Accra, Ghana, February 19, 2020//-Former Minister for Communications & Presidential Spokesperson, Dr Edward Kofi Omane Boamah has advised the government to spend its multi-billion dollar borrowed money wisely in productive sectors rather than spending in consumables.
“When you borrow it is important you invest in areas that could repay the debt in future”, according to him:
However after accumulating billions of debt, the managers of this current government went to borrow for 41yrs.to invest heavily in consumption.
“We’ve witnessed unbridled borrowing under Akufo-Addo government, ballooning the debt stock from GHC120 billion to GHC225 billion in just three years”, Dr Boamah said.
The way they borrow makes Ghana’s debt unsustainable, he stated.
Dr Boamah noted that total expenditure on free Senior High School (SHS) since inception in 2017 is GHC5.6 billion and the money realized from oil sector alone as a result of the massive injection of resources in the industry by the previous Mahama administration.
Out of the government’s borrowed amount, “only a quarter of oil money is needed for free SHS and look at the massive borrowing they’ve engaged in, the huge taxes they’ve collected…, mind you , to whom much is given, much is expected,….regardless of these monies their performance remains abysmal”, he stated.
Any good economics student knows that the capital injection into Sankofa and Tweneboa, Enyenra, Ntomme (TEN) fields is leading to growth in Ghana’s GDP in 2017 and beyond.
Dr Boamah was quick to add any government that came after President John Dramani Mahama after 2016 was to reap the benefit thanks to Mahama’s vision.
Debt Sustainability Deteriorating
When adds the $3 billion Eurobond to the country’s total debt stock will further worsen Ghana’s debt sustainability position.
Professor John Gatsi, a renowned Ghanaian economist lamenting that Ghana’s debt sustainability (measured by Debt-to-GDP, benchmarked internationally at 60%) is deteriorating.
He believes that for a middle income country like Ghana, even if this ratio is above 60%, it should be anchored on robust interest payments to tax revenue ratio and revenue to GDP.
However, these ratios according to him have deteriorated over time in the face of rising public debt levels, currently nearing GHC225 billion as reported by the Bank of Ghana in its latest Summary of Economic and Financial Data – 2020.
Prof Gatsi explained that even though the Debt-to-GDP ratio benefited heavily from statistical rebasing of the economy in 2018, the ratio since late 2018 has been deteriorating from 57.6% of GDP to 62.1% of GDP.
It is a time tested financial principle that when debt is used to finance strategic projects it leads to sustainable benefits but the borrower must respect the practical stage where more borrowing is distressful to the economy, he stressed.
African Eye Report
