Renowned Economist and Vice Presidential candidate of the New Patriotic Party, Dr Mahamudu Bawumia has rubbished claims by Finance Minister Seth Terkper that said government’s involvement in “smart borrowing” will sustain Ghana’s growth and development.
After an analysis of the country’s debt situation, the Institute of Economic Affairs (IEA) said in a statement “If measures are not put in place to check this culture of excessive and unlimited borrowing and spending by our elected leaders, economic progress will continue to elude us for a long time to come. Should we continue on this path, our national debt will grow to about 70 percent of GDP by 2016 and close to 100 percent by 2020, returning our nation to where it was some 30 years ago; on the brink of financial collapse.”
According to Dr Bawumia, “I wonder how this high rate of borrowing and interest payments which has led to an increase in interest rates, deprived the state of resources in several critical sectors like health and education, led to lower investment in infrastructure and led the country to the doors of the IMF for a bailout, can be described as “smart”. This must indeed be a new form of “smart” we are not aware of. It is like asking an alcoholic why he is drinking so much and he tells you that he is doing “smart drinking”.
HIMIC not HIPC
Dr Bawumia also opined that Ghana’s current debt stock has moved her from a Highly Indebted Poor Country (HIPC) to a Highly Indebted Middle Income Country (HIMIC).
According to him, the country is right back to the debt unsustainability that led it to HIPC.
The Bank of Ghana at a Monetary Policy Committee Meeting in November 2014 pegged the public debt at as August 2014 stood at GH₵66 billion.
But latest figures from a February 2015 MPC meeting put the new debt figure at GH₵76.1billion as at December 2014.
Public debt which is a total of external and domestic borrowing and interest payments is now 67% of the total value of the economy.
“…at 67% of GDP, Ghana’s debt stock has crossed the critical 60% of GDP level that developing countries with limited access to capital flows should worry about in terms of debt sustainability. In fact, Ghana is right back to the debt unsustainability that led to HIPC. However, HIPC debt relief will not be available again. Ghana’s status can thus best be described as that of a Highly Indebted Lower Middle Income Country (HIMIC),” he said.