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An Economist, Dr. Adu Owusu Sarkodie, has stated that inasmuch as concerns about Ghana’s rising debt stock are legitimate following the International Monetary Fund’s (IMF) approval of One Billion dollars for the country’s COVID-19 fight, the focus should rather be on the efficient use of the money.
The amount, which is to be drawn under the IMF’s Rapid Credit Facility, is to help the country improve confidence, and catalyze support from other development partners.
Ghana is still classified at high risk of debt distress with a current debt of 218 billion cedis, representing 63 percent of GDP.
The IMF facility comes with zero interest; with a repayment period of 20 years, and a five-year moratorium.
But, Dr. Adu Sarkodie told Citi Business News the country certainly needs the money to rebuild the economy after COVID-19.
“I think the public debt is high. Under normal circumstances, I wouldn’t even want to advise Ghana to borrow, but we find ourselves in a very difficult time and every country needs help from the IMF and the World Bank and even from our sister countries. So, I feel the main issue here should be about efficiency and accountability. We have borrowed so much. When we went to HIPC, our public debt was about 5 billion as at 2006. Thirteen years down the line it has been increased to 218 billion and that is ending December 2019, and we don’t seem to show much on the amount that we have borrowed. So, there’s always a question of efficiency and accountability. Are we going to use this IMF support for the intended purpose or is it going into somebody’s pocket?” he noted.
He further called for strict measures to be put in place to make sure the IMF loan is used carefully.
“I think as a country, we should be very serious, we should put in the stringent measures to make sure that we use this funds judiciously to achieve the intended purposes. Obviously, countries that have done well in times of crisis like this, are countries that have solved simultaneously the coronavirus and reviving the economy. We need to do the two at the same time. We need to fight the spread of the virus and revive the economy at the same time. There is also a pledge to support the SMEs which is a good idea, but will they end in the books?” he asked.
The Economist warns the country will pay dearly for it in the future if the one billion dollars is misapplied.
“I want to plead with the authorities. We are not in normal times as they said. If they don’t use this funds judiciously, it will come back to haunt us and we will go and pay the loan and not have enough to show for the loan we have contracted. So it’s a the question of efficiency, transparency and accountability. We need to make good use of this,” he said.
“The last time, President Akufo-Addo asked Ghanaians to pray. The Finance Minister also went on the floor of Parliament to quote 2nd Chronicles 7:14 that, ‘if my people who are called by my name, shall humble themselves and pray’. But, I think the key word should be, the word they omitted, that is, we should turn away from our wicked ways. It is also part of the passage. It is an ‘if’ condition. If ‘we humble ourselves and pray and if we turn away from our wicked ways, God will hear our prayers’,” he added.
Background
In its quest to help mitigate the economic impact of the novel Coronavirus pandemic in Ghana, the International Monetary Fund on Monday, 14th April, 2020, approved a loan of US$1 billion to Ghana to help address the urgent fiscal and balance of payments needs that Ghana is facing.
This comes barely a week after the Finance Committee of Parliament gave clearance to the Minister of Finance to spend GHS1.2 billion from the Contingency Fund.
The Finance Minister has already revealed that the cumulative effect of the novel coronavirus pandemic will cost Ghana GHS9.505 billion.
