Public Debt Growth Cut ‘Significantly’ – Terkper

The growth of Ghana’s public debt stock has been slashed by a chunk, Finance Minister Seth Terkper has said.

“Public Debt stood at GH¢ 93,064.8 million as of November 2015 mainly as a result of exchange depreciation,” Mr Terkper told journalists at a press conference.

He said reduction in the growth of the debt stock could be put down to new debt management strategies implemented with regards to onlending/escrow, sinking fund, refinancing, etc., as well as maturity lengthening.

“Growth in public debt reduced significantly,” he told journalists, adding that Public Debt to GDP Ratio tapered in 2015.

He said there was a decline in public debt stock between 2000 and 2006 due to HIPC/MDRI reliefs.

The debt stock has always been a topic of heated political argument. The current total debt stock increased by GHS5 billion between May and June 2015. As of September last year, figures from the Bank of Ghana’s economic and financial data showed the total debt stock stood at GHS94.5 billion, representing 70.9% of Gross Domestic Product (GDP).

After its first review of Ghana’s implementation of a three-year bailout programme, the International Monetary Fund (IMF) said the country’s performance under the Extended Credit Facility programme exceeded pre-HIPC levels.

Per the trend of the growing debt stock, the Bretton Woods institution projected that Ghana will end 2015 with a 75% debt-to-GDP ratio.

Ghana’s total public debt in the first-half of 2015 increased consistently by about GHS15.1 billion, growing from GHS79.4 billion in January, to GHS94.5 billion in June.

Late last year, the flagbearer of the main opposition New Patriotic Party (NPP), Nana Akufo-Addo, said Ghana’s total debt stock will hit GHS110 billion by the time President John Mahama leaves office, a situation he believes amounts to mortgaging the country’s future.

“The indebtedness of Ghana has gone from GHS9.5 billion in a space of six years; a growth of over a 1,000 per cent.

“At the rate that it’s going, it’s going to be close to GHS110 billion by the time Mahama leaves office,” Mr Akufo-Addo told an audience in Canada.

He said: “The future of our nation is being mortgaged and compromised, and that is why it is vital that next year, we put a stop to it and bring sanity to the administration of our country.”

In September last year, he said Ghana’s total debt stock will more than triple by 2020 if President John Mahama’s mandate were renewed at the polls in 2016.

“In 2009, when they [NDC] came into office, Ghana's debt was GhS9.5 billion; this was Ghana’s debt from Nkrumah’s time to when Kufuor left office.

“Four years later, by 2012 ending, it had gone up more than three times to GhS33.5billion.

“The NDC got a second term in office, in 2012. We are not even at the end of 2015, but Ghana's debt has shot up another three times to GHS95 billion!” the three-time presidential candidate observed.

Using that trend to compute his prediction, the former Abuakwa South Member of Parliament told party supporters at Shama, on the final day of his ‘Rise and Build’ tour of the Western Region on Thursday, September 24, that Ghana’s debt stock will hit GHS300 billion if the Mahama administration is given another four-year term.

“What is the future of our youth? What future can they have with these statistics? That is why we have a huge responsibility to reverse the trend of our future and bring Ghana back onto the path of progress and prosperity,” he said.

President Mahama said late last year in the Volta region that his government’s borrowing accounted for only 17 per cent of Ghana’s total external debt stock. According to his calculation, the Kufuor administration’s borrowing accounted for 41 per cent of the total $14 billion external debt with which Ghana is currently saddled.

"…Recently you'd have heard that this government has borrowed so much money it has put Ghana in debt. Government is a continuum, and, so, governments leave debt behind and other governments inherit them and pay them off, but they also borrow in order to be able to do infrastructural projects. So, it’s a rolling thing.

"…Now let me do a little analysis here. Our external debt amounts to $14 billion. If you disaggregate the debt and you apportion it by the different governments, then from 1980 – that is part of Limann's government through Rawlings' government from 1980 up to the year 2000 – that is the NDC one…that period is responsible for nine per cent of the debt.

"…Then if you take that same debt, and you break it down, 41 per cent of that debt is attributable to the time between 2001 and 2008…now from Prof’s [John Mills'] time to my time, if you take Prof's time, it’s 33 per cent of the debt and [from] 2013 to 2015 is 17 per cent of the debt…so from Prof’s time to my time accounts for 50 per cent of the debt. The other 50 per cent is debt that we have inherited and that we are paying, and 41 per cent of that debt was borrowed by the NPP administration. So, when you come and say NDC government has borrowed $14 billion, 41 per cent of the $14 billion was borrowed by the NPP administration.

"And, so, normally when they throw these figures out, if you don’t analyse the figures, they just throw them out in a Goebellian fashion to confuse the electorate and just put blame on some government, but we’ve taken that debt. We are paying it. We’re servicing it because I know that it was used for development," Mr Mahama explained to a crowd of NDC supporters to wrap up his ‘Changing Lives, Transforming Ghana’ tour.

Mr Mahama's analysis of the debt situation was a response to former deputy governor of the Bank of Ghana, Dr Mahamudu Bawumia, who had earlier said the rate of borrowing by the government will leave the country with a debt close to GHS100 billion by the end of 2015.

"We’ll reach GHS99 billion by the end of this year," Nana Akufo-Addo's running mate told journalists after Finance Minister Seth Terkper read the 2016 budget to Parliament.

"The interest on this debt alone is going to be six times Ghana’s oil revenue," Dr Bawumia said.

"When we found oil, we were happy that we found oil, but the borrowing of this government has compromised the whole oil discovery; you need six times our oil revenue just to pay interest on the debt, not even capital, so, it is a really sad development," he complained.

Per his computation, the amount of money borrowed by the Government so far is “equivalent to over $37 billion over seven years. Can you imagine what $37 billion can do for this economy?” he asked.