Business News of Tuesday, 28 February 2017
Source: Business day Ghana
Latest figures from the government on Ghana’s total debt stock suggests that every Ghanaian, including new born babies, now owe four thousand five hundred and nineteencedis (GHC4,519) as at December 2016.
This figure shows a one thousand, one hundred and thirty-two cedis (GHC1,132) increase from the three thousand, three hundred and eighty-seven cedis (GHC3,387) that each Ghanaian owed as at December 2015.
As at the beginning of 2009, Ghana’s total debt stock was GH¢9.5 billion. By the end of 2016, the debt stock had ballooned to GH¢122 billion, representing 74 per cent of Gross Domestic Product (GDP).
With the Ghana Statistical Service’s current estimation of Ghana’s population at 27. 9 million people, a division of the population figure by the aforementioned public debt (GH¢122 billion), means that every Ghanaian currently owes GH¢4,519 to the country’s creditors both internally and externally as at now.
President Nana Addo, in his state of the nation’s address, noted: “we cannot continue this way with our public finances. I will not allow this economy to collapse under my watch. We will reduce significantly the fiscal deficit this year.”
He added: “In fact, 92% of Ghana’s total debt stock was incurred in the last eight years under the previous government. The interest costs on this debt have also increased and will amount to an estimated GH¢14.1 billion in 2017.”
In 2009, every Ghanaian was indebted to the tune of GH¢380 as the total public debt stock at that time stood at GH¢9.5 billion.
This means that from 2009 to date, an additional amount of four thousand one hundred and thirty-nine cedis (GHC4, 139) has been added to the total debt stock owed by every Ghanaian including new born babies.
IMF Report on Ghana
An International Monetary Fund (IMF) report, after reviewing Ghana’s performance under the Extended Credit Facility program, indicated that Ghana’s total public debt had now exceeded pre-HIPC levels.
This IMF indication raised public debate on whether current economic challenges had sent Ghana back to its 2001 HIPC state.
However, the former Finance Minister, Seth Terkperhas allayed such fears, assuring Ghanaians that the country’s debt stock was backed by strong infrastructural projects that have the capacity to refinance loans acquired by government since 2012.
The IMF programme negotiated was ostensibly to restore fiscal discipline, debt sustainability and increase economic growth. The previous government promised Ghanaians that the reckless public expenditure that characterized the 2012 election year would not be repeated in 2016.
The promises to the Ghanaian people were, however, not kept. In fact, virtually all the targets under the IMF programme, as at December 2016, have been missed. Fiscal indiscipline, once again, reared its head in the 2016 election year.
Total projected expenditure for 2016
Total projected expenditure for 2016 was GH¢43.9 billion (26% of GDP), but actual expenditure amounted to GH¢50.3 billion (30.2% of GDP). At the same time, revenue performance for the year was poor. The total revenue target for the country was GH¢37.9 billion (22.7% of GDP), but the actual revenue came in at GH¢33.2 billion (19.9% of GDP).
The combination of higher expenditures and lower revenues than projected resulted in a significant increase in the budget deficit for 2016.
As compared to a target of 5.3% under the IMF programme, the fiscal deficit for 2016 was 9% of GDP on a cash basis and 10.2% of GDP on a commitment basis (that is on the basis of expenditures undertaken but not yet paid for).
“At the time Ghana entered into the IMF programme to restore fiscal discipline, the fiscal deficit was 10.2% of GDP. It is very clear, therefore, that the objectives set out in the programme have not been achieved,” the President has revealed.
President Nana Addo stated: “Today, as a result of policy choices, we find ourselves in a situation where Ghana’s total revenue is consumed by three main budgetary lines: wages and salaries, interest payments and amortization and statutory payments. These three items alone account for 99.6% of government revenue.”
“More debt was accumulated by the previous government in the last eight years than all other governments put together since independence,” the President noted, adding that, the starting point in turning round the fortunes of the country must be with agriculture.