I cautioned govt to stop mega borrowing; We’re not being told the truth about the economy – Kofi Amoah

Dr Kofi Amoah (Left) and Finance Minister Ken Ofori-Atta

Economist and CEO of Progeny Ventures, Dr Kofi Amoah says he constantly warned government against excessive borrowing, a situation which has led to the current economic crisis being faced.

Speaking on TV3’s Business Focus with Paa Kwesi Asare from his California home, the former advisor to Dr. Mahamudu Bawumia said he was worried about the finance minister’s penchant to borrow was going to lead to a situation where the country would not be able to pay back its debts.

He was reacting to the latest downgrade by Standard and Poors (S&P).

“The Minister of finance or the government must be able to tell us that our finances are sound and that we can service our debts and there is not cause for alarm, but when the sources of your borrowing are in trepidation, and you may not be able to pay them, and financial credit agencies are downgrading you then it means we are not being told the truth,” he said.

According to him, most of the macroeconomic indicators are performing poorly.

“Let’s face this properly. When the government was borrowing a lot of money, some of us raised our voices that please stop the mega borrowing because it will come to a point when you cannot pay and if you cannot pay it will affect everything that you are doing” said Dr Amoah.

“Look at the cedi, its going down, look at the level of inflation, things are beginning to be more and more expensive and so it boils down to the structure of our economy. Do you have enough productive activities for making things, employing your young people productively to be able to satisfy your local demand and sell something to somebody for more revenue to do the things you need”? He asked.

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According to him, the level of joblessness is getting worse.” We have enormity of joblessness; our young people are crying for work to do and on top of that we spend a lot of money importing things from other people’s countries that means we are producing jobs in other people’s country instead of producing our own jobs”.

He says the only solution is for us to organize ourselves properly to engage our people more.

S&P decided to push Ghana’s debt further into speculative territory, lowering its foreign and local currency sovereign ratings to CCC+/C from B-/B, on Friday August 5.

It said its outlook for the country is negative, “reflecting Ghana’s limited commercial financing options, and constrained external and fiscal buffers.”

The Covid-19 pandemic and the conflict in Russia have magnified Ghana’s fiscal and external imbalances, S&P said.

Demand for foreign currency has been driven higher by several factors, including nonresident outflows from domestic government bond markets, dividend payments to foreign investors and higher costs for refined petroleum products, the agency said.

Dr Kofi Amoah further said “Look at the Cedi, it is going down, look at the inflation, everything continues to be more expensive and therefore it boils down to the structure of our economy.

“Do you have enough productive activities for making things, employing your own people productively to be able to satisfy your local demands and sell something to somebody for more revenue to do the things that you need ? Here we are, we have enormity or joblessness, our young people are crying for work to do and on top of that we spend a lot of money importing things from other people’s countries.

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“That means that we are producing jobs for other people’s country instead of producing our own. So the downgrade and all of that is just a microcosm of the reflection of the inadequacy of our internal economic direction and policies.

“Every so often, we go back to the IMF, that means that there is an endemic issue of the way we think of ourselves, the way we organise ourselves to create wealth and to create jobs for our people.

“For me… Ghanaians are looking for quick fixes, what do we do do now? There is no quick fix, the only thing that is available to us and to any other country is that you organise yourselves properly for your people to be productively engaged.”

The Government of Ghana has however said it is disappointed by S&P’s decision to downgrade Ghana because bold policies have been implemented in 2022 to address macro fiscal challenges and debt sustainability which have been significantly exacerbated by the impact of these global external shocks on the economy.

The government said it will continue to be proactive in addressing the impact of these external and domestic headwinds on the economy and on the lives and livelihoods of Ghanaians.

the Ministry of Finance said ” On 5th August 2022, Standard and Poor’s (“S&P”) Global Ratings downgraded Ghana’s foreign and local currency credit ratings from ‘B-/B’ To ‘CCC+/C’ with a negative outlook. According to S&P, the downgrade is due to intensifying financing and external pressures on the economy.

“In arriving at their decision, the credit rating agency considered: (a) the lingering effects of the COVID-19 pandemic and the severe global shock of the Russian invasion of Ukraine on Ghana and the consequent fiscal and external imbalances; (b) elevated gross financing needs in the face of International Capital Market hiatus (c) the limited commercial financing options; and (d) the credible steps taken by Government to fast-track fiscal consolidation and the passage of key revenue bills.

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“The Government is disappointed by S&P’s decision to downgrade Ghana despite the bold policies implemented in 2022 to address macro fiscal challenges and debt sustainability which have been significantly exacerbated by the impact of these global external shocks on the economy.

“Government will continue to be proactive in addressing the impact of these external and domestic headwinds on the economy and on the lives and livelihoods of Ghanaians. Government has implemented key revenue and expenditure measures, including the 30% cut in discretionary expenditures. The delays in the passage of key revenue measures introduced in the 2022 Budget affected revenues performance in the first half of the year. However, all the revenue measures introduced in the 2022 Budget, including the review of the MDA Fees and Charges Bill, the Tax Exemption Bill, the E-Levy Bill, have all now been promulgated by Parliament. These fiscal measures are now in full implementation mode to support our fiscal and debt sustainability policies.”

It added “The Government is committed and is confident that it will successfully emerge from these challenges in the shortest possible time as we have demonstrated the track record to do so in the Akufo-Addo led Government. Our current engagement with the International Monetary Fund for a Programme, incorporating our Enhanced Domestic Program (EDP), is expected to support our drive to restore and sustain macroeconomic stability; debt sustainability and promote growth and job creation whilst ensuring social protection to achieve our vision of a Ghana Beyond Aid.”

Source: 3news.com|Ghana