Ghana’s public debt is estimated to reach an alarming all time record high of Gh¢220 billion by the close of the 2019 fiscal year following government’s strong appetite for borrowing.
According to the minority in parliament, the NPP administration under president Akufo Addo has borrowed a whopping sum of about Gh¢160 billion but has nothing to show for it since it took over the reign of power in 2017.
Minority spokesperson on finance, Mr Cassiel Ato Forson stated this while addressing a press conference to respond to the mid-year budget review presented to parliament by the finance, Ken Ofori Atta on Monday.
Public debts dynamics
According to the minority, the Finance Minister’s presentation on Monday brought to light that our public debt has risen sharply from GHS 120 billion as of December, 2016 to GHS 204 billion as of June, 2019.
The sharp rise, according to the minority, represented an increase of about GHS 84 billion in the last two and half years under President Akufo-Addo.
“This has brought the debt to GDP ratio to 59.2 percent from 55.6% in December, 2016 even with the benefit of a rebased economy,” Mr Forson posited.
He alleged that government has “cosmetically” posted a positive primary balance for two consecutive years at a time when the public debt has ballooned to GHS 204 billion.
Forecast of public debt
“We project that based on government’s appetite for borrowing and the current trend, our public debt will reach GHS 220 billion by the close of the 2019 fiscal year”. He said.
According to him, this would represent about 62% of GDP adding this would mean that in three years, President Akufo-Addo would have added GHS 100 billion to the public debt.
He stressed that this figure would only represent what had been added since 2017 adding that in all, President Akufo-Addo has borrowed about GHS 160 billion (not what is added to the public debt) since 2017 with part of it used for debt reprofiling.
The public debt, he noted, would exceed the projected GHS 220 billion, once draw-down begins for a number of loans approved by Parliament.
This rapid increase in the public debt level, he said, meant that we have reached a point of debt unsustainability, a fact confirmed by the World Bank Country Director.
This also is at variance with what the President and his party told the people of Ghana in opposition.
They created the impression that they could govern the country without borrowing and that even if they borrowed at all, the funds would solely be channeled into capital investments.
After adding GHS 84 billion to the public debt, President Akufo-Addo cannot point to any significant capital investments made over the last three years. Almost all of the borrowed funds have gone into consumption related expenditure.
Overall growth of the Ghanaian
The overall growth of the economy during the first quarter of 2019, according to the minority, was 6.7 percent driven by the industrial sector (oil) which grew at 8.4 percent.
This, he said, was followed by the services sector, 7.2 percent with the agricultural sector, being next with 2.2 percent. “Apart from the services sector which showed an increase in growth from 5.8 percent in the last quarter of 2018 to 7.2 percent in the first quarter of 2019, all other sectors saw a decline in growth”. He said.
He added; “Surprisingly, after all the money spent on the so-called “planting for food and jobs” growth in the agricultural sector has not seen any significant change”.
He continued, “From the first quarter of 2018 to the first quarter of 2019 and in fact growth declined from 4.4 percent in the last quarter of 2018 to 2.2 percent in the first quarter of 2019”.
FISCAL SECTOR DEVELOPMENTS
Sourcing an alleged Ministry of Finance’s Fiscal performance between January and May this year, the minority posited that the NPP was faced with serious fiscal challenges.
According to the presser, “Revenue and grants through the first six months of the year was 15.5 percent below target. Key sources of revenue all fell below target”.
“Personal income tax by 7.0 percent, customs NHI levy by 18.9 percent, customs GetFund levy by 22.5 percent, import duties and levies by 20.6 percent, luxury vehicle levy by 78.5 percent, yield from capping policy by 53.1 percent, ESLA by 31.0 percent, and grants by 60 percent”. He claimed.
Expenditures on the other hand exceeded its target by 4.2 percent adding that these developments resulted in the widening of the overall fiscal deficit to 3.3 percent of GDP as against a programmed target of 2.9 percent of GDP and a programmed 2019 budget deficit of 4.2 percent of GDP.
The primary balance deficit, he mentioned was 0.8 percent of GDP as against a programmed deficit of 0.1 percent of GDP.
He averred that the programmed budget deficit target for the 2019 fiscal year of 4.2 percent of GDP was set when Ghana was preparing her last Budget under the IMF programme and to officially exit the programme.
The minority claimed that several stakeholders within the Ghanaian economy including business associations called on President Akufo-Addo to review several taxes and avoid the imposition of new ones prior the minister’s presentation.
They, however, accused President AkufoAddo of slapping increases on three taxes that form part of the ESLA and the Communication Service Tax.
Under the ESLA increments, an average increase of 25% was imposed on the Power Generation and Infrastructure Support Levy, Road Fund Levy and the Price Stabilization and Recovery Levy.
This means that once they come into effect, consumers will be paying almost GHS 1 on petrol and diesel and GHS 1.7 on 14kg cylinder filled with gas.
If these increases create frustration and Ghanaians wish to vent through phone calls or on social media, the Mid-year budget has made that expensive as well following the imposition of a 50% increase in the Communication Service Tax from 6% to 9%.
They have therefore, accused the government of being insensitive to the plight of the average Ghanaian despite his promise to improve the standard of living among the Ghanaian people.
According to them, president Akufo Addo appeared rather obsessed with churning out what they called macroeconomic indicators.
These indicators, the minority claimed, have little or no bearing whatsoever on the hardships confronting the Ghanaian people under his almost two-year reign in government.
According to Mr Forson, “Ghanaians are suffering under the leadership of the NPP government that benefited greatly from the positive gains they inherited from the John Mahama led administration”.
He added that “Despite the lofty and flowery talk, in the last two and half years, the Ghanaian economy has been largely characterized by: a rapidly deteriorating standard of living of the average Ghanaian.”
Increasing hardships with periodic rises in the prices of goods and services, increasing cost of utilities, particularly, energy, water and petrol were mentioned by Ato Forson as some of the many hardships that have characterised the economy.
Mr Forson further stated that businesses were struggling to keep up with their operations due to the high cost of doing business under the current government.
Mr Forson, who is also the ranking member on the finance committee of parliament, mentioned at the press conference that the economy under the NPP had been fraught by collapse of businesses with the accompanying job losses.
“Ghanaians are suffering under the leadership of the NPP government that benefited greatly from the positive gains they inherited from the John Mahama led administration,” said Ato Forson.