Respected economists and lecturers have waded into the debate of whether Ghana’s humongous public debt caused it to waltz into the Highly Indebted Poor Country (HIPC) club, saying that indeed the country is unofficially there.
At almost GHC 160 billion of public debt incurred by the Akufo Addo administration in its four-year tenure, a quick calculation shows that every hour of the four years, the government incurs some GHC 4.7 million in debt. Every 24 hours, the administration adds some GHC 109 million to the debt stock.
Economist and Professor of Finance at the University of Ghana Business School, Godfred Bokpin, says Ghana’s unofficial return to HIPC (Highly Indebted Poor Country) is not surprising, while Professor John Gatsi of the University of Cape Coast (UCC) thinks Ghana is at HIPC without the benefit of the initiatives’ unique debt relief feature.
This conclusion by the economists follows recent reports by the World Bank and the International Monetary Fund (IMF), which has listed Ghana in the Category of the Highly Indebted Poor Countries on its website after the two Bretton Woods institutions projected that Ghana’s debt to GDP which currently stands at 68.3% will hit 76.7% by the end of December 2020.
The development has sparked heated public debates between critics and government officials about the status of Ghana. Officials of the Akufo Addo administration claim Ghana cannot be classified HIPC because it has used up its only opportunity on the debt relief scheme of international creditors.
But critics insist that HIPC is a mere semantic that distorts the fact that Ghana has breached the debt unsustainability threshold and thus has no choice but to seek debt relief under humiliating conditions.
“Per the IMF’s more than 76% debt -to-GDP ratio with lower tax to GDP and rapid piling up of arrears with a reduced rate of access to water due to low investment and all year round pollution of water bodies, Ghana has thus been categorized as a HIPC country,” Professor Gatsi stated.
“The only difference now is that there will not be any debt forgiveness and debt relief with conditions to invest in programs to reduce poverty. The first time HIPC was introduced, it was a package meant to support highly indebted poor countries experiencing acute poverty, social exclusion, and general poor and abandonment of infrastructure programs. It, therefore, came with support and benefits structured by the IMF& World bank.”
On his part, Professor Bokpin said he is not in the least surprised by the turn of the event. “I am not surprised that we are back to HIPC. It’s can be understood and it can be explained. Currently, Ghana is spending 46% of its tax revenue generated in servicing its debt and it’s one of the highest in Africa. We’ll see the real effects of this after the election.”
Professor Bokpin elaborated: “every cedi we generate, 46% goes to debt payment. The rest goes into paying wages and salaries.”
Another economist, Dr Saeed Boakye of the Institute of Fiscal Studies told Starr FM that the debt situation is “…showing that the country has digressed when it comes to managing its affairs. You can’t keep borrowing and expect that everything will be fine.”
Ghana’s public debt stock in June this year is almost GHC 260 billion with the Akufo Addo administration incurring a staggering GHC 160 of this debt. This makes the administration the biggest debtor since Ghana’s independence.
Incidentally, critics have pointed out the fact that there is no infrastructure to show for the huge debt in the four-year tenure of the administration. In desperation, President Akufo Addo is on a commissioning spree of infrastructure project, the majority of which were started or finished by the predecessor administration of the National Democratic Congress (NDC).