Ghana, according to some economic and financial experts is itching closer to the comity of countries referred to as “Highly Indebtedness Country (HIPC).” It’s a level of economic ranking that suggests affected countries are somewhat, put in trust for a bail-out.
The bailout, however, does not come on a silver platter, unless affected countries carry out sustained economic reforms prescribed by the World Bank or the International Monetary Fund (IMF). It’s similar to an insolvent financial institution that is placed under an “economic incubator” to be nurtured carefully for survival. In some instance such insolvent institutions suffer total collapse.
The last and the only time Ghana, accessed the HIPC initiative was in 2003 under President Kufuor’s administration. It’s one decision that was kicked against by many Ghanaian stakeholders, including senior cabinet members of the Kufuor administration like then Finance Minister, Yaw Osafo Maafo and the current President, Nana Akufo Addo. Nana Addo was the Attorney General at the time.
From the economic archives, Ghana currently owes the World Bank an outstanding debt of GH215 billion. Not to talk of that of the International Monetary Fund (IMF) and others, within the international financial market. And many financial experts have predicted economic doom for the country, if immediate steps were not employed to address the country’s dire economic situation.
The World Bank has warned Ghana against her piling of external debt; stating that the country’s current external borrowing or external debt rate makes Ghana one of the most discomfort economic destinations. That’s because the country has a moderate to high-risk debt distressed economy. The Bretton Woods institutions are therefore warning the Akufo Addo-led administration not to cross the acceptable thresholds of debt sustainability or risk being declared a Highly Indebted Country.
According to the Resident Representative of the International Monetary Fund (IMF), Ghana’s precarious economic disposition is being facilitated by the worrying culture of the country’s borrowing without the corresponding revenue generation, especially at the turn of this administration.
What is worrying is the fact that our level of revenue generation has hit an all-time low, although the economic management team headed by the Vice President continue to tout themselves for being able to seal every available loop-hole within, especially, the public financial and economic circuits. It’s been the contention of many within the economic team that with the restoration of technology in many public revenue generation places, the country’s public purse will increase in folds and bounds.
That has however, proven not to be the case. So then, how do we deal with the massive corruption and rot at the Immigration Service, Customs Excise & Preventive Services, the Passport Office, Births and Deaths Registry and many other public institutions that Dr. Bawumia claimed, he had overhauled with the installation of digital devices to check corruption, among other thieveries.
In the estimation of Dr. Albert Touna-Mama, the IMF’s Resident Representative, “Ghana’s debts servicing and revenue fall at 30 percent, which is twice as much compared to countries of similar Ghana feature”, adding, “We use debt service to revenue as a proxy of how sustainable the debt of Ghana is. At the moment, that ratio is close to 30 percent. When we take that for countries of similar features, it should be below 18 percent. This is twice as much as what it should be. So, of course, we are concerned about borrowing of Ghana”, Dr. Touna-Mama disclosed.
It does seem to be a huge farce, the long held view that debt and borrowing are measured by Growth Domestic Products (GDP). In fact, a very essential metric the IMF uses to gauge a country’s debt portfolio is debt servicing, as against revenue collection. It’s the management of the two economic indices that determine how resilient a country’s economy is or should be, in order to gain international recognition or otherwise.
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