The insatiable desire of the John Mahama-led government to chase after loans irrespective of cut-throat interest rates has landed the country in a quagmire as the Finance Minister has budgeted more cash to service interests on loans at the expense of the needed infrastructural expansion.
The Minister of Finance and Economic Planning, Seth Tekper, last Friday presented the 2016 budget statement to Parliament and announced that, government has to fork out about Gh¢10.5 Billion representing 6.6% of Gross Domestic Product (GDP, including oil) to service interest on loans accessed in recent times. In a sharp contrast, the government has earmarked a paltry Gh¢6.7 Billion representing 4.2% of GDP including oil to undertake capital expenditure projects.
Interestingly, the estimated Interest Payments for the year 2016 would surpass all taxes on domestic goods and services which is projected to hover around Gh¢7.5 Billion representing 4.7% of GDP including oil.
Indeed the amount is bigger than what the government would spend on all other government units which is estimated at Gh¢9.7 Billion representing 6.1% of GDP.
Similar to what happened last year, the astronomical increase in the debt stock from Gh¢9.5 Billion in 2008 to abut Gh¢ 90 Billion has left government with little resources to spend on critical areas of the economy such as the Ministries of Roads and Highways, Trade and Industry, Food and Agriculture, Transport and Water Resources and Housing.
Ahead of the presentation of the budget last Friday, the Institute of Statistical, Social and Economic Research (ISSER) cautioned government to stop borrowing to pay debts. ISSER expressed worry at the government’s recurrent expenditure saying it was not sustainable in relation to the gap in revenues.
Meanwhile, Dr. Mahamadu Bawumia a renowned Economist and Vice Presidential Candidate of the opposition New Patriotic Party (NPP), says the Mr. Seth Terkper’s 2016 budget presentation especially on the Eurobond loan facility, exposed his lack of understanding on the subject.
Speaking on the Eurobond, the Finance Minister said “Ghana has once again issued a landmark bond and has become the first sub-saharan African country outside South Africa to issue a 15-year bond…Government secured its fourth Eurobond at a coupon rate of 10.75 percent with a maturity of fifteen years” adding that, the bond is “a soft amortizing bond to be repaid in three installments of US$333 million in years 2028 and 2029, and US$334 million in 2030.”
Alhaji Dr. Bawumia in a short interaction with The New Crusading GUIDE over the weekend expressed worry at the stance of the Finance Minister on the Eurobond saying “it is a sad story”
“The Eurobond issue of 10.75 percent, for 15 years is a terrible bargain and instead of Mr. Tekper to be crying, he is rather saying he has done very well and deserves applause. It rather shows a fundamental lack of understanding. It is a very bad deal for the country”, Dr. Bawumia reiterated.
In a similar fashion, Minority Leader Osei Kyei-Mensah-Bonsu also pooh-poohed the 2016 Budget which he insists is pointing to an uninspiring direction for a struggling economy.
The Minority Leader was not convinced the 2016 statement paints any hope for the nation, indicating that its content is a true reflection of President Mahama's catchphrase "I have a dead goat syndrome".
“This is a dead goat budget,” he told his colleague Legislators when he seconded the motion to adjourn sitting after the Minister presented the budget.
Moments after the presentation of the financial statement, the Minority issued a press statement taking the government to the cleaners for supervising over a bad economy despite earning more inflows than any other government.
“From independence in 1957 to 2008 Ghana’s total debt amounted to GHC 9.5 billion. In the last seven years alone under this NDC government, Ghana’s total debt has increased from GHC9.5 billion in 2008 to an estimated GHC99.0 billion at the end of 2015. The government has borrowed some GHC 90 billion in seven years! This is an unprecedented rate of accumulation of the public debt. In dollar terms, this NDC government has borrowed the equivalent (at the time of borrowing) of some $37 billion in seven yeras”, the Minority stressed.
They added that “the record therefore shows that this NDC government has had access to a massive flow of resources in the last seven years. Taxes, loans and oil revenues alone over the last seven years amount to an inflow of some GHC 200 billion in the last seven years. Under the 8 years of the NPP government from 2001-2008, taxes, loans and oil revenues alone amounted to some GHC 20.00 billion. In the last seven years (i.e. excluding 2016) this NDC government has had, in nominal terms, at least 10 times the resources that the NPP had in 8 years”.
Notwithstanding all these massive resources in terms of tax revenue, loans, and revenues from gold, cocoa and oil exports amongst others, the Minority insists that “public finances are in such a bad state to the extent that we had to seek an IMF bailout. That is the record of the last seven budgets of this NDC government. It is a record of failure”.
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