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Minority members of Parliament say government’s claims about the health of the economy are false, cautioning such half-truths will hurt investor confidence.

Accusing the government of peddling falsehood on the true state of the Ghanaian economy in relation to the country’s debt to GDP ratio at a news conference Thursday, the Minority Spokesperson on Finance, Anthony Akoto Osei, expressed regret that "propaganda" is being used as "a tool to mislead the public and more importantly, international investors".

The minority’s assertion follows the Finance Ministry’s release of figures to some media houses in a bid to quell reports that the struggling Ghanaian economy is nearing the status of a high indebted poor country, HIPC.


Below is the Minority’s full statement

Government Must Stop Deceiving Ghanaians And International Investors On Ghana’s Debt


Barely a day after internal reports of the Central Bank showed that the debt profile for June 2015 had shot beyond 71 percent of GDP; the Ministry of Finance released a sort of counter report showing a significant decline in the debt-to-GDP ratio to 62 percent for July 2015.

This report has been made available to select media houses for propaganda purposes.

A more appropriate way is to publish these numbers on the website of the Ministry of Finance. It is regrettable that it has become a tool to mislead the public and more importantly, international investors.

This ‘debt-propaganda’ work is coming right on the heels of a Eurobond road show, which in all likelihood may begin next week, and raises a number of questions, including cajoling international investors by painting a good picture of the debt situation.

Another reason why the figures are being released is the fear of HIPC and therefore with the debt numbers supposedly at 62 percent, government officials will be armed with the sort of tool and ammunition to fend-off the “fear-of-HIPC” attack which is coming from some quarters.

Here are reasons why July 2015 debt number is a fluke and why this sort of debt ‘gymnastics’ is not a good thing and should be avoided in any realm of macroeconomic management. Let us recall what happened to the exchange rate in July 2015.

By mid-July 2015, figures from the Bank of Ghana showed that the currency had appreciated in value by close to 31 percent. A quick reversal of this string appreciation occurred because the appreciation was not supported by fundamentals.

By the end of July 2015, the currency had appreciated by 25.1 percent. The impact of the appreciation resulted in a decline in the external debt stock by 20.5 percent, which has resulted in a decline in the debt-to-GDP ratio by 8.9 percent.

This sort of decline in debt in one month alone can only happen under certain conditions – through debt forgiveness, through exceptionally strong economic growth, through increased government revenues that remain available to support an accelerated reduction of the debt or through a strong exchange rate of the currency which is supported by a boost in exports. It is clear none of these factors are at play under the current circumstances. Therefore with an unreal exchange rate appreciation, the likelihood of the debt-to-GDP ratio moving up becomes imminent and quick. An upward movement in the debt numbers stemming from an exchange rate moving to its market level, after dropping so low, can trigger a crisis of confidence.

Loss of confidence can have grave economic implications and even trigger a bout of exchange rate depreciations.

Available domestic debt data for August-2015 (Ghc37.0 billion) when combined with an external debt stock (Ghc57.0 billion), using the Central Bank exchange rate data for August of Ghc3.92, is indicative that the debt-to-GDP ratio will rise in August 2015 to 64.7 percent. Even though the government has in its possession government debt data for August 2015, it chose to ignore that and rather present the July 2015 debt numbers which presents a rosier picture.

This is a clear attempt to mislead the public.

Looking to September 2015, under conditions that domestic debt stock remains unchanged at the August level, then additional Eurobond borrowing of $1.5 billion to the debt stock and with the exchange rate at current levels the debt-to-GDP ratio will go beyond 72 percent. Gauging what is likely to happen in the last quarter of the year, as the government expects more borrowing from the World Bank, bilateral, multilateral and commercial sources, we could see some additional $1 billion being added to the debt stock. At this point, the debt stock will be at least 75 percent of GDP at the end of the year.

Many issues arise here: The debt-to-GDP ratio would be approaching 80 percent of GDP and the fiscal space that the country would need to borrow for developmental purposes would have been consumed. Without the fiscal space, infrastructure development and the fight to alleviate poverty and ensure growth inclusiveness would be difficult. Failure to pull the brakes at this point could result in the economy going on its knees and at that point critical expenditures like those on public sector wages and salaries would be problematic.

This second point leads to a number of questions: Wouldn’t it be more appropriate to give a more current picture of evolution of the debt profile? Why would government not also release the debt numbers for August 2015 and give an indication of where we are headed for in September 2015 and the rest of the year? Are these numbers being thrown out to deceive international investors and paint a rosy picture of our debt situation ahead of the pending Eurobond road show? Are the debt numbers going to bounce up immediately after the country has borrowed from the international capital markets? Are the swings (up and down movement) we see in the exchange rate politically motivated? Ladies and gentlemen, we urge the government to tell Ghanaians the truth.

The truth it is said, shall set you free.