It will be recalled that Government during the delivery of the 2021 budget statement, the Acting Finance Minister, Hon. Osei Kyei Mensah Bonsu, indicated in paragraphs 149 and 150 Ghana’s current debt stock and the reasons accounting for same.
He stated “Mr Speaker, the provisional nominal debt stock as at December 2020 stood at GHS291,614.5 million (USD50,829.6 million), representing 76.1% of GDP.
This ratio includes the financial and energy sector bailouts. Excluding the Financial Sector Bailout, the nominal debt stock as percentage of GDP falls to 71.5%. The increase was mainly as a result of an Eurobond issuance in February 2020, Covid-19 pandemic effect, crystallization of contingent liabilities in the energy and financial sectors, and lower than expected GDP growth.”
It was stated further in paragraphs 153 and 154 “Following from above, the composition of the total debt stock was made up of a provisional amount of GHS141,780.60 million (USD24,712.94 million) and GHS149,833,89 million (USD26,116.66 million) for external and domestic debt, respectively, which correspondingly accounted for 48.6% and 51.4% of the total. As a percentage of GDP, external and domestic debt represented 37.0% and 39.1%, respectively.”
IMF’s revelation puts Ghana’s debt to GDP at 78%
In spite of the above statement, the International Monetary Fund (IMF) has revealed Ghana’s public debt as a percentage of GDP for 2020 was 78%. According to the IMF, the rise in the debt stock can be attributed to the inclusion of some GHS7.63 billion costs incurred in the energy sector which was somewhat excluded by government in its calculation of the total debt stock.
The IMF made the revelation in its May 2021 Article IV Consultation paper following a visit by a team of experts to Ghana from April 28 to May 12, 2021. Leader of the Fund’s technical mission, Carlo Sdralevich in a statement said, “Government interventions in 2020 also exacerbated pre-existing fiscal rigidities and public debt vulnerabilities. The government deficit, including energy and financial sector costs, reached 15.5% of GDP, while annual gross financing needs exceeded 20% of GDP. Public debt rose to 78% of GDP in 2020, from 64.4% in 2019, including ESLA of GHS7.63 billion in 2020.”
Concerns about Ghana’s recent increasing debt
Ghana’s debt stock has ballooned from GHS122billion representing 57.12% of rebased GDP, according to the IMF, World Economic Outlook Database, April 2019 report to GHS291.6billion as at December 2020, representing an increase of 139 percent and 78% of GDP, according to the International Monetary Fund (IMF).
The World Bank has projected that Ghana’s debt to GDP ratio will reach 81% by 2023, with the IMF also predicting that Ghana’s debt to GDP ratio is expected to reach 81.5% by December 2021, with further increase in debt to GDP to 83.2% by 2022, 84.8%, 86.0% and 86.6% by 2023, 2024 and 2025 respectively.
In short, Ghana’s economy will reach very unsustainable levels, by the time this administration leaves office in 2024. The situation is already dire based on the Economic Intelligence Unit (EIU) report issued in April 2021, which said “Ghana is hardly able to ensure prudent debt servicing through prompt payment of maturing principals accruing from official credit facilities”. This leaves the country in a position which can be described as highly debt distressed.
Ghana’s Economy in Bad Shape
It must be reaffirmed that Ghana’s economy has never been in good shape under this Government. Analysis of the Ghana’s economy based on official data from the Finance Ministry indicate that when the Administration took office in 2017, the economy was on a rebound with growth rate of 3.4% in 2016 as against 2.2% the previous year.
Hence, overall growth rate of 8.1% in 2017 gave indications of stellar economic management under this Administration. However, this was based on an overly excessive growth of 80.3% in the petroleum sector in 2017 from a decline of 15.6% in 2016. Petroleum sector growth of 3.6% in 2018 gave the government a reality check, removing completely any hallucinations of sustained economic growth.
For instance, growth of the mining sector which had reached 30% by the fourth quarter of 2017 witnessed a sharp reduction by about 60% to 12.6% in the fourth quarter of 2019. Also, Manufacturing growth which was 13% in the third quarter of 2017 decelerated to 6.30% in the fourth quarter of 2019.
The financial sector also contracted at an average of 6.6% per quarter, as against the average quarterly expansion of 12.5% in the 12 quarters between 2014 and 2016. From 2007 and 2016, the combined Kufuor/Mills Governments raised USD4.5 billion in Eurobonds. However, this Administration raised USD5 billion between 2018 and 2019 alone.
Of the USD17.5 billion in Eurobonds raised between 2007 and 2021, USD13 billion, representing 74% was contracted under this Government. It therefore came as no surprise when Ghana’s economy grew at a rate of 0.4% in 2020, below the revised target of 0.9%.
Poor deficit management resulting in deficit of 16.0%
For fiscal deficit management, the government announced a current deficit position of 11.7% in the 2021 budget statement, in contrast to the IMF April 2020 Fiscal Monitor, which put the deficit at 16.0%, far higher than the 13.9% and 5.7% for Zambia and Cote d’Ivoire respectively within the same period. This is disappointing given the enactment of the Public Financial Management Act (PFMA) and the establishment of the Fiscal Council during this Administration.
16.0% deficit position does not support the claims of being better managers of the economy.
