General News of Tue, 4 Sep 201822
Our economy cannot support $50 billion bond – Ato-Forson
Former Deputy Minister for Finance, Cassiel Ato-Forson, has said that the current state of the country’s economy cannot support the floating of a $50 billion bond.
According to him, the economy may grind into serious challenges if the government goes ahead with the plan to float the bond.
“Ghana’s economy cannot support a public debt of $50 billion. Debt servicing as we speak at a percentage to total revenue is about 50%. Debt services and wages and salaries takes away the entire revenue of the country so how are we going to service that debt. Are they going to borrow to service that debt? What is the size of the economy of Ghana? It is less than $50 billion. It is not applicable,” he said.
President Akufo-Addo while on a state visit to China last week urged that country’s president, Xi Jinping that Ghana was looking at floating a $50 billion Century Bond and was interested in getting China to take part.
“The Ministry of Finance and the economists in Ghana are looking at floating a $50 billion Century Bond. This will provide us with the resources to finance our infrastructural and industrial development. We are hoping that, at some stage, China will interest itself, and take a part of it as China’s contribution to Ghana’s development,” Akufo-Addo told Jinping.
But Cassiel Ato-Forson, who is also the Member of Parliament for Ajumako Enyan Esiam constituency in the Central Region said the government does not have the capacity to use the $50 billion if it successfully floats the bond.
He noted that the value of the government’s planned development programmes was far less than the amount it was seeking to raise, arguing that the current revenue of the country is woefully inadequate to guarantee the repayment of the amount and its corresponding interest.
“Government of Ghana does not have the capacity to utilize $50 billion even within 3 years. I say this because I know we don’t have prepared projects to the tune of $50 billion. So why do you go out there to borrow$50 billion put it in an account, start paying interest you cannot spend in within 2 to 3 years but excess of 4 years. What kind of economic management is this?,” he quizzed.
He is cautioning the government to “be careful” over its plan.
$50 billion bond without dev’t plan not good
Meanwhile, an economist, Dr. John Gatsi has cautioned the government against the move especially as it does not have a long-term national development plan that will provide guidance on what the money must be spent on to achieve a set target.
He said floating the bond against political promises was not sustainable.
He is therefore calling on the government to consult various stakeholders especially parliament over the matter to ensure that a sound decision is taken.
“A country should engage in such a long-term borrowing based on a long-term development agenda approved by parliament and guiding all of us. That should be the case because when you are using natural resources as a mortgage for the country, you need to know that commodity goes through volatility in terms of price and when such things happen, they pose problems for the country,” he said.
“It is inappropriate to allow one government to put the country on that path bearing in mind the risk this poses to us in the future….It will be in the interest of the government to get the attention and the buy-in of other stakeholders especially parliament before engaging in further this discussion,” John Gatsi added.