NDC government added a whopping GHC343,117, 880,000 to the gross public debt - IPG replies John Mahama

The Institute of Progressive Governance (IPG) has provided an answer to one of the five questions recently posed to the Vice President and Flagbearer of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia, by the former President John Dramani.

IPG quoted former President as questioning Dr. Bawumia: Why has the public debt risen from GHS 120 billion in 2016 to GHS 763 billion in 2024? In a rather simply response, IGP indicated that the public debt has risen to GHS 763 billion because the last NDC Government added a whopping GHS 343 billion to the total debt stock.

Quoting figures from the Ministry of Finance’s Annual Debt Management Reports (available on the website of the ministry), IPG indicated that after 19 years in office, former President Jerry John Rawlings left a total debt stock of about $7.16 billion. Former President Agyekum Kufour inherited this debt and technically added less than a billion dollar to it because of the debt reliefs from the enhanced HIPC initiative. However, having inherited $8.07 billion from Kufour, NDC under the leadership of President John Evans Atta-Mills and John Dramani Mahama added a whopping $21.15 billion to the country’s gross public debt.

"Currently, the total public debt in USD is $51.1 billion. This means that President Akuffo Addo in almost 8 years (as at 31st July 2024), has added $21.88 billion to the gross public debt.

This figure is not too different from the $21.15 billion NDC under the leadership of Mills/Mahama added.

For the academic purpose, the marginal increases of Akuffo Addo’s debt over Mills/Mahama could be explained on two grounds. First, Ghana’s GDP has increased from $56.1 billion in 2016 to $75.3 billion in October 2024, suggesting higher levels of expenditure", the statement stated.

"Again, after becoming a lower middle-income country in over a decade ago, the proportion of the non-concessional loans in the country’s debt portfolio has gone up.

This means that the Ghana is now spending more on interest payments compared to the period of the last NDC Government.

It is therefore very strange for the former President to ask a question, whose answer is found under his sleeves! Indeed, the NDC government left a total debt stock of $29.227 billion (see page 5 of the 2016 Annual Management Debt Report at the website of the MoF).

Using the exchange rate of $1 to GHS4.20 on the 7th January, 2017 (the day Mahama handed over power to Akuffo Addo), in terms of Cedi, Mahama left a total gross public debt of GHS122.724 billion", the statement added.

"However, using today’s (30th October, 2024) exchange rate of $1 to 16.22, $21.15 billion NDC added to Ghana’s gross public debt is estimated at GHS 343 billion. It must be emphasized that if Nana Akuffo Addo has never borrowed a penny since he became president, Ghana’s total debt stock would have risen to GHS473.48 billion! Unfortunately, this rise in the public debt is purely because of depreciation! It is for this reason why nominal figures are usually avoided when analysing public debt.

Unfortunately, politicians have over the years explained public debt in a way that would cause public disaffection to their political opponents. Ideally, economists use debt-to-GDP ratio to explain debt sustainability. The main reason for the choice of debt-to-GDP ratio is to avoid the danger of adding depreciation to debt accumulation", the statement said.

"There are various thresholds for using debt-to-GDP ratio to determine debt sustainability. While the IMF does not accept anything above debt-to-GDP ratio of 60% for economies like Ghana, the magnanimous West African Monetary Institute (WAMI) accepts up to 70% for countries in its zone. Using the 2006 constant prices, Kufour inherited an economy with debt-to-GDP ratio of 182%! Ghana’s debt was therefore highly unsustainable in the year 2000! After joining HIPC and enjoying debt reliefs, Ghana’s debt-to-GDP ratio drastically went down to 32% in 2008.

Unfortunately, by 2014, Ghana’s debt-to-GDP ratio has gone up again to an unsustainable level of 71%. Indeed, Mahama left an economy with an unsustainable debt-to-GDP ratio of 73.3%! This is not a record the former President should be proud of it!

For the first time since 2006, in 2017, Ghana’s debt-to-GDP ratio experienced a decline (to around 68.9%). In 2018, the economy was rebased (from 2006 to 2013 constant prices) and the GDP became 24.2% higher", the statement explained further.

"Subsequently, what would have been a debt-to-GDP ratio of 73.3% in 2016 (using the 2006 constant prices) became 56.8% in the new base year. This declined to 55.5% 2017 and inched up to about 62% in 2019 but went up astronomically to 76.1% in the 2020 (the Covid-19 pandemic year). At the end of 2023, Ghana’s provisional debt-to-GDP ratio had declined to 72.3%!

If the current 72.3% of debt-to-GDP ratio is bad, then former President Mahama should explain to Ghanaians why the 73.3% he left in 2016 is better!", the statement concluded.