In a flurry of mixed signals emanating from the Finance Ministry, the Minister of Finance, Seth Terkper, last Wednesday hinted that Ghana may not be broke, but had an account that was definitely ‘red’.
Speaking on the Citi Breakfast Show on Wednesday, Seth Tekper admitted that the country was in the red and may be on a brink of going bankrupt.
But his latest admission has muddied the waters even more because earlier this week, he specifically stated that the National Democratic Congress (NDC) was not in a position to meet demands for settlement of salary arrears of striking workers.
According to him, government had made some ‘critical payments’ in the last couple of weeks.
For weeks now, several adjectives have been used to describe the state of government finances. Words such as ‘red’, ‘broke’, ‘bankrupt’ and ‘HIPC’ have been freely used by both government officials and critics.
‘Ghana is not broke. We are a country that collects 15-16 per cent GDPs as taxes. Some developing countries do 9-10per cent… we need to widen the tax base and bring in more revenue,’ the Finance Minister rebutted on Wednesday.
‘We are also a country that gets grants and have good ratings that will help us borrow to finance our developmental expenditure so to say that Ghana is broke, is overstretching the issue,’ he said in a bid to allay fears.
But Seth Tekper’s next statements made it even more difficult to reconcile his earlier rebuttal. ‘We are in red and that is factual but is our being in red planned or unplanned? If I am in red because I could not finance or complete the Accra-Kumasi road on my budget as a developing country and therefore go for a loan which I plan to pay within the spate of 15 or 30 years and I’m able to maintain it over time, that is planned expenditure,’ he stated.
‘We are talking of the sustainability of a policy that was put in place; which is throwing the budget out of balance and I think this is the history,’ the clearly worried Finance Minister explained.
But critics have stated that government accounts are drained such that the Mahama-led government cannot meet its payment obligations, hence the countless industrial actions by public sector workers.
Doctors, University lecturers, basic school teachers, Judicial Service workers and several other workers are either on strike or are planning industrial actions to demand payment of their outstanding remunerations and allowances.
The NDC government is currently struggling to meet its obligations to statutory funds such as the National Health Insurance Scheme (NHIS), the Ghana Education Trust Fund, the District Assemblies Common Fund (DACF), Social and Security and National Insurance Trust (SSNIT) and road contractors who draw their payments from the Road Fund.
President Mahama recently claimed that the problem dogging government finances could be attributed to the huge public sector wages.
The Executive Director of think-tank, IMANI, Franklin Cudjoe agrees with this view, and reasoned that the implementation of the Single Spine Salary Structure was flawed causing the squeeze from huge government wage bills.
The NDC government is currently caught in a desperate race to borrow funds abroad to offset some of the deficits it is experiencing.
‘Borrowing is unplanned when we lack budget discipline; when someone overspends and we have to borrow to pay back, this kind of red is undesirable,’ stated the Finance Minister who was trying to justify what he meant by Ghana’s account exceeding the red mark.
By: Raphael Ofori-Adeniran