Economy Is Crashing – Says Banker
The Chief Executive of Dalex Finance, Ken Thompson, has stated that there are strong indications that Ghana's economy is heading for total collapse this year.
'We are heading for a crash…we have got to strive for operational efficiency because we are extremely wasteful in this country. The financial indiscipline that is collapsing the economy will continue this year,' Mr Thompson lamented.
The CEO was making a presentation on the theme, 'Crystal Ball Gazing: The Ghanaian Economy in 2015,' at a public lecture organised by the Chartered Institute of Marketing Ghana (CIMG) in Accra on Wednesday.
According to him, government had completely failed to put in place an effective mechanism to control public spending and check fiscal indiscipline.
This, he said, had over the years increased the country's debt index astronomically, making the already overburdened taxpayers to live with the worry of financing public debts. Ghana's debt to GDP was a little over 60 percent as at September last year and there were indications that it might cross 70 percent by the end of 2014.
'Our behaviour has not changed. We have been living above our means for years,' Mr Thopmson said.
Government intends to borrow GH¢25.42 billion within the first six months of 2015 from the domestic market and this can push the debt portfolio, which stood at GH¢70 billion as at September 2014, to GH¢100 billion.
This decision of the government, he claimed, would crowd out funding to the private sector.
Mr Thompson also predicted that inflation rate would increase exponentially by 25 percent this year.
He further predicted that interest rates would continue to rise in 2015, especially after the first quarter, and that 'Treasury Bill rates may get to 37 percent.'
Ghana Is Broke
According to him, figures produced by the Monetary Policy Committee of the Bank of Ghana showed that the country is extremely cashless.
“If you earn a thousand cedis and you spend a thousand two hundred cedis, you are broke. Ghana is broke,” he stressed.
Overspending is one of the major factors stifling the progress of the Ghanaian economy.
Mr Thompson presented figures from the Bank of Ghana that showed that government revenue was GH¢17 billion as against an expenditure of GH¢24 billion.
Ghana's economy grew by 14 percent in 2011, making it the fastest growing economy in the world.
Since 2011, the growth rate has fallen drastically - a development that has compelled government to head for an International Monetary Fund (IMF) bailout.
This year the economy is projected to grow at a rate of about 3.9, a development many critics of the President John Mahama-led government say is a magnificent retrogression of the Ghanaian economy.
The local currency suffered sharp fall in value in 2014. It lost about 40 percent of its value against other foreign currencies like the US Dollar, the British Pound, the CFA Franc and the Euro.
IMF Targets To Be Missed
As part of the conditions for bailing out the Ghanaian economy, IMF has stressed the need for fiscal discipline because the economy has recorded huge expenditure deficits since 2008.
But Mr Thompson strongly argued that government would not be able to meet any of IMF's targets in the bailout.
'Ghana Government will not meet its targets set in the conditionalities,' he claimed.
The reason, he said, was because government had not been able to meet any of its development targets for the past 20 years.
According to the seasoned accountant, government would continue borrowing insatiably because the leadership of the Bank of Ghana (BoG) that is supposed to control borrowing and fiscal indiscipline within the public sphere is weak.
'The current Bank of Ghana leadership is not independent and fails to check fiscal indiscipline,' he said, and added that BoG would continue to print more money to finance fiscal deficit.
BY Melvin Tarlue & Roland Paa Kutin