Former Finance Minister, Mr Seth Terkper, has indicated that Ghana’s economy may collapse if government does not consider prudent measures to salvage the situation.
Myjoyonline.com reported on Saturday that the former Finance Minister made the remarks while contributing to discussions on the state of the economy on NewsFileon Saturday.
According to him, based on the assessments of Bloomberg and Fitch, there’s sufficient evidence to suggest that, Ghana’s economy is not in a fine shape. Therefore government must roll out swift interventions to avert a possible collapse of the country’s economy.
“We’re gradually going, and we have gone HIPC before. So HIPC is a good example for us. That is if your borrowing becomes unsustainable,” he said.
Commenting on the state of the economy, Mr Seth Terkper added that government’s claims that Ghana is a sovereign country must tally with the country’s ability to thrive on its own.
“The keyword there is sovereign rights, which we’re also exercising in not going to the IMF. Yes you have sovereign rights, okay, but you’re not able to finance your budget. So what is that sovereign right? Now you have your sovereign rights to do education. You have your sovereign rights to do all your government programmes. But are you able you able to finance it yourself?” Mr Terkper quizzed.
His comments tie into an earlier projection by an economist with the University of Ghana Business School (UGBS), Prof. GodfredAlufarBokpin. Speaking on the Super Morning Show on Monday, Professor Bokpin said Ghana risks an economic collapse. According to him, as the country’s debt stock hits high distress levels, 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.
Last week, independent ratings agency, Fitch, downgraded Ghana’s creditworthiness from a B to a B minus, with a projected 83% debt-to-GDP for the year ending December, 2021.
Fitch in their report noted that, “Government’s ability to deliver unplanned fiscal consolidation effort could be hindered by the heavy reliance on domestic debt issuance with higher interest cost in the context of an already exceptionally high-interest expenditure to revenue ratio.”
But reacting to this on NewsFile, Deputy Finance Minister, Mr John Kumah, strongly disagreed with Fitch’s ratings, stating that in 2017, the country sought no assistance from the international market to meet its expenditure target.
“That is where we disagree with Bloomberg, Fitch and some of these rating agencies. It appears that if Ghana says that we are not going to the international market, then we don’t have an alternative to finance our expenditure in this country. This is not the first time Ghana has not gone on the market. In 2017, Ghana didn’t go on the market and yet we met our expenditure target and revenues. They have their doubts but one year is not far away. Just like they doubted us in 2021, we delivered”.
The Deputy Finance Minister emphasised that “an economy growing above five per cent in COVID and meeting its revenue target cannot be said to be having a negative outlook. I believe that if this is the basis of concern for them to be rating us at the levels that they are doing, we are very surprised”, he added.
MrKumah also assured the public that government will continue to manage the economy in the best interest of its citizens.
“We are all entitled to disagree but I want to assure the country that irrespective of other people’s lack of confidence in us, we have strong confidence in our ability to deliver the best and manage the economic affairs of Ghana in the best of means possible. All the targets we have set for 2022 shall be met by the grace of God,” he stated.