the government of engaging in a lot of misleading commentary and outright populism, while in opposition, on the Public Debt.
Scandalized by the comments of the governing NPP whilst in opposition, the former Deputy Finance Minister bemoaned, “Amidst deliberate misrepresentation of the facts about our debt position, its computation and rationale for borrowing, they also claimed to possess the magic to mobilize domestic resources to finance their campaign promises. They dismissed borrowing as “a lazy approach” to economic management and promised a different paradigm.”
“Contrary to these claims, our public debt has ballooned to GH¢154 billion (excluding the Energy Bond of GHC4.7 Billion) as of May, 2018 from GH¢122 billion in January, 2017,” he stated noting “it is expected to increase further by GH¢3.8 billion – (1.7 billion + 1.4 billion + 0.7 billion)–should the financing plan specified above, i.e. selling state assets, prepayment of license fees, and monetization of mineral royalties, fail to materialize.”
In addition to this, the Government has issued a Bond worth GH¢2.2 billion to GCB in respect of its assumption of the collapse of UT and Capital Banks, adding to the public debt to be borne by the poor tax payer, he stated.
“Based on the foregoing, we project that in the year 2018 alone the government will be adding about GH¢25 billion to the Public Debt stock. This will add to the total borrowing for 2017 of some GH¢26 billion. The Public Debt therefore, can be projected at about GH¢173 billion by end-December 2018, which will take our debt to GDP ratio well beyond the 70% HIPC threshold,” declared Mr. Forson.
Touching on the mounting fiscal pressures, the Ajumako-Enyan-Esiam Member of Parliament warned that the country’s fiscal credibility is being compromised, regarding government expenditures, with large fiscal slippages being created by the government’s inability to raise the needed additional revenues to meet the “unrealistic promises that are increasing expenditures.”
He said the projected deficit target of 4.5 percent would be missed due to huge deviations in revenue and expenditure and the financial sector related cost and that “aside the fact that Government is accumulating arrears and sweeping them under the carpet, there is also a prior decision by government to cut down expenditure up to an amount of GH¢850 million on already-starved key sectors of the economy purposely to make enough savings to meet the demands from specific expenditure.”
He said the government’s decision to cap transfers to statutory funds is gradually collapsing all statutory funds. The capping law, according to him was introduced purposely to free some revenue for government to undertake opulent expenditure but that has rather proven woefully inadequate due to the huge fiscal burden emanating from the introduction of new expenditure.
Fiscal challenges direct consequences of Akufo-Addo’s populist promises
According to Mr. Forson, “a clear fact that emerges from the discussion so far is that the current crisis confronting the managers of the economy, compelling them to impose a raft of heavy taxes on the already burdened populace, is self-imposed” and that Akufo-Addo government should be wary of burdening Ghanaians in its desperation to “save face”.
He said the fiscal problem is the direct result of “shallow opportunism and populism” and that it is obvious the promises made by the NPP in 2016 and their initial actions as contained in the 2017 budget were intended only to get them elected and convey an impression of fidelity to those promises.
The reality however, he noted is that, it has led to major problems for the economy which have translated into severe hardships for the generality of our people with inflation beginning to rise again and being pegged in double digits following a fleeting stay at single digits in the last two months or so.
“The Ghana cedi continues its catastrophic nosedive and is showing no sign of improvement despite lofty talk from government and the Bank of Ghana. It is currently trading at GH¢4.8 to the dollar and appears almost set to reach GH¢ 5 to the dollar if the trend is not curbed immediately. This has in turn led to steep rises in the prices of goods and services leading to more hardships for the people. Fuel prices have increases astronomically as have transport fares,” he stated.
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