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Ghana’s economy worse off after IMF programme

By: Emmanuel Bruce
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Mr Isaac Adongo
Mr Isaac Adongo

THE Member of Parliament (MP) of Bolgatanga Central, Mr Isaac Adongo, has said the high level of fiscal indiscipline in the country has made the economy worse off than when the country signed onto the three-year extended credit facility (ECF) Programme with the International Monetary Fund (IMF).

He said the narrative from the government upon the completion of the programme was an attempt to hide the precarious economic condition in the country.

“There is a rising risk in terms of our fiscal environment and we are worse than when we entered the IMF programme,” he said on the floor of Parliament.

Mr Adongo was contributing to a debate on the floor of Parliament after the Minister of Finance, Mr Ken Ofori-Atta, had appeared before the house to update members on the completion of the IMF programme.

He is also due to hold a lecture on April 4 to review the economy after the IMF.

Rising wage bill
Giving reasons to back his claim, he said: “In 2016, our total wage bill was GH¢14 billion, today we are dealing with GH¢22 billion, representing an increase of 63 per cent.

On the average, we are adding 21 per cent to our public wage bill every year and if this continues, by the year 2020, we would have doubled the wage bill that we left in 2016.”

That, he said, was the height of indiscipline in the management of the economy.

Rising interest payments
The MP also pointed out that interest payments were on the rise despite the Finance Minister’s pledge in 2017 that he was re-profiling the country’s debts in order to reduce interest payments.

He said this was a major worry to the economy.

“In 2017, the minister came to Parliament to say he was re-profiling our public debt in order to reduce our interest payment but I am sad to report that our interest payments has increased from GH¢11 billion to GH¢15.8 billion in 2018 and projected to reach GH¢18.3 billion by the end of this year,” he stated.

“When you add the wage bill to that of our interest cost you will get a figure that consumes our entire tax revenue and we should be worried. When you spend your tax revenue on two items then you should be worried.

When you add the amount we spent on statutory funds to these two items, the total expenditure was GH¢52 billion while our total revenue, including grants was GH¢47 billion, leaving a funding gap of GH¢5 billion,” he explained.

He said this GH¢5 billion was financed with proceeds from the country’s Eurobond in 2018.
“This means that we borrowed GH¢5 billion to pay wages and salary, interest cost and we are celebrating this,” he noted.

Spending Eurobond proceeds on consumption
Mr Adongo said what was even more worrying was the fact that there was nothing left for goods and services, which meant that a large part of the country’s Eurobond proceeds went into goods and services and consumption.

“We are borrowing GH¢10.6 billion every year for consumption. We are leaving debts for our children without assets,” he noted.
“In 2017, domestically financed capital expenditure where we spend our Eurobonds was GH¢1.6 billion and this included GH¢1.1 billion that we got from ABFA to finance domestic capital expenditure.

What this means is that the difference GH¢500 million, equivalent to US$119 million was what we spent form our Eurobond proceeds of US$750 million.

This means that the remaining US$630 million was spent on consumption,” he explained.
“You go to the capital market to borrow at expensive rates and come and spend it on consumption,” he said.

US$3 billion bond
 Mr Adongo said the situation was not different from the recent US$3 billion Eurobond that was issued as a huge chunk of it would be spent on consumption.

“If you look at the domestically financed component of our capital expenditure budget, it stands at GH¢3.22 billion and we have already budgeted GH¢1.27 billion from ABFA to fund that expenditure, leaving a difference of GH¢2 billion to be financed with Eurobond proceeds,” he pointed out.

“If you convert that figure at the rate of GH¢5 you are going to get approximately US390 million dollars, which means US$1.6 billion of what we just went to bring is going into consumption,” he added.

He said the remaining US$1 billion is expected to be used to re profile the country’s maturing debts.