National Communications Officer of the opposition National Democratic Congress (NDC), Sammy Gyamfi has predicted doom for the country’s economy if pragmatic policies are not put in place to salvage the situation.
Speaking on Dwaboase on TV XYZ, Gyamfi, who is a constant critic of the Akufo-Addo administration’s policies, stated that Ghana could become bankrupt in the next 2 or 3 years when the government does not change its ways of “borrow and consume.”
Blomberg reported last week that Ghana’s dollar bonds have slumped 10% in 10 days, moving deeper into distressed territory as investors judge that re-financing debt in the Eurobond market won’t be an option when the Federal Reserve hikes rates and budget targets remain elusive.
The extra premium demanded on Ghana’s sovereign dollar debt, it said, jumped on Wednesday to an average 1,105 basis points, from 683 basis points in September.
Ghana’s $27 billion of foreign debt had the worst start to the year among emerging markets, extending last year’s 14% loss, according to a Bloomberg index.
Investors are questioning whether Ghana — the region’s second-biggest economy — can sustain its debt levels if a surge in borrowing costs shuts it out of international markets. Government debt climbed to 81.5% of gross domestic product at the end of last year, from 31.4% a decade ago, according to data compiled by Bloomberg.
Sammy Gyamfi who was reacting to this said he had observed trends of borrowing in the country and realised that most bonds were channeled into consumption since the Akufo-Addo government assumed office.
“When President John Mahama was in power, we embarked on prudent borrowing but the NPP maligned us…Today they borrow and chop [consume] it while the economy keeps declining,” Gyamfi told host Prince Minkah.
He also noted that the borrowing the NDC did in power was for the betterment of the country, saying “the Terminal 3 at the Kotoka International Airport can pay for itself because the airport works.”
He also mentioned the MPS Terminal at the Tema Port which was built under the Mahama administration as well as the Atuabo Gas plant which he said “has saved the country some 300 million dollars” every year.
To him, the taxes being collected are not put in good use hence putting pressure on the national purse which is not being managed well by the government.
Experts have been warning of an imminent collapse of the country’s economy when certain measures are not put in place.
Among those predicting doom is an economist with the University of Ghana Business School (UGBS), Prof. Godfred Bokpin.
Prof. Bokpin who spoke to Joy SMS stated that the current debt situation could get worse by the end of September, if proper interventions are not implemented.
“When you see the proportion of the debt payment, relative to the size of the revenue envelope and you look at your rising debt and you look at the rate of economic growth and the drivers of that growth, you can reasonably predict that it’s just a matter of time that the economy will just collapse. We’re probably going to run into a little bit more difficulties towards the end of September,” he said.
Following Ghana’s downgrade to ‘B-‘ from ‘B by credit rating agency, Fitch another economist who is the Dean of the Business School at the University of Cape Coast (UCC), Professor John Gatsi believes the economy is not in good shape.
“I think we are not surprised about the downgrade because the fiscal indicators are very clear. We do know that for some time now our interest payments, as a ratio of tax revenue, have been going up significantly. In 2021, the interest payment of about 32.5billion cedis as a ratio of what has been put up by GRA of about 57.3 billion…That gives you around 47 percent and you add that of compensation and expenditure on infrastructure, you are going around 127per cent of the revenue and so all these indicators are very clear to us,” Prof Gatsi said in an interview with TV3.
“You will recall that second half of last year the signals were there but we have not been able to do anything that will actually give that confidence.”
The downgrade of Ghana’s IDRs and Negative Outlook reflect the sovereign’s loss of access to international capital markets in 2H21, following a pandemic-related surge in government debt.