The President of Ghana, Nana Akuffo Addo, called on the German Finance Minister, Christian Lindner, to “push” China, Ghana’s largest external creditor, to accept Ghana’s proposal for debt relief. Following the call, the German government has stated that it is willing to help Ghana advance its proposal with its external creditors, particularly China. However, some conditions must first be met.
Of the 5.7 billion US dollars in total external debt that Ghana is attempting to restructure, the Asian nation is owed roughly 1.7 billion. In a yet-to-air interview with Blessed Sogah on Foreign Affairs on the Joy News Channel, German Ambassador to Ghana Daniel Krull stated that his country will only assist if certain requirements are met.
He noted that this would be possible if only others joined this framework. Mr Krull also said that a multilateral framework had been established specifically to address these types of crises. He urged all parties involved in the process to adhere to this approved framework which he described as the G20 framework.
Daniel Krull stated the following when asked to outline Ghana’s domestic requirements:
Ghana’s Energy Sector: He described it as “the biggest loss maker” with a total of $1.5 billion in new debt piling up only in this sector. In his opinion, Ghana seeking $10 billion from the IMF will not solve the economic crisis if the debt issue is not fixed. He proposed that Ghana must find a solution to the 50% technical and non-technical losses in the energy sector to find a long-term solution to the problem.
Revenue: The second element of concern to the ambassador is Ghana’s revenue system. He stated that Ghana had one of the lowest tax-to-GDP ratios – not even 13%. As a result, he said that they have been working with the local government to establish an intelligent system of proper revenue collection, which he believes is a significant step forward. If the government must meet the targets that have been set by the IMF, processes and decision-making must also be sped up, he said.
Budget Preparation: The Ambassador added that he is still shocked at the procedures for our budget preparation and how complex it is to understand the budget and believes that this issue must be worked on by the government. He however expressed confidence that with the requisite political will, new opportunities will be created for economic development.
Any country will want to tread cautiously before offering “aid” to a struggling economy such as Ghana’s because they do not want their investment to go down the drain as a result of mismanagement and poor leadership. Ghana’s economy is so bad that it is now seeking debt relief from its creditors. What if the creditors do not accept the proposal for a debt relief? How will we come out of this economic mess?
Obviously, the government does not have a well-structured system for revenue collection. It is sad that they scrapped off the toll fee and rather chose to burden Ghanaians with the E-levy and other undesired taxes.
As a matter of urgency, the government must heed the German Ambassador’s call to fix all the problems identified. We cannot continue to depend on external forces to grow our economy. Our leaders must do better!
Priscilla Fumadorh
Priscilla is an entrepreneur and a creative communicator who loves to communicate through writing. She is passionate about national economic issues and does not miss a chance to offer her opinions on them for the good of the country.