Chief Executive Officer of Dalex Finance and Leasing Company Limited Ken Thompson has criticized Ghana’s current economic situation saying “we are heading for a crush.”

According to him, inspite of the fact that Ghana is blessed with cocoa, gold, and a lot of natural resources including oil, its people are not enjoying the benefits. He therefore called on government to ensure that its policies and decisions bring about practical benefits to the people. Speaking at an annual CIMG lecture, Mr. Thompson criticised the phenomenon where it defaults in paying its debts hence borrowers are refusing to lend to it. He exclaimed “Ghana is broke!”

This he said is from figures produced by the Monetary Policy Committee. To buttress the point, he stated “If you earn a thousand cedis and you spend a thousand two hundred cedis you are broke. Ghana is broke – so says the government of Ghana.”

Figures issued by the bank of Ghana according to him showed that government revenue was Gh17billion, expenditure 21billion, payroll 43%, so between payroll and interest, it’s consuming 70% of our budget and that is before any deductions are made for NHIS, GETFUND, District Assemblies Common Fund. The Dalex CEO added that 2013, income was 14billion, expenditure 21 billion, saying “I don’t know which other way to put it but Ghana is broke, and our behaviour has not changed. We’re living beyond our means.”

Ken Thompson intimated that Ghana has got to a point where government debt is unsustainable at 60%, and from government’s own figures, “it’s hoping to borrow twice as much between Januany and December this year as it borrowed last year, and that was before the oil price crashed.”

When the oil prices crashed, government was contemplating whether or not to transfer the falling price to consumers. What happened according to him was that the small savings that was made, government rather transferred it to just 10% of the population – civil servants.

On efforts to address the challenges within the public sector including the bloated payroll, he said GHIFMIS will solve the problems. He called on government to disciplined by checking its spending. Government’s borrowing from the local market, he said is unfairly crowding out local businesses from the money market.

On treasury bills, he predicted a rise to 37% because government keeps issuing bonds as the Bank of Ghana fails to control government in its spending patterns. The Central Bank’s support of government in managing its deficit by printing more cash into the system thereby having more money chasing fewer goods. This he said will eventually cause a rise in inflation which he says will rise to as much as 25%.

He added that the government’s decision to go the IMF for a bailout programme is not entirely a bad decisions, but said it is not the panacea to all the problems with the economy – “it is not a silver bullet”. He suggested however, that government disciplines itself on its spending. For him, the programme is most likely to crash since for “over 20 years governments of Ghana have not been able to meet any of its targets.”

He indicated that the cash reliefs from the fund are likely to be back-loaded because “the government of Ghana will not meet these conditionalities – I doubt it. The cash relief will either be delayed or at worst will not come.” He advised Ghanaians not to be excited when the deal is finally signed.

He bemoaned the over-reliance of imports into the country that over a short period of time “Ghanaians have stopped eating the gari, brown rice, yam, etc but rather prefer to eat perfumed rice, quacker oats, indomie, pizza, etc. This will cause the major currencies like the Dollar to appreciate and the Cedi depreciate. This is exacerbated by the impressive performance of the Dollar globally which has been further boosted by the recent fall in the prices of crude oil on the world market.

He pointed out that until foreign products are made more expensive in the country, as compared with local products, a lot of people will continue to patronise foreign products which will not only negatively affect the value of the Cedi but also take jobs away from the country.

He was quick to add however that, competing with foreign products will be most difficult because it is cheaper to produce outside than in Ghana because the Cedi is over-valued. For this to be addressed he called for policies that would allow the Cedi to correct itself and also increase exports. This he said would involve collapsing all firms in the country that are import-based and revive as well as introduce ones that are export-based.

On the local currency – the Cedi, he said it is over-valued, hence gives falls confidence and the wrong signals which eventually leads governments to make wrong decisions. According to him, if the Big-Mac Index, which has proven more reliable than all the other sophisticated models is used to access the value of the Cedi, it will be realized that the Cedi’s value is artificial. He pointed out that per the index, a Dollar is currently equivalent to 6 Cedis. He is however, calling on the Central Bank to allow the local currency to correct itself.

He chided the level of waste in the country and asked that Ghanaians in general, especially the public sector to do enough to cut-back on waste – by turning of air-conditioners, and other electrical gadgets when they’re not in use among others. This he said could save the country and its people a lot of money that would otherwise be spent on paying for electricity.