From the above, it is now left in no doubt that the claim of the government to be better managers of the economy is not supported by their deficit position, as compared to the record of the NDC which recorded deficit of 7.8% of non-rebased GDP as at 2016.
The NDC achieved this deficit position even in the absence of the Fiscal Responsibility Act (Act 982), and in the face of managing major energy crisis and considering the downturn in global oil prices. Government must therefore admit that it resorted to reckless borrowing and excessive spending.
Poor performance on Index of Economic Freedom, Global Gender Gap Index issued by the World Economic Forum and ease of doing business ranking are evidence of economic mismanagement
The current state of Ghana’s economy coupled with the imposition of the taxes reflects the insensitivity of this Government and dishonesty in the management of the economy. It is no wonder that the Index of Economic Freedom indicates government obtained an average score of 57.28 for the periods between 2017 and 2020 as compared to an average score of 78.63 between 2013 and 2016.
This is further demonstrated by Ghana’s rank of 107th with a score of 0.67 as at 2020 in the Global Gender Gap Index issued by the World Economic Forum as compared to a rank of 59th with a score of 0.71 in 2016. The ease of doing business rankings also shows that Ghana’s rank has declined from 108th as at 2016 to 118th as at 2020; making one wonder where “the men” this NPP Government claimed to have are.
More allocations of funds to Office of Government Machinery despite the above challenges.
Surprisingly, despite the economic difficulties and high distressed debt position, allocations to the Office of Government Machinery increased from GHS79,392,760 to GHS823,880,668 representing 937.73% in 2021 despite a reduction in staff strength. From 2020 to 2021 alone, allocations to the Executive Office of Government Machinery increased by 504.85%. This is despite calls for “shared burden” by the Finance Minister. Budgetary allocations as against previous provisions revealed that, over the last four years, allocations to the Office of Government Machinery have increased by 71.57%.
Financial loses on account of corruption
According to Community Development Alliance (CDA), corrupt practices swallowed Ghana’s USD2.1 billion Covid-19 Cash in its report on the corruption risks associated with public procurement during the COVID-19 pandemic. The CDA said there were irregular procurement practices that violated the procurement laws, with breaches of anti-corruption laws, regulations, codes and international conventions and best practices.
The Chamber of Bulk Oil Distributors (CBOD) also asserts that, an amount of GHS1.9 billion was lost to petroleum tax evasion in 2019 alone. According to the 2019 Auditor-General Report, unaccounted funds from 2017 to 2019 for Public Boards, Corporations, and other Statutory Institutions amounted to GHS20 billion.
Also, Metropolitan, Municipal and District Assemblies (MMDAs) could not account for GHS50.4 million from 2017 to 2019. The extent of corruption in the Akufo Addo-led Administration became more revealing when Ghana’s first ever Special Prosecutor, Martin A.B.K. Amidu, resigned from office, describing the President who set up his office as “mother serpent of corruption”.
This was after Ghana’s widely respected and highly praised Auditor General, Daniel Yaw Domelovo, who was well known and revered for his fight against corruption was asked to proceed on 142 days accumulated leave and forcibly removed from office subsequently upon resumption.
The above reflects the Sub-Standard performance of this Government, as these corrupt practices and irregularities have occurred under an Administration that promised to protect the public purse. It is therefore not surprising that between 2017 and 2020, Ghana obtained an average score of 41.25 on the Corruption Perception Index. This follows scores of 40, 41, 41 and 43 for 2017 to 2020 respectively.
This is compared to an average score of 46, with scores of 46, 48, 47 and 43 between 2013 and 2016, despite claims to the contrary by the President during the interview with CNN’s Zain Asher. Thus, the NDC’s worse score of 43 on the Corruption Perception Index (CPI) is equivalent to the NPP’s best score, indicating that Ghana has sunk deeper into corruption in the last four years.
Government must admit its failures in the management of the economy.
Government must therefore acknowledge to Ghanaians that it has failed in its management of the economy, and allow for an independent audit of the Covid-19 Trust Fund. This is critical in order to ensure probity, accountability and that Ghanaians are updated with a detailed breakdown of the Covid-19 relief expenditure, which according to this Administration cost GHS19 billion as indicated in the 2021 budget statement. This was what also occasioned the tax (1% Covid-19 Health Levy) that has been introduced.
Conclusion In conclusion, it is obvious that Ghana is in financial crisis and needs urgent help. A crisis facilitated by the Akufo Addo – Bawumia led Administration which has been brought about as a result of failed leadership and poor economic policy management strategies. This failure has resulted in government engaging in dishonesty and several attempts to hide economic figures as well as the true state of the economy away from Ghanaians.
Government must be humble and acknowledge its dishonesty as the economic situation of Ghana is already known to the people of Ghana. Government must as a matter of urgency adopt conscious measures to reduce Ghana’s debt to GDP ratio in order to tackle unemployment and achieve sustained economic development.
The writer, Hon. Francis-Xavier Sosu is an economic policy analyst; private legal practitioner, human rights lawyer, Member of Parliament for Madina Constituency, Member of the Appointments Committee and Deputy Ranking Member of the Constitutional, Legal and Parliamentary Affairs Committee of Parliament.
The writer can be contacted via: email@example.com or www.madinamp.com
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