Accra, Ghana//-Debt service alone takes about 91% of Ghana’s tax revenue. While only 9% of it is available for other critical spending.
Isaac Adongo, financial expert, and Member of Parliament for Bolgatanga Central in the Upper East Region is worried about this development.
According to him, the implications of the government’s increased appetite for borrowing started manifesting in 2019 when debt service (interest and amortization) as a percent of tax revenue exceeded 70%.
This trajectory will be maintained even in the medium term and will reach 91.6 percent in 2022, Mr Adongo added.
Overall fiscal deficit dynamics
Speaking on the theme: ‘Transforming Ghana’s Economy – Scapegoats, Root Causes & Hard Choices’ at 11th Leadership Dialogue Series (LDS 11) on Tuesday 6 September 2022 organised Centre for Social Justice (CSJ), he said it had been an era of cosmetic fiscal deficit reporting since 2017.
As previously stated, several alien schemes are explored by the government to artificially suppress the fiscal deficit.
This purpose has however not been achieved because the IMF which the government is courting for an urgent $3 billion bailout has keenly followed development within Ghana’s public finances.
“After 2017, Ghana’s fiscal deficit as reported by the IMF was on the rise, reaching 7.3% of GDP by 2019, an indication that our public finances were worsening.
Government ignored these signals and consistently reported cosmetic fiscal deficits which was not a true reflection of the state of public financing in Ghana. Ghana’s public finance management stated deteriorating even before covid-19”.
The quantum of the public debt poses serious questions regarding the efficiency of utilisation in pursuit of critical national development needs and how it has impacted the size of the economy.
“Thus, when Ghana’s public debt grows from about GHC120 billion to about Ghc400 billion in just five and half years, legitimate enquiries must be made into what the monies were used for when we have very deplorable roads, kids in Senior High School (SHS) are running double track systems, new hospitals have not been built and the old ones ill equipped to deliver fit for purpose health care etc”, Mr Adongo said.
Ghana’s debt to GDP shows that whilst its public debt is growing at a faster rate, the economy is not growing at a level that is required to anchor debt sustainability.
In other words, the MP noted that the country is not growing the income earning opportunities of Ghanaians, so Ghana is not generating the pool of income necessary to ensure that it can generate significant resources from the economy to pay for and service these debts.
Judgment debts must be watched
On his part, the Dean of the University of Cape Coast School of Business, Professor John Gatsi called on the government to watch judgement debts carefully as it is payment for no value for debt in terms of infrastructure such as schools, hospitals, water systems and irrigation, among others.
“It is payment in some cases for poor judgement, disrespect for the tenets of rule of law, ill-prepared contract management and discriminatory handling of contracts due to perceived political affiliation”.
Ghana’s economy is distressed
Prof Gatsi who is also a Chartered Economist and Barrister, noted that the country’s economy is distressed due to high unsustainable public debt, low revenue performance, undulating macroeconomic environment, fiscal dominance, neglect of the potential of modernised agric and inefficient spending, and high interest payment which dwarfs financial commitment to other sectors.
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