NPP Vice-Presidential Candidate, Dr. Mahamudu Bawumia, Monday morning virtually got the Finance Minister, Seth Terkper into conceding that even though the government “could have borrowed $40 billion,” the exchange rate depreciation over the last few years has undervalued the debt accumulated in the last eight years in dollar terms.
Dr. Bawumia has consistently made the point that even though the government has borrowed more (some $40 billion in value at the time of borrowing), the debt on the books look smaller because of exchange rate depreciation and has severally called on government to therefore account for projects and expenditure worth that $40 billion it has borrowed.
However, government spokespersons and officials including the President have all along disputed Dr. Bawumia’s analysis and even attempted to ridicule it, referring to the book value of Ghana’s debt which currently stands at some $25billion.
Finance Minister, Seth Terkper, who appeared in an exclusive one-on-one interview with Peace Fm’s Kwami Sefa Kayi, on the Kokrokoo Morning Show on Monday, in the course of the interview made similar points as most government officials had made on Ghana’s debt stock in relation to Dr. Bawumia’s analysis but was soon countered through a text message sent into the show by the NPP Vice-Presidential Candidate.
The text message read “Kwame, Seth is misleading Ghanaians on the debt stock. There is a big difference between how much you have borrowed and how much you owe. Because of the exchange rate depreciation, the dollar value of how much you have borrowed can fall but it does not mean that you did not borrow that higher amount. The total value of what the government has borrowed at the time of borrowing is some $40 billion even though on the books we owe less because of exchange rate depreciation. The minister should be honest with Ghanaians on the issue, Dr. Bawumia”.
In response to the message, the Finance Minister conceded that he does not dispute what Dr. Bawumia is saying and rather noted that even though the government could have borrowed $40 billion, it should be praised for beating it down.
“I think the point is a simple one, I think I did mention that when the exchange rate rises, the debt in cedis goes up and when it goes down, it tightens, so I said the same thing which Dr. Bawumia is saying. But I think the point is that, if we borrowed $40 billion and today I am at 70% of GDP, then you should give us credit for bringing it down.”
“So if you say cumulatively, which I doubt, but if cumulatively we have borrowed $40 billion, which is the size of the GDP but the size of the debt to GDP is 70%, it means that I have been able to improve the situation by 30% and not kept the debt stock at 100%,” he said.
Dr. Bawumia just last week took on the government again on the debt issue and proceeded to ask how the government could manage the resources when it does not even know exactly the value of monies it has borrowed.
Speaking the International Young Democrat Union Freedom Forum in Accra, he said, “Now if you look at the money that has been borrowed in dollar terms, at the time of borrowing, it is currently around $40billion; this is the value of the money that has been borrowed.”
Of course, because of the exchange rate depreciation, the actual amount owed is less than the value that has been borrowed, but when I mention it, this government doesn’t seem to understand that you can borrow an amount of $X but because of exchange rate depreciation, you actually owe less at the end of the day because if the exchange rate is GHS1 to 1$ and I borrow GHS100, then it’s $100 I’ve borrowed, but if it depreciates to GHS10 to $1, then that GHS100 I’ve borrowed now will be $10 on the books. But it doesn’t mean that I didn’t borrow GHS100 to start with.
So, when I say to the government that they’ve borrowed the equivalent of $40billion, they will tell me I am wrong because they are using the current exchange rate, and, therefore, they’ve only borrowed about $10. So, if you cannot even understand how much money you have borrowed, how can you manage the money? I mean you don’t have a sense of how much money you have borrowed, how can you manage it?” Dr Bawumia quizzed and added “It’s mindboggling but these are the people managing our economy and if you cannot understand simple facts like these, how do you go to the more complicated act of creating jobs?” he questioned.