john mahama

President John Dramani Mahama has hit back at Dr. Mahamudu Bawumia?s criticism of the government?s excessive borrowing saying, he would keep borrowing.

According to Mr. Mahama, the country was not borrowing to fund recurrent expenditure. Rather, it was borrowing to fund social infrastructure such as water and electricity.

?We did not borrow to drink or to eat; we borrowed to bring facilities such as electricity and water to the people of Ghana,? he told chiefs and people of Kyebi in the Eastern Region on Wednesday when commissioning a water project.

However, the President failed to tell his hosts that nowadays some government agencies rely mostly on bank loans and overdrafts to pay staff salaries, including the universities, because of the late arrival of government subventions.

According to the President, many countries doing well economically across the globe have once borrowed heavily.

During a Tuesday public lecture at the Central University College main campus at Miotso where he was invited as a Visiting Professor of Economics, Dr. Bawumia painted a rather gloomy picture about the future of the Ghanaian economy, with unrestrained borrowing burdening the country with huge debts.

He attributed the cause to mismanagement by the Mahama-led National Democratic Congress (NDC) administration leading to the weakening of economic fundamentals of Ghana.

According to Dr. Bawumia, who was former Deputy Governor of the Bank of Ghana, the country?s debt stock would cross 60% of GDP level by the close of the year ? a situation he noted was beyond the limit for developing countries. Over a five-year period since the NDC assumed power, there has been an increase in the stock of debt by 426% with an average increase in the stock of debt by 85% every year. ?This is a frightening rate of accumulation of debt by any standard,? Dr. Bawumia warned.

?At this rate?the country will be on its knees before the end of the year?the Ghanaian economy is in a crisis,? he warned.

He pointed out that the mounting debt stock had created a rife situation for a possible classification of Ghana as a Highly Indebted Poor Country (HIPC). ?Ghana is headed back towards the debt unsustainability that led to HIPC. However, HIPC debt relief will not be available again and the earlier we recognize this, the better for all of us,? Dr Bawumia warned.

However, economists have indicated that the lower middle income status of Ghana and its new status as an oil producing country would make it virtually impossible to opt for the HIPC initiative to seek debt write-off from international creditors.

More Loans

But President Mahama has brushed these warnings aside, saying the country?s economy was not retrogressing. ?Don?t let anyone deceive you. This country is not retrogressing. We are moving forward and we will stay on that course,? he told the gathering at the durbar in the Eastern Region.

He said there was no truth in the assertion that his government had not been prudent in its borrowing.

?There are some who claim Ghana is borrowing too much and that it is increasing the nation?s debt, but I dare say if you borrow and use it prudently you are on the right course and that is what is important,? Mr. Mahama said.

The President, who used helicopter throughout the two-day tour of the region apparently because of bad road networks, stressed that he would continue to borrow more.

President Mahama?s rebuff is consistent with his earlier posture that Ghana has a huge capacity to accumulate more loans for projects; and it appears the fears expressed by economists and multinational agencies such as the International Monetary Fund (IMF) and rating agencies, Fitch, Moody and Standards and Poors do not bother him.

It will be recalled that at an NDC youth programme in Winneba, then Vice President Mahama virtually insulted people who complained against excessive borrowing when he used his infamous ?what a hell? and ?baloney? against the critics.

Recently, Minister of Defence, Mark Owen Woyongo, announced that government had to borrow GH?50 million to pay for gratuities of over 1,000 soldiers who have been released from the service but couldn?t go home because of lack of money.

Drowning In interests

Since 2009, interest payments on Ghana?s public debt have assumed an astronomical trajectory. From 2008 to 2013, interest payment has increased to 5.1% of GDP and it is being estimated to hit 6.5% of GDP by the end of 2014. Earlier interest payments were below the 3% mark.

According to Dr. Bawumia, these interest payments are more than government budgetary allocations to over six important government ministries combined. Interest payments in 2014 would amount to some GH?6.604 billion. This is three times more than allocations to the Ministry of Roads and Highways, the Ministry of Trade and Industry, the Ministry of Ministry of Fisheries, the Ministry of  Food and Agriculture, the Ministry of Water Resources and Housing and the Ministry of Transport which total budgetary allocation is about GH?2.062 billion.

The interest payment is also expected to gross more than four times Ghana?s oil revenue, ?In 2014 interest payments (GH?6,604 million) will be four times Ghana?s revenue from oil (GH?1,670 million).

No projects

Several critics have wondered where all the accumulated debts have been channelled into as they argue that no significant infrastructural projects have been undertaken by the NDC government in the past six years of its rule: ?It is not clear exactly what developmental projects all this $20 billion borrowed has been used for. The increase in government debt over the last five years is an amount that can build at least 15,000 km of tarred roads. It is an amount that could have built 6,000 senior secondary schools even at the high cost of GH?6.0 million each. It is an amount that could have built hundreds of first class hospitals. It is an amount that could have solved Ghana?s energy and water problems,? Dr. Bawumia calculated.

By Raphael Ofori-Adeniran

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