Minister of Finance and Economic Planning Seth Terkper has described as sustainable Ghana’s ballooning public debt which has risen from nine billion cedis to 90 billion cedis in seven years.
Ghana’s public debt has risen from nine billion cedis to 90 billion as of May this year – a rate economic analysts and opposition politicians say is simply unsustainable.
But the Finance Minister has parried the criticisms, saying the loans taken thus far have been invested into commercial projects that can repay the loans.
“We are making progress… Our debt is sustainable. It is not about whether you take debts. If we are going to resolve ‘dumsor’, our budget cannot resolve dumsor. Let’s face it,” he said adding the country must change course if it has to deal with some of the power crisis and some of the difficult challenges facing the economy.
He was speaking on Joy FM’s Newsfile programme on Ghana’s increasing public debt.
The Finance Minister only last week presented a supplementary budget to Parliament asking for the approval of some 865 million cedis part of which will be used to prop up the cedi.
The House also approved the issue of a Eurobond that will raise an amount of $1.5 billion, which would increase Ghana’s debt profile.
The Minority has been grumbling over what it says is the excessive borrowing by the government.
They fear at this rate of borrowing Ghana could head to the Greece debacle of a debt-to-GDP ratio of 180 percent. But speaking on Newsfile, Seth Terkper discounted any such fear.
He said government has “changed course” and has devised “new strategies”, including the World Bank guarantee to properly structure its loan profile.
He said much of the loan taken so far have been invested into commercial projects such as the Ghana Gas project, the Bui and the Kpong Dam projects that will generate sufficient cash flows to service the loans.
He said the Akosombo Dam for instance paid for the loan that was taken to build it – something that demonstrates loans properly invested cannot be bad for the economy.
1.5 billion dollar Eurobond
Seth Terkper berated the erstwhile New Patriotic Party government for not making any repayment plans for the 750 million Eurobond it took in 2007.
According to him, 500 million out of the $1.5 billion Eurobond approved on Thursday to be issued would be used to refinance the Eurobond debt Kufuor’s government failed to plan for.
“When you replace a debt with a debt you are not increasing your debt,” he said but was quick to admit that, that policy was not sustainable.
He said as part of a more reliable strategy to ensure that the country does not wait for a decade before paying its Eurobond debt, government is revising the petroleum management fund out of which a sinking fund would be created to pay those debts every year rather than having to wait for ten years.
Seth Terkper said the loans have been invested well and within the medium to long term, the country will reap the full benefits.
But Chairman of the Public Accounts Committee of Parliament and a member of the Minority, Kwaku Agyemang-Manu said the Finance Minister’s assertions cannot be accurate.
He said it is not true that the NPP did not make provision for the repayment of the Eurobond issued in 2007.
According to him, the Kufuor government which had struck oil around the same time the Eurobond was issued, had planned to use part of the oil proceeds to repay the loan.
“We knew we had oil. We were going to lift oil in 2011…You come in to waste the oil funds, mortgage it for other loans and you come and tell us we didn’t have plans to pay our debt. I cannot accept that.”
He also dismissed the assertion by the Minister that VRA paid for the investment made into the Akosombo Dam, insisting it was the relief from the HIPC initiative that the government relied to pay for the Akosombo expansion projects.
He said the borrowing trend of the government is alarming.
“You came and inherited a huge fiscal space and you thought you were in heaven and could borrow as much as you can. We started raising red flags at that time but you said we have space to borrow.
“In seven years 9.5 billion cedis debt stock was 35 per cent of GDP in 2009, and now you borrow to 90 billion, we are heading to the 100 billion mark and you are still borrowing…we are not seeing any results,” he said.
Even more dangerous is the shrinking of the economy. He stated in 2008, the economy grew at eight per cent but with this huge debt hanging around the country’s neck the economy is rather shrinking gradually and is estimated to grow at 3.5 per cent.
“That is worrying. The economy that should work actively to pay off some of these debt is like a vehicle that is losing grip; slowing down in growth,” Kwaku Agyemang-Manu indicated.
He said if with the worrying trend, the government and the Finance Minister do not still see the danger, then the country is doomed.
Credit: myjoyonline