Accra, Ghana//-The phrase-‘Ghana Beyond Aid’ was introduced into the Ghanaian political lexicon in 2017, following the swearing-in of Nana Addo Dankwa Akufo-Addo as the President of Ghana on 7th January 2017.
He could not go a day without mentioning Ghana Beyond Aid agenda which he was so committed to.
“It is time to pursue a path to prosperity and self-respect for our nation. A Ghana Beyond Aid is a prosperous and self-confident Ghana that is in charge of her economic destiny; a transformed Ghana that is prosperous enough to be beyond needing aid, and that engages competitively with the rest of the world through trade and investment”, Mr Akufo-Addo , eloquently stated.
He went ahead to unveil the charter and strategy document to guide the nation in attaining the Ghana Beyond Aid agenda at a large public gathering on May Day in Accra in 2019.
Two years down the lane, neither President nor his Vice President Dr Mahamudu Bawumia has forgotten about the agenda and rather embarked on a borrowing spree, resulting in a debt crisis.
Ghana is in a debt crisis
Ghana is in a debt crisis as its total public debt hit record GH¢291.6 billion in December 2020, representing 76.1% of GDP, according to data released by the Bank of Ghana.
Its external debt alone stood at GH¢141.8 billion ($24.7 billion) which is equivalent to 37.0% of GDP, while the domestic debt inched slightly to GH¢149.8 billion at the end of 2020, about 39.1% of GDP.
Also the financial sector debt stood at over GH¢21 billion in December 2020, according to the 2021 budget.
The debt crisis would not abate anytime soon as IMF revealed in its April 2021 Fiscal Monitor that the country’s debt is expected to hit 81.5% of GDP by the end of this year.
This simply means the debt will go above GH¢300 billion before the end of 2021, taking cognizant to the number of Eurobonds that would be issued by the government.
Ghana’s debt to GDP ratio will surge to 83.2% in 2022, and then further to 84.8%, 86.0% and 86.6% in 2023, 2024 and 2025 respectively, per the IMF data on low-income developing countries.
This experts said could push the country’s economy into a highly debt distress category, as majority of revenue will be used to service debt, leaving minimal fiscal space.
In Sub Saharan Africa, Zambia and Congo Republic are the only two countries that will record unsustainable debt levels, worse than Ghana, according to the IMF Monitor.
Notwithstanding having had significant amounts of debt cancelled 15 years ago, Ghana is spending 49.5% of its revenue on interest payments.
This a financial analyst Joe Jackson described as “the country is broke’ and has no money to undertake development projects in the country.
So the easy way out for the government is to pile more taxes on the individuals and businesses which are being impacted negatively by the COVID-19 pandemic.
The country’s debt crisis is caused by the government’s appetite for borrowing for consumption related expenditures including the free Senior High School (SHS) programme which has been bedeviled with challenges since its introduction in 2017.
But the government blamed the current debt predicament on the COVID-19 pandemic which broke out in the country in March 2020. That position has been contested by a renowned Ghanaian economist, Dr Nii Moi Thompson in his article- How Ghana’s Economy Was Run Into a Ditch Before Covid-19 – and the Lessons Thereof – African Eye Report.
Economists, analysts and industry experts have been signaling the alarm bell on Ghana’s rising debt as the propensity of debt default is too high.
Debt cancellation call
So, it was not surprising when Mr Akufo-Addo passionately called for the cancellation of debts owed by Ghana and other African countries, in the wake of COVID-19.
Speaking at the Summit on Financing African Economies, in Paris, France, on Tuesday, 18 May 2020, he noted that, the Bretton Woods Conference, which took place as World War II drew to a close, created a global financial architecture which, over the last 77 years, has proven to be unfavourable for Africa.
The economies of Europe, America, and Asia having grown significantly during that time, whilst those of Africa have not, attributing collateral damage from the Cold War, Mr Akufo-Addo noted.
Arguing that inequity in the global economic system, an economic relationship built on power and resource grab, as well as leadership and governance issues on the African continent, as issues confronting the continent.
“These challenges have resulted in a global economic system that has proven to be incapable of supporting lives and livelihoods, and allocating sufficient long-term resources to support Africa’s economic transformation,” President Akufo-Addo said.
Africa’s development finance cost does not reflect its economic fundamentals
Africa’s development finance cost does not reflect its economic fundamentals, credit, or default cost, citing the case of Ghana where the country’s sovereign debt is more expensive than that of the similarly-rated Belarus, which pays some 100 basis points less than Ghana.
The structural inequities confronting African economies, the President stressed, has been worsened by COVID-19, evidenced by the fact that a mere 2% of the 1.3 billion vaccine doses administered globally, at the end of April, were in Africa.
“The pandemic has also ensured that the total fiscal deficit of Africa rose from 4.7% of GDP in 2019 to 8.7% in 2020; overall debt levels are also estimated to have increased from 57% of GDP in 2019 to 70% in 2021. Without the ‘fiscal room to breathe’, Africa could truly become ‘the forgotten continent, and that is why there is urgent need for comprehensive debt relief and debt cancellation,” President Akufo-Addo stated.
However, some Ghanaians are of the view that if African countries’ debts are forgiven, they will go back again “cup in hand” to beg for aid, technical support, among others.
By Masahudu Ankiilu Kunateh, African Eye Report