The Economy Is Collapsing Due To Akufo-Addo’s Reckless Borrowing – Sammy Gyamfi

The National Democratic Congress’s (NDC) Communications Officer, Sammy Gyamfi, claims that the Akufo-Addo government’s poor handling of the economy is the reason for the country’s low ratings from international rating agencies.

The government’s enormous borrowing and expenditure on consumption-driven things, he claims, is sinking the economy and must be stopped.

“This situation has been largely occasioned by the Akufo-Addo/Bawumia government’s reckless spending, which reckless spending reached a climax in 2020 and has now inescapably plunged the country into an unprecedented budget deficit,” Sammy Gyamfi said in response to the downgrade of Ghana’s economy by international rating agencies Fitch and Moody’s.

This, combined with the government’s proclivity for risky and unprecedented borrowings, which have mostly been squandered on consumption-driven government activities, has sunk the country into an unsustainable financial hole.”

Fitch lowered Ghana’s economy from B to B- with a negative outlook in January 2022.

Ghana’s economy was also downgraded by Moody’s from B3 to Caa1 with a stable outlook, down from B3 with a negative outlook.

According to them, the new ratings reflect Ghana’s difficulties in resolving its liquidity and debt problems.

Ghana is looking to domestic revenue mobilization to save the situation due to limited access to the international financial market.

The government is pushing hard for the 1.75 percent electronic financial transaction levy (E-levy), which it claims will bring in $1 billion per year.

Amid widespread popular opposition to the E-levy, some commentators have suggested that seeking an IMF bailout would be a preferable option, but the administration has stated on multiple platforms that it does not wish to seek assistance from the IMF.

But according to Sammy Gyamfi, rather than pushing through E-levy, the government must cut down on its expenditure and plug loopholes in the public sector, such as corruption and financial irregularities, and reduce the tax exemptions granted to some establishments.

Read Sammy Gyamfi’s statement below:

ON THE MATTER OF GHANA’S DOWNGRADE BY FITCH AND MOODY’S:

The B- and Caa1 rating of Ghana’s economy by Fitch and Moody’s respectively is our worst-ever rating by these internationally reputable agencies. What these downgrades simply mean is that:

1. Ghana’s economy has virtually collapsed. Investor confidence in Ghana’s ability to meet its debt obligations is at an all-time low. What this effectively means is that the country’s credit rating is very poor and highly risky. In other words, the investor community believes that our ability as a country to stabilize and service our debt is very very weak.

2. So bad and precarious is our economic situation that Ghana has lost access to the international capital (eurobond) markets. Hence, the country’s significant reliance on very costly short-term domestic borrowing, which is increasingly leading to the crowding out of the private sector. Even worse is the fact that Ghana defaulted on its loan repayments in 2020 and 2021 ($1,035,867 and $744,048 respectively).

3. This situation has been largely occasioned by the reckless spending of the Akufo-Addo/Bawumia government, which reckless spending reached its climax in 2020 and has now inescapably plunged the country into an unprecedented budget deficit. This coupled with the government’s penchant for reckless and unprecedented borrowings which have been largely wasted on consumption-driven activities of this government have plunged the nation into an unsustainable debt hole. Currently, Ghana’s debt to GDP ratio is at an all-time high of 83% according to Fitch (i.e including energy sector debt), with interest payments of about 50% of total revenue. This current situation is worse than the country’s economic position when we joined the HIPC program sometime in the year 2001.

4. In short, Ghana’s economy has been collapsed by Alhaji Bawumia and President Akufo-Addo. We are now in the junk category of nations. We no longer have money for developmental projects. Moody’s projects that Ghana’s government debt ratios will continue to deteriorate in the next few years with extremely weak debt affordability significantly constraining policymaking. We are in a situation where we must continue to borrow at very high interest rates to meet our basic needs. This is going to escalate the level of hardships and suffering in the country for all Ghanaians.

5. The solution to the economic crises on our hands doesn’t lie in the E-levy but rather:

* Cutting down on government’s expenditure which has been mainly consumption-related. For example, the rental of hyper-expensive luxurious jets by President Akufo-Addo must cease forthwith.

* Plugging the holes in the public sector and significantly reducing financial irregularities, leakages, waste and corruption.

* Reviewing and significantly reducing tax exemptions, among others.

In all this, the head of the economic management team, Alhaji Bawumia has gone mute and is no where to be found. The chickens have come home to roost. It is time for reality check.

Source: GhanaFeed.com