Posted on: www.dailyguideghana.com
By William Yaw
Owusu
Tuesday July 7,
2015
Economics and finance expert, Dr. Mahamudu Bawumia says Ghana now
requires International Monetary Fund (IMF) approval to be able to borrow for
projects because of its vulnerability.
Ghana, Dr Bawumia said joins the likes of Haiti, an earthquake
ravaged country which Ghana had to support with $3million cash to support them
when the quake hit the Central American country.
“Today, the IMF has classified Ghana as a country at High Risk of
Debt distress. In this regard, any major borrowing for projects to be
undertaken by Ghana would now require prior IMF approval,” the New Patriotic
Party (NPP) running mate for the 2016 election said in London at the weekend.
Addressing the Young Executive Forum – UK, a group associated with
the NPP on the state of Ghana’s economy, the former Deputy Governor of Bank of
Ghana said that other countries similarly classified as being at High Risk of
Debt Distress included Afghanistan, Burundi, Central African Republic, Chad,
and Haiti and asked “Is this the independence our forefathers fought for?”
Loss Of
Confidence
He said that “Ghana appears to be having problems servicing her
debts and this is making investors lose even more confidence in the economy,” adding
“There is word out there in the international financial markets that Ghana has
recently defaulted on its debt to Standard Bank for the financing of the Teshie
Desalination project.”
“It is very important that the government quickly denies this if it
is untrue or rectify the situation if it is true. Again, this government should
remember that Ghana’s international debt obligations cannot be treated in the
same way as obligations to the DACF or GETFund where arrears are incurred with
impunity.”
He said that the implications of Ghana defaulting on the
international debt obligations “are severe for the country’s reputation.”
Repaying Debts
He said that the difficulty in servicing or repaying debts had also
led to the recent offer by the Minister of Trade and Industry to the
Destination Inspection Companies (DICs) of contracts in exchange for helping
government to settle its judgment debt.
“Of course, the Ministry of Finance has denied any knowledge of this
incredible offer but I must say that it is highly improbable that the Minister
of Trade would make such an offer without consent at the very highest levels.”
Capital Expenditure
Dr. Bawumia said that notwithstanding the massive increase in the
debt stock, capital expenditure as a percentage of GDP had actually been on the
decline from 9.1% of GDP in 2008 to 4.8% by 2014 and added that capital
expenditure as a percentage of GDP averaged 11% for 2001-2008 without oil while
that for 2009-2014 has averaged 6% with oil.
“This means that contrary to all the government claims of an
increase in infrastructure expenditure on projects all over the country, the
reality is that Ghana’s expenditure on infrastructure is declining,” he said.
HIPC Scenario
Dr. Bawumia said that at 67% of GDP in 2015, Ghana’s debt stock had
crossed the critical 60% of GDP level that developing countries with limited
access to capital flows should worry about in terms of debt sustainability
adding “In fact, Ghana is right back to the debt unsustainability that led to
HIPC.”
Cedi Depreciation
He said that in 2014, the cedi depreciated by 31% against the US
dollar, making it one of the worst performing currencies in Africa in 2014 and
the depreciation had continued in 2015, with 27% loss in value between December
2014 and June 2015 thus far notwithstanding the IMF bailout.
“In the last 18 months alone the cedi has depreciated by over 50 per
cent! The periods of NDC economic governance has now become symptomatic with
the periods of massive depreciation of the currency. Unfortunately, the
government appears clueless as to what to do.”
He added: “This reflects a lack of policy credibility on the part of
the government and a lack of confidence by investors. This is the price
Ghanaians are paying for the government’s lack of policy credibility and weak
fundamentals.”
IMF Policy
Review
Dr. Bawumia said that even the IMF bailout had not been able to
restore confidence by “convincing the markets that the government is committed
to turning things around.”
He said the IMF itself has instituted a review of the government performance
every four months saying “This is unprecedented for Ghana’s IMF programs and
demonstrates a lack of confidence by the IMF itself in the government’s
commitment to the program even though they would not publicly say so.”
Rampant Corruption
He said the economy is in tatters because some public office holders
are stealing state resources with impunity.
“What we have in Ghana today is not just corruption but corruption
with impunity,” adding “it is corruption by people who have no fear for the
consequences because they know they can conspire to get away with it.”
He said “these acts of corruption are very costly to the nation and
take away the opportunities for government expenditure in critical areas.”
“Former President Rawlings has recently noted that the corruption
for which he overthrew the government in 1979 is not up to 10% of the
corruption we are seeing today,” he said.
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