The Danquah Institute is calling for a critical national dialogue on Ghanaï¿½s spiraling public debt stock, which, according to the latest report from Monetary Policy Committee of the Bank of Ghana, has jumped to nearly 50% of Ghanaï¿½s rebased economy.
Over the last four years our policy think tank has been vocal in raising concerns about what we consider to be aï¿½mad rush for loansï¿½ by Government, and the disturbing absence of real transparency and value-for-money component in several of these loans.
Today, it has become evidently clear that Ghana is fast-forwarding backwards to its 2000 status of a poorly-indebted, and with very little to show for this high level of unprecedented borrowing and spending.
What Government is effectively doing is building a future of debts for the youth of Ghana to inherit and struggle with, when ironically, over the last four years alone official records show that GHï¿½950 million has been spent directly in the name of creating youth employment, but with evidentially very minimal impact in the lives of the youth of this country.
GHï¿½43.9 billion Debt
The Bank of Ghana on Wednesday, 18th September, 2013, revealed that total public debt stock at the end of August 2013 stood at GHï¿½43.9 billion (US$20.90 billion), up from GHï¿½35.1 billion at the end of December 2012. Indeed, barely five years ago, at the end of 2008, Ghanaï¿½s total debt stock stood at a comparatively minimal GHï¿½9.5 billion (or US$8 billion then), which translated into 31.5% of the 2008 GDP, as compared to the current debt/GDP ratio of 49.5%.
Thus, Ghana, under the NDC administration, is adding an average of GHï¿½6.88 billion every year to its public debt. This is simply not sustainable. Government cannot continue depending on borrowing as the only ï¿½creativeï¿½ solution to every problem.
Indeed, without the 2009 rebasing of the economic indicators, the country would have been reclassified as a Highly Indebted Poor Country by now, as our current debt stock would have equalled the size of the economy.
It is worth noting that rebasing did not change the size of the existing economy. It was only done to better reflect the size of the economy. It always, therefore, had the risk of giving the managers of the economy but an obvious false sense of comfort with the debt/GDP ratio, since rebasing only further exposed the low level of revenues the state is able to squeeze from economic operators and workers.
Equally worrying is the fact that government is stifling real private sector growth by squeezing out economic actors from the credit market. Governmentï¿½s willingness to borrow at interest rates as high as 27% is rather discouraging any downward movements in the cost of credit. Government is, therefore, actively suppressing business and the capacity of business to create jobs.
Election Year Spending
Linked to this is the fact that a greater chunk of our current total debt, 54.6%, is from public sector domestic borrowing. Our checks show that an unusual share of this domestic debt portfolio was incurred in election year.
In 2012 alone, government borrowed in excess of GHï¿½7.1billion from the domestic market, against a projected borrowing of GHï¿½2.7 billion.
Instructively, Government did not even meet its capital-spending target for last year. So, subtracting what went into the wage bill and some notable road projects, what did Government do with the large amount of funds it received, which led to Ghana recording the highest ever annual fiscal deficit of 12.1% in 2012?
The GYEEDA Report, which details how nearly GHï¿½1 billion was spent ostensibly to create jobs for the youth but much of it cannot be traced, tells only part of this worrying story of how the public purse is being abused under this unsustainable culture of borrow and spend.
We have to ask, how was all these billions spent, considering the continued labour agitations over unpaid remunerations; rising arrears owed to contractors, schools, SSNIT, utility providers, GETFund, NHIS, DACF and, the partial freeze on infrastructural development by this same Government?
Low Tax Yields
Domestic revenue totalled GHï¿½9.8 billion, below the target of GHï¿½11.6 billion. Total tax revenue amounted to GHï¿½7.7 billion, lower than the target of GHï¿½9.1 billion. Grant disbursements were GHï¿½542 million, falling short of its target by 41.7 percent. Non-tax revenues amounting to GHï¿½2.1 billion for the period also missed the target by 12.4 per cent.
So far this year, the economy has taken another negative turn, registering a larger than projected budget deficit when Government has not even been able to spend close to its target! The consequence of the decline in both tax yields and grants this year is that Government is unlikely to achieve its budget deficit target of 9% as contained in the 2013 budget deficit. According to a staff team from the International Monetary Fund which visited Ghana during the week of September 11-17 2013, led by Christina Daseking, Ghana is set to achieve a budget deficit of 13%, breaking the record of 2012.
The Danquah Institute does not detect from Government policy the application of any alternative solution to the current economic crisis, which, if not resolved, could trigger social crisis next year.
For these reasons, we are calling for a critical national dialogue on the nationï¿½s fast-racing debt, with the hope of finding a workable solution to ease the economic hardships of Ghanaians today and better secure the future of the youth of Ghana.
We are by this call inviting civil society and other stakeholders to join us to make this happen.
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