NDC gov’t borrows $37bn in 7yrs

• Posted on December 17, 2015
• by Nana Kwesi Coomson
• Comment

Government has borrowed about $37 billion, equivalent to GH¢148 billion in the last seven years, Dr Mahamadu Bawumia, Vice Presidential Candidate of the New Patriotic Party (NPP) in the 2016 elections has stated.

According to him, “The more than GH¢91billion increase in the debt stock over seven years represents an increase in the stock of debt by 957.9 percent over the seven-year period, an average increase in the stock of debt by 136.84 percent a year.”

“This is a frightening rate of accumulation of debt by any standard of measure and has resulted in Ghana being classified as a country at high risk of debt distress by the IMF.”

Dr Bawumia made this known at a press conference organized by the NPP in Accra recently on the 2016 Budget.

Debt Stock & Debt Sustainability

He said unbridled borrowing from government between 1992 and 2000 resulted in Ghana’s debt reaching 189 percent of GDP in 2000.

The interest payments on the debt took away critical fiscal space needed for expenditure on health, education and infrastructure.

Ghana had to opt for the HIPC initiative in 2001 since Ghana’s debt had become unsustainable.

By the end of 2008, following the adoption and implementation of the HIPC initiative and government’s policy framework of fiscal discipline, the country’s debt to GDP ratio declined to 27 percent of GDP (GH¢9.5 billion).

“Indeed, from independence in 1957 to 2008 Ghana’s total debt amounted to GH¢9.5 billion.

However, in the last seven years alone under the NDC government, Ghana’s total debt has ballooned from GH¢9.5 billion to a projected GH¢99 billion by the end of 2015. Of this, GH¢54 billion ($14 billion) is external debt and GH¢45 billion is domestic debt.

What is clear is that 90 percent (i.e. GH¢89.5 billion) of Ghana’s total debt since independence has been accumulated under this NDC government between 2009 and 2015.

He made reference to a recent assertion by President John Mahama that 41 percent of Ghana’s external debt of $14 billion was accumulated by the NPP between 2001 and 2008. “This is not true,” he argued.

Fiscal Deficit

In the eight years of the NPP between 2001 and 2008, the average fiscal deficit as a percentage of GDP was 4.4 percent.

In the last seven years (2009-2015), the fiscal deficit has averaged 8.1 percent with three successive years of double digit deficits between 2012-2014 (the first time in Ghana’s history we had recorded double digit deficits in two consecutive years, not to talk of three consecutive years).

“Today under the IMF bailout programme, Ghana is trying to get to the 2008 fiscal deficit level of 6.5 percent, which the NDC said was bad. Did we go or we come?”