Ghana’s former Ambassador for Netherlands, Dr Tony Aidoo has descended heavily on the Akufo-Addo government for its insatiable taste for loans.
The maverick politician and member of the opposition National Democratic Congress (NDC) referred to as a “viscious cycle” the borrowing and debt servicing strategy by the Akufo-Addo-Bawumia administration that promised Ghanaians not to borrow to build the country.
Speaking to host Kwame Minkah on Power FM’s Dwaboase programme Tuesday, Dr Aidoo who has observed the trend of events under the New Patriotic Party (NPP) administration warned the country was heading in the wrong direction since the current leadership has failed to embark on investment projects that will directly affect the Ghanaians people.
“When I was a member of [the late] President Mills’ cabinet, I used to tell him that our rate of borrowing is too high. But then there was a rational basis to the NDC’s borrowing. Most of them went into investment projects. Like the establishment of the gas sector. That was what we called smart borrowing,” Dr Aido recounted.
The former Head of the Policy Evaluation and Oversight Unit of the Office of late President Atta Mills from 2009 to 2013 also noted the John Mahama administration did well by injecting loans to ” impressive infrastructural development.”
He went on to say “John Mahama too borrowed for impressive infrastructural development like hospitals, schools, roads and so on. But this current administration over the past 5 years, what has the borrowing been used for? ”
He quizzed, “Have they gone into any constructive investment for development purposes or they’ve gone into consumption?” and added the phenomenon was “very difficult to accept” because the Akufo-Addo government has not embarked on any “development project” that will ” yield future dividends for the benefit of the people”.
The growing concern of the Dr Aidoo comes on the back of a warning from the International Monetary Fund (IMF) advising the government to prioritise controlling spending and generate more revenue in order to reduce the country’s debt burden.
The government has said the bad economic situation has been exacerbated by the onslaught of the COVID-19 pandemic, but has increased taxes in its 2021 budget.
According to a B&FT report, currently the IMF has pegged the country’s public debt at 78 percent of GDP in 2020, up from 64.4 percent in 2019, including energy sector debt of GH¢7.63 billion in 2020. In addition to that, government deficit, including energy and financial sector costs, reached 15.5 percent of GDP, while annual gross financing needs exceeded 20 percent of GDP in 2020.
It is against this background that the IMF, in its Article IV discussions with managers of the economy, is advising government to adapt fiscal consolidation measures that that will free up revenue for government to undertake essential spending on health and other social interventions in the fight against COVID-19.
“The 2021 budget’s recent policy pivot towards fiscal consolidation is an important step in the right direction and a difficult one in a pandemic. Fiscal consolidation should be deepened and anchored around debt and debt service reduction to create space for social, health, and development spending.
Given the social and equity implications, fiscal consolidation should rely more on progressive revenue and spending measures, while guaranteeing fiscal support to the most vulnerable and social safety nets,” leader of the IMF mission, Carlo Sdralevich, said.
He further threw his weight behind government’s planned audits of COVID-19 emergency spending and of arrears accumulated in 2020, in addition to routine budgetary reporting practices, saying it will help account for the increase of spending and its effectiveness, and provide lessons to improve the robustness of public financial management systems.