The government has been cautioned against long-term borrowing without a long-term development plan to ensure that the monies received are put to proper use.
Dr. John Gatsi gave the advice on Eyewitness News on Monday, September 03, 2018.
“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. We’ve seen that for Argentina and Zambia and it cannot be different for Ghana,” 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.
The development has raised a lot of questions among Ghanaian investment analysts and other stakeholders.
While some are concerned about the apparent salvation Ghana and other African countries have found in the trade with China, others believe Akufo-Addo’s specific request to China over the planned $50 billion bond will not be in the interest of the country.
John Gatsi told Umaru Sanda Amadu that following the declaration by the Senior Minister Osafo Maafo that the government will only be motivated by the promises it made to Ghanaians and not a long-term development plan, the $50 billion bond could be deemed as inappropriate.
“As we speak, we do not have a long-term development plan. When the Senior Minister was being vetted, he said they were motivated by the promises they made to the people of Ghana and will not be entangled by what is being called a 40-year development plan so clearly that government is not interested in the long-term development plan which should guide such borrowing,” he said.
He further stressed that the government must not be allowed to “put the country on that path” considering the high risk involved.
He said such a decision must only be taken when stakeholders particularly parliament is consulted.
“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 government to get the attention and the buy-in of other stakeholders especially Parliament before engaging further in this discussion. We can also not allow one government to entangle the natural resource base of this country for borrowing to undertake projects that are not clearly cut in the national development plan,” he added.
$50 billion bond not sound economic practice
Meanwhile, a former Deputy Minister for Finance, Cassiel Ato Forson believes it is not economically sound for the government to issue a $50 billion bond.
According to him, the country’s current economic situation will not support such a decision.
“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 servicing 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.