Expectation of $19 billion loan from China to add GHC81.7 billion; legitimate questions

Introduction

Public borrowing is clearly guided by the Public Financial Management Act, 2016 (ACT 921) to ensure disclosure, transparency, accountability and responsibility. It is now clear that all government borrowings shall be null and void unless the terms and conditions of such borrowings are approved by resolution of Parliament. It is equally known that now all public borrowings shall have borrowing purpose which should be accommodated in the debt management objectives and the debt management strategy.

Annual Borrowing Plan

In order to ensure discipline in public borrowing, the annual borrowing requirement for each fiscal year must be approved by Parliament. The Minister of Finance is required to publish on the website of the Ministry of Finance including any updates. This simply means debt management including borrowing should not be kept away from the public. The annual borrowing plan as provided for in section 60(2) shall include the following:

• planned borrowing operations over the year

• borrowing instruments to be used

• the indicative timing of the borrowings

Ghana’s Public Debt and the Chinese Loan

Ghana’s public debt as at 31st December 2016 was GH¢122.2Billion which increased to GH¢142.5Billion as at 31st December 2017 indicating 17% debt accumulation for one year. The GDP of Ghana is in excess of GH¢200Billion. Given a conservative average exchange rate of GH¢4.3 to the $ is used , the expected $19Billion in August 2018 means adding GH¢81.7 Billion to the debt stock which is already expected to rise to about GH¢150Billion in September, 2018 thereby recording (GH¢150Billion plus GH¢81.7Billion= GH¢231.7Billion). As usual, China cannot release GH¢81.7Billion in August, 2018 even when there concentration miracles for Ghana for which the loan is granted in August. The conditions to be fulfilled to release even $1billion will be so intense. This implies without rebasing the GDP as announced the debt to GDP ratio which started rising since September 2017 from 68.5% to 69.8% at the end of 2017 may become very bad.

Borrowing Diversification Needs Infrastructure Diversification

Ghana has diversified her debt portfolio and sources of the debts but failed to showcase commensurate infrastructure for the debts acquired from many sources with emerging interest in Japan and Islamic bonds. We have seen enough borrowing perhaps we have to see enough strategic infrastructure

Legitimate Questions

If documents about the loan are yet to be sent to Parliament to receive Parliamentary approval in accordance with the Public Financial Management then what influenced the announcement in June 2017 that Ghana has secured $19Billion from China? If indeed this loan will be activated as announced, there should be comprehensive disclosure. What is China benefitting? What are we ceding to China? Our bauxite reserves? What will be the implication on debt to GDP? Is this loan part of the annual borrowing plan approved by parliament? What will be different this time bearing in mind that the overarching demands by China did not allow Ghana to receive the full $3Billion CDB loan in the past. China again? Given the size of this loan and what Ghana is possibly going to cede to China is it not proper to allow contents of the loan document to receive in-depth and wider public discussion?

Conclusion

The Public Financial Management Act has made debt management and borrowing a public issue. Let us create the platform for development-oriented discussion when the document is ready. It is however, important for government officials to be telling us some details now instead of the usual $19Billion loan is coming