The Member of Parliament for Bolgatanaga, Issac Adongo has rubbished Vice President, Dr. Mahamudu Bawumia’s presentation on Ghana’s debt accumulation.
The Vice President at a town hall meeting on Tuesday tagged the rate of debt accumulation over the last three years as the lowest Ghana had achieved in a decade.
This is despite the public debt rising to GHS214.9 billion as of November 2019.
“The strong fiscal adjustment that has taken place and better debt management meant that the rate of debt accumulation has slowed down considerably to the lowest in a decade. Between 2008 and 2012, Ghana’s debt stock increased by 267 percent. Between 2012 and 2016, Ghana’s debt stock increased by another 243 percent. But between 2016 and 2019, the increase has been by 79 percent. So there is a big difference,” the Vice President said.
But Mr. Adongo on Eyewitness News said Dr. Bawumia’s claim was factually inaccurate.
“The facts do not support what he said. If you read through his speech, you would notice that he quoted the public debt of Ghana at GHS122 billion. That is false. The Auditor-General has certified Ghana’s debt at GHS120 billion and there is no dispute about that unless the Vice President says he does not trust the work of the Auditor-General. On that score, he goes ahead to make some analysis of the growth of our public debt. He makes the analysis that Ghana’s debt grew by almost 49 percent within the period of 2008 to 2012, that is factually inaccurate. And then he says between 2012 to 2016 it grew by some 39 or 49 percent. That cannot be accurate.”
“If you look at the numbers, the debt to GDP as of December 2016, was 54% if you consider that the public debt was GHS120 billion and not 1GHS22 billion. Now if you take 56% you will notice that the public debt within the period of NDC even for four years grew by just 16%. If you compare that to him even taking just three years to compare to four years, you notice that you move from 54 percent to 62.5 percent as at December 2019 and you will notice that the debt to GDP has grown exponentially. These are data from the budget and yet Bawumia says when you move all the way from 54 percent to 62.5 percent that gives you 3.9 percent growth in debt to GDP accumulation. How do you do that Mathematics? It just does not wash.”
The total public debt has increased from GHS122 billion in 2016 to GHS214 billion in November 2019 representing 62.2 percent of GDP.
Possible incoming debt distress
Ghana’s recent sale of $3 billion in Eurobonds puts it in high risk of distress, according to the International Monetary Fund.
Ghana received about $15 billion in offers for the debt issuance that included a tranche of sub-Saharan Africa’s longest-yet Eurobond with an average life of 40 years.
The sale would increase Ghana’s debt burden, which the International Monetary Fund estimated was 63% of gross domestic product at the end of 2019.
The World Bank also cautioned Ghana against piling its external debt and exceeding the sustainability threshold.
The Africa Economic Outlook, in its section on Ghana, also warned that increased foreign participation in Ghana’s debt exposes the country to global market swings and foreign exchange risks.
It noted that “mounting energy sector liabilities, due to excess installed capacity from take-or-pay contracts with independent power producers, and the ongoing financial sector clean-up are likely to lift the debt-to-GDP ratio above the current 60.6 percent.”
In addition, despite the Fiscal Responsibility Act, it warned that the runup to elections might put pressure on the government to overspend and under-tax “which could derail progress toward fiscal consolidation.”
The Finance Minister, Ken Ofori-Atta, in turn, assured that Ghana’s debt to GDP, which is the total value of all goods and services produced, will not escalate to alarming levels with the issuance of the latest Eurobond.