I AGREE WITH EXPERTS; COVID ALONE IS NOT REASON FOR HIGH FISCAL DEFICIT.
Ghana’s Vice-President Dr. Mahamadou Bawumia appears to have burst the bubble of some key government spokespersons when he admitted that Covid alone could not have been responsible for Ghana’s high fiscal deficit of 11.4 % in 2021 as suggested by some economic experts. This is despite earlier attempts by governments spokespersons to blame the current economic woes solely on the effects of Covid.
Addressing party supporters at a lecture in Kasoa, the Vice – President said he agreed with experts who said there was more to Ghana’s fiscal deficit than covid. He attributed the challenge to the combined effect of the banking sector bailout; the Energy Sector levies and the Covid-19 expenditure which he says contributes a total of 50 billion cedis.
“Interest payments on the borrowing alone, because these were financed from borrowing for our excess capacity payments, banking sector clean-up and the Covid-expenditures were financed from borrowing and the Ministry of Finance estimates that the interest payment on this borrowing for these three items alone amounted to 8.5 billion Ghana cedis and this is about 23% of Ghana’s annual interest payment of about 37 billion Ghana cedis”. Said Dr. Bawumia.
According to him, it is important to put these expenditures into perspective by juxtaposing it against the total expenditure of some of the government’s key flagship programs such as the free SHS, One District One Factory, Planting for Food and jobs, NABCO, Teacher training allowances, Ghana Card, Nursing training allowances amongst others. He said the interest payments on the three items far outweigh the total expenditure on the government’s flagship programs.
“The data shows that over the last 5 years, our expenditure on all these flagship projects was 15.6 billion cedis and this is compared to our expenditure on those three exceptional items I have just mentioned of 50.1 billion Ghana cedis. The expenditure on these three items amounts to more than three times the expenditure on the flagship programs”. Bawumia mentioned.
According to him, the annual interest cost of the borrowing for the exceptional items will pay for double the annual cost of all the flagship programs.
Dr. Bawumia charged the receiver for the financial institutions to retrieve the assets of the institutions to defray a significant portion of the 25-billion-cedi debt.
On the issue of Ghana’s debt stock, Dr, Bawumia said the challenge was a global one owing to attempts by most governments across the world to protect livelihoods and stimulate their economies from the effects of covid.
“In 2020, the global government debt increased by 13 percentage points of GDP to a new world record of 97% of GDP. In advanced economies, the debt to GDP was up by 16 percentage points to 120% of debt to GDP and up by 9 percentage points to 63% of GDP in emerging markets”. Dr. Bawumia said.
Dr. Bawumia noted that without the 50-billion-cedi debt incurred because of the banking sector bond, energy levies, and covid, Ghana’s debt to GDP would have been 69%.
“Between 2019 and 2021, Ghana’s debt to GDP increased by 17.6 percentage points. It should be noted and it is important that without the 50.2 billion for the exceptional items of the financial sector, Energy and Covid, Ghana’s debt to GDP would have been about 68% instead of the current 80 % that it is”. According to Dr, Bawumia.