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View Full Version : Hello, Can Ghana Too Have Debt Ceiling?



Neo
4th August 2011, 12:35 AM
I hope Ghanaians are following the fight over debt ceiling in the congress of the United States of America not only with interest but with concern for our own country’s debt problems.

If the United States of America, the riches country with the largest economy and a three star credit rating is scared of being downgraded to a two-star status, what about a HIPC country like Ghana? Or because we have no credit to defend, our attitude is why worry? As my good friend King Kpo formerly of Noguchi Memorial Institute would say “Stone in water, fears no cold”.

All over Europe, countries like Britain, Greece, Spain and Portugal are slashing their debt, the main course of their economic stagnation, yet in Ghana and Africa; we are borrowing money from anywhere we can get it including dubious lending agencies. The worst part of this is that these moneys are used on either frivolous projects such as ex-gratia for parliamentarians or capital projects that on their own do not generate immediate income.

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Countries in sub-Saharan Africa including Ghana, have generally adopted a development strategy that relies heavily on foreign financing from both official and private sources. Unfortunately, this has meant that for many countries in the region the stock of external debt has built up over recent decades to a level that is widely viewed as unsustainable. Ajayi and Khan acknowledges that although debt-service ratios have remained relatively low because of the highly concessional nature of external financing provided to Africa, many countries in the region have been unable to service their debt without recourse to rescheduling under Paris Club arrangements or by accumulating arrears.

After borrowing all our independent life, we should know by now that the burden and dynamics of external debt show that they do not contribute significantly to financing economic development in developing countries. In most cases, debt accumulates because of the servicing requirements and the principal itself. As Nakatame and Herera reported in 2007, external debt has become a self-perpetuating mechanism of poverty aggravation, work over-exploitation, and a constraint on development in developing economies.

Here in Ghana, the external debt started multiplying geometrically from 712.713 million US dollars in 1976 under the National Redemption/Supreme Military Council of Acheampong to 7.569 billion US dollars in 2003 under President Kuffour. Luckily for us, Ghana’s external debt came down drastically from 6.2 billion US dollars at the beginning of 2006 to 2.2 billion US dollars that same year when the International Monetary Fund (IMF) began a 100% debt reduction policy to Ghana and 18 other developing countries under the Multinational Debt Relief Program. But by the time President Kuffour left office in 2009, the debt had risen to 5.72 billion US dollars. Note that these figures do not include Ghana’s domestic debt. With our gross national income of 6.6 billion US dollars, we rank around 100 in the grading of nations. I don’t have figures for 2011, but our per capita debt in 2001 was 2.7 million US dollars, and we are still borrowing.

In Ghana, debt reduction has been delayed for many years because governments have been unwilling to admit they have made bad loans. We are witnesses to what debt is doing to many countries both developing and developed. But only the developed countries are doing something about it whiles those of us who cannot even compete just sit aloof and stare as if it does not matter.

Debt has crippled many developing countries, millions face poorer and poorer living standards as precious resources are diverted to debt repayment. In effect, due to enormous debt repayments, the poor are subsidizing the rich. It has been reported that developing countries like Ghana now spends $13 on debt repayment for every $1 it receives in grants. For the poorest countries (approximately 60), $550 billion has been paid in both principal and interest over the last three decades, on $540 billion of loans, and yet there is still a $523 billion dollar debt burden. Why is it so?

Now that the developed countries are in recession and debt, they would use us and our resources to solve their problems with gimmicks and interest on our loans. Very soon we will see that the total debt will rise despite our ever-increasing payments, while aid will fall. They no more have money for aid but will have millions for loans with high interest rates. Their agents such as the IMF and World Bank will come out with funny programs such as structural adjustment and HIPC to lure us to borrow for almost everything. For instance, when the recession was at its peak in 2009 and the dollar started falling, investors started buying gold.

Since then the price of gold has been souring. In the same year, the IMF gave Ghana a 600 million dollar three-year loan, amid concerns about the impact of the global recession on poorer countries. At the loan award ceremony, the IMF said the Ghanaian economy had proved to be relatively resilient because of the high prices of cocoa and gold. So why give us more loans when we are earning so much from gold and our economy is resilient enough to withstand a recession that even the United States has virtually been crippled?

J.W. Smith reported last year that policies such as Structural Adjustments with its associated borrowing have, contributed to “the greatest peacetime transfer of wealth from the periphery to the imperial center in history”, to which we could add, without much media attention. We are busy fighting homosexuals and insulting our political opponents.

We have to see through these machinations and cut down on our borrowing. If we cannot cancel the debt backlog, the least we can do is to have a ceiling of how much debt we can incur without destroying our future and that of our children. I am aware that such a ceiling will not on its own eradicate poverty, but it will remove a significant barrier to progress and justice. I am not advocating for us not to ask for loans altogether, what I am saying is that we should set a limit to our debt based on our GDP. If our GDP goes up, we can borrow more knowing that we have the resources to pay or balance the evil effects of the debt. If we need loans and our GDP has not changed, we have to cut some of the spending and the wastage in other sectors before the loans are approved. The unmitigated appetite for burrowing is one single reason why Ghana is now far behind countries like South Korea who could not compare with us just after independence. The debt crisis has been shown to be killing even to developed countries how much more Ghana.

Many years ago, Dr. Adabayo Adedeji of the African Centre for Development Strategy in Nigeria and a former Under Secretary General of the United Nations, reported that debt is tearing down schools, clinics and hospitals in Africa and the effects are no less devastating than war. Can you imagine that we have borrowed so much and have exported so much cocoa, timber, gold and now oil, yet some Ghanaian children are schooling under trees?

Far back in 1999, the UNICEF suggested in their report “The Progress of Nations” that debt is killing children. It was pointed out that as countries are diverting resources away from social provisions to repay debt, those most affected are the poor, especially women and children. The UNICEF’s report said 30,000 children died each day due to poverty. That was just under 11 million children each year in the 90s and early 2000s. Just extrapolate that to today.

Please for the sake of our future and that of our children, let us find a way to set a limit to our borrowing with its accompanying debt. “Ohia ye yaw”.






Source: Kwame Yeboah