Former Finance Minister, Seth Tekper, says Ghana will only default in repaying its debt if the borrowing to refinance the budget and other expenditure continue unabated, as well as the “crowding out effect” is not stop.
Answering a question from Joy Business during a press briefing by his outfit, PFM Tax Africa, on the fiscal economy, Mr. Tekper prayed the country will not get to the level of default, but cautioned the government from excessive borrowing.
“For now, we are borrowing to finance the budget. We may get to that point if the ‘crowding’ continues or if the borrowing to meet the refinancing and the borrowing to meet the other expenditures continue. For example if you want to continue with stimulating the economy through a government programme, where is the revenue going to come from”, he stressed.
“The revenue is not going to come from the budget…it’s going into interest payment, it’s going to come from borrowing. If those type of borrowings are expensive then we may….you know I don’t want to go there”, the former Finance Minister pointed out.
“And I say so as a former public servant, and I say so because of the capability I know within the public sector, not just the Ministry of Finance. Remember when you rather do your own home grown policies, the sectoral elements involves several sectors – the Ministry of Roads and Highways, the Ministry of Education – how to control expenditure. Remember we had the Ministry of Employment, labour and everybody joining us, sat down and we agreed to pay single spine arrears later. We allowed it to be phased out and we phased it out over a period of three years”, he further explained.
He also said that the many civil and public servants who helped the nation to negotiate and structure programmes with the International Monetary Fund are still around, saying “I’ve enormous respect for some of the people who are serving in the current administration, Kufuor’s administration who are involved in austerity programmes. After all when we talk about austerity programmes, it is not NDC programmes.”
“And many of them, some are ministers and when called upon can bring us a homegrown programmes. I think, we have the expertise and of course when we [NDC] attempted to bring in the African Development Bank and the World Bank, they all came. So I think, I’ll rather hope we avert that [debt default].”
Continuing, he said “and that involves revenue. I think that I’ve read and I think is positive the fact that the government is moving to put in place a domestic revenue automation system which used to be an appendage of GCNet System, which was going to be phase 2 of our [NDC} reforms, which will change all the legislations.
Ghana’s debt stood at about ¢332 billion at the end of May 2021, about 77% of Gross Domestic Product.
This has raised concerns by some economists and analysts, fearing that the nation could default in repaying its loan if the current borrowing continues.
Presently, the IMF and the World Bank classify the country as highly debt distress country.