A Senior Economics Lecturer at the University of Ghana, Legon, has raised concerns over government's continuous borrowing strategy, warning the economy could suffocate under high indebtedness.
Dr. Eric Osei-Assibey says allocations in the recently approved budget for the first quarter of 2017 shows interest payments takes a chunk of government revenue, a situation he says pushes the economy into further distress. He raised fears a second John Mahama-led administration or the successive government may face an uphill task fixing the economy.
The GH¢10.9 billion approved by Parliament last week is expected to finance “critical government expenditure” in the first quarter of 2017.
Finance Minister, Seth Terkper, made the request to the Finance Committee of Parliament in line with Article 180 of the 1992 Constitution and Section 23 of the Public Financial Management Act, 2016 (Act 921).
The Article states that “Where it appears to the President that the Appropriation Act in respect of any financial year will not come into operation by the beginning of that financial year, he may, with the prior approval of Parliament by a resolution, authorize the withdrawal of moneys from the Consolidated Fund for the purpose of meeting expenditure necessary to carry on the services of Government in respect of the period expiring three months from the beginning of the financial year or on the coming into operation of the Act whichever is earlier.”
The Act is usually activated where there is a likelihood for a change of government.
Some GH¢1.8 billion has been earmarked for interest payments; grants to other government agencies will cost GH¢2.3 billion, while compensation and salaries to government employees take up GH¢3.8 billion.
Speaking on PM Express on the Joy News channel (Multi TV) on Tuesday, Dr. Osei-Assibey said he had hoped that government cuts down on its expenditure, especially when revenue figures did not match spending.
“Knowing that you are not really earning more, the economy is really not expanding, you do not embark on expenditures that do not have a direct bearing on productive sectors of the economy otherwise you worsen the situation,” he said.
He said the rate at which the country was borrowing, a high inflation could be triggered with serious repercussion on all the other macroeconomic figures and businesses.
“Like we are paying about 10 billion cedis this year alone, that is about 30% of the total expenditure. So if you are paying about 30% on debt servicing and you are paying about 40% for salaries and wages then how much is left for capital expenditure? That is where this economy finds itself now,” he laments.
He advised that if the economy continues to be run like that, an expansion would be severely stifled.
“It wasn’t surprising that the IMF came out last time to revised our growth projection for the year from about 4% to 3.5% this year, which is the one of the lowest we have recorded in many years,” he said.