The New Patriotic Party (NPP) government’s reckless borrowing led Ghana to the International Monetary Fund (IMF), stated Minority Leader of Parliament Haruna Iddrisu.
Mr. Iddrisu told the media that no justification from the government about the reasons for going to the IMF would shift the blame from them. The National Democratic Congress (NDC) has stated severally that the borrowing policies of the NPP were unsustainable and would eventually lead to an economic collapse if not checked.
The NDC has said that the reason the government had to resort to the IMF was because of reckless borrowing by the NPP government. According to the Minority leader, Haruna Iddrisu, despite being warned about the dangers of overburdening the economy of Ghana with debt, the NPP government took on and did not care about how it would affect future governments.
Why is Our Debt Stock So High?
The New Patriotic Party (NPP) came into power in 2017 with promises to the Ghanaian people. One of those promises was to reduce the state debt-to-GDP ratio from 73% to 60% by 2021. However, instead of reducing our debt, the NPP government has increased it. As of June 2019, our debt-to-GDP ratio had risen to 79%.
The NPP government has been borrowing money, domestically and externally. On the external side, this borrowing has led Ghana to seek financial assistance from the IMF.
On the domestic side, this borrowing has resulted in high-interest rates for loans being given out. The high-interest rates have then caused problems for other sectors of the economy like health care and education. For example, the inflation rate shot up by about 15% at one point in 2020
How We Ended Where We are Today
The NPP government, led by President Nana Akufo-Addo, has been in power for five years. Some decisions have led us to where we are today: negotiating a loan with the IMF. Here are three reasons why this is happening:
1. The NPP government has taken on too much debt. In their first two years in office, they have added 9 billion Ghana cedis (about $1.8 billion) to our national debt. This is unsustainable and is placed a strain on our economy. The state’s economy is in distress as it currently has a total public debt stock of GH¢391.9 billion, as of the end of the first quarter of 2022.
2. The NPP government has mismanaged our resources. They’ve cut down on fuel subsidies which increased transport costs, leading to a higher inflation rate and increase unemployment rates. They also cut down on VAT exemptions, which led to higher prices of goods and services across the board.
3. The NPP government hasn’t been transparent about its decision-making process or the reasoning behind it. As such, there is a lack of accountability from those in power which leaves people confused about what will happen next or how bad things are.
Our Reality Now as A Nation
We are currently in a bit of hot water. Our economy is not doing so great and we have been forced to rely on other countries for financial assistance. The economic situation made people project that we would soon go to the IMF for help.
While the NPP government’s reckless borrowing is certainly part of the reason why Ghana is going to the IMF, it is not the only factor. Other factors include high levels of corruption, poor economic management, and a lack of diversification in our economy. These are circumstances that could have been managed.
Notwithstanding, covid-19, the Russian-Ukraine war, and a few other uncontrollable factors increased our spending. This perfect storm of factors has led to a situation where Ghana is now deeply indebted and struggling to make ends meet.
The IMF may help us get back on track, but we must also learn from our mistakes and make sure that we do not find ourselves in this situation again.
Adam Ibrahim
Adam is passionate about politics and issues that affect governance. As a writer, he channels his energies into writing on pertinent national and political issues for the good of the Ghanaian people.
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Thank you.