President John Mahama has said accusations that his government has ballooned the country’s debt stock are not true, rather accusing the main opposition New Patriotic Party (NPP) of doubling Ghana’s debt while in office between 2001 and 2008.Vice-presidential candidate of the NPP, Dr Mahamudu Bawumia has constantly accused Mr Mahama and the NDC government of borrowing so much but showing nothing for it, thus ballooning the country’s debt more than all post-independence governments put together.
Speaking an in exclusive interview with Ovation International, however, Mr Mahama said: “If you look at the facts, it is absolutely untrue that we are incurring debt because post HIPC, Ghana had a debt write off. But if you look at the period from 2006 until 2008, under the NPP government, they virtually doubled the debt again after it had been written off. We will release what the debt figures were from independence till now, we will show the structure to Ghanaians. Our debt profile is currently $24 billion – and in total, that is dollar and cedi debt, GHc104 billion.”
Below is the remainder of what Mr Mahama said in response to a question about whether his critics were right in saying his government had incurred too much debt within a short time:
But if you look carefully at the graph, our debt profile is declining and that is because we have now put in place a public debt management strategy.
Before, any state-owned enterprise that borrowed money, it was added unto the public debt, but what we have done now is to create a Public Debt Management Strategy that says that state-owned enterprises must borrow off their own balance sheets.
So we are no longer piling state-owned debts on the public debts. Today, if you go to the Ghana Airport Company, all the work they are doing at the moment, they have borrowed the money themselves and they are responsible for their own development.
If you go to Ghana Ports and Habour Authority (GAPOHA), the ports expansion and all they are doing, the debt incurred is a Private Public Partnership (PPP) between GAPOHA and Meridian Ports Services. Government has no obligation towards it.
That is what is happening with all our state enterprises. As a result of that, you find out that the debt to GDP is slowing.
And so, currently, if you do the calculation based on 4.9 per cent growth in the first quarter of this year and you take the debt as a percentage of GDP, the debt has come down from 72 per cent to 63 per cent. So the debt is declining and anybody who says we are piling up more debt is mistaken because it shows the person is not in tune with the new Public Debt Management Strategy we are using.
It must be said however, that absolute public debt is incurred by investing in public infrastructure where there are no financial returns. Hospitals for example; if you build a hospital, you do not expect that the hospital will repay the debt. We are building district hospitals, we are building regional hospitals and we are building polyclinics.
Can anyone put a price on the cost of healthcare to the people? The number of pregnant women who will not die during childbirth because there is now a better facility in their locality? The number of children who go to school because now there is a secondary school in their community? People who would have dropped out after Junior High School?
Therefore, if debt or credit is being taken in order to put in the social and economic infrastructure so that it will help to stimulate and grow the economy, it should be applauded because it will create jobs. During the construction period, people are employed as well. If you go to all the schools, the hospitals, the roads, the water projects and everything we are building, it is Ghanaians I see working on these sites. Welders, engineers, carpenters, painters everybody.
If you go to the roads, today, more than 90 percent of the roads are constructed by Ghanaian contractors, if you go there you will find out that the owner of the company is Ghanaian, the workers, engineers, iron benders etc are all Ghanaians. And so, those monies, even if we borrow them are going back into the pockets of Ghanaians.
The point is we are borrowing, but we are borrowing sensibly. Seriously, no country develops with its own resources alone especially countries in Africa.
You must take credit to put in the critical social infrastructure but you must put it in places where you would get return on investment. Three things that I have concentrated on since I came into office. One was to stabilize the electricity, which as I explained, we are doing a lot of work on, two was to stabilize the economy, which we have attained through the stabilization of the cedi. The cedi has been stable for one of the longest periods ever, expenditure has gone down, revenue has gone up, the deficit is coming down, inflation is slowing, and so on the macro level, there is stabilization taking place. The third focus was to restore the social and economic infrastructure.
The social and economic infrastructure of this country was in very bad state. The point is you cannot achieve anything if you do not repair the social and economic infrastructure. You cannot evacuate cocoa to the ports because the roads are bad. And so people close to the border find it easier to cross the border to sell their products instead of selling to Cocoa Board.
Now that we are doing the roads in all those areas, there is more cocoa being evacuated to the ports, you can send fertilizer to the farmers so that you can increase their productivity, more food can come to the market, which means food can become cheaper, people now have access to clean drinking water, which means people will be prevented from having all these water-borne diseases for which they go to hospital and overburden our NHIS. It is a very interlinked situation that we have adopted.
But certainly with debt, like every government, we have debt, the NPP government borrowed quite a lot and were even given debt forgiveness in what was called HIPC. They used that funds for some development, it is the same thing; but we have approached it in a different way that has not overburdened the public debt.
In addition, we have also deployed the funds probably more judiciously in priority areas, areas that are targeted at economic growth of Ghana and Ghanaians.
By the way I should add that through the Public Debt Management Strategy. We have in agreement with the IMF put a ceiling on commercial borrowing. We will not go above $500 million per year. There is no ceiling however on non-concessional credits. We have capped commercial credit for the next three years.
Also, all state enterprises have to set up their own debt service accounts and borrow on their own balance sheets. If you therefore look at the trajectory of our debt, it is coming down, and with the acceleration of growth, it means it will come down even faster.