
Vice-President Mahamudu Bawumia
Vice-President Mahamudu Bawumia says Ghana’s latest return to the International Monetary Fund (IMF) must lead to a strong resolve for enhanced fiscal discipline and stronger commitment to building modern systems for sustainable economic development.
Speaking at the official launch of the Accra Business School’s IT Programmes yesterday, the Vice-President said government’s decision to seek support from the IMF, following the effects of COVID-19 and the war in Ukraine, must be a wakeup call for a renewed effort towards strengthening the modern economic systems the government had put in place.
He indicated that the COVID-19 and geo-political tension between Russia and Ukraine had led many countries to the IMF for support, due to rising cost of living and inability to sustain debt levels.
This, he pointed out, had necessitated the need for Ghana to put in place measures that ensure more fiscal discipline.
Restoration
Dr Bawumia emphasised that the immediate task was to restore fiscal and debt sustainability through revenue and expenditure measures and structural reforms, adding that “non-concessional borrowing should be curtailed to enhance debt sustainability”.
The Vice-President bemoaned the fact that successive governments had failed to achieve long-term economic stability after each of the past 17 IMF programmes due to the lack of systems to ensure sustainable stability.
He, however, noted that the current government was focused on ensuring that such systems were put in place to achieve enduring economic stability.
Moving forward, he said, Ghana must embrace modern systems to enhance sustainable economic development, and reduce bribery and corruption, while “we make the delivery of public services more efficient and enhance domestic revenue mobilisation”.
Changing narrative
Dr Bawumia noted that, since 2017, government had been focused on building these systems, which include a biometric national identification card, functioning digital property address system and an aggressive financial inclusion programme, digitization of government services, among others.
“With enhanced fiscal discipline and structural reforms to restore debt sustainability and growth, we should emerge stronger than we have with the previous 17 IMF programmes. But it will take hard work and difficult decisions,” he intimated.
“It’s a day when the neglect of many decades comes to an eventual end. It’s a beginning to lay the foundations of strengthened institutions to take up the challenges of time with an able and apt workforce. It’s a day when a new beginning is being made by forging a common alliance between the government and academic leaderships to protect, preserve and promote above all, democracy via digitalisation,” he added.
Sore points
He said the country had been hit by a “quadruple whammy”, including the energy sector excess capacity payments, the banking sector clean-up, COVID-19 and the Russia- Ukraine war, the impact of which pushed the country to seek the support of the Bretton Woods institution.
“The excess capacity payments of GHC 17 billion relate to a legacy of take or pay contracts that saddled the country’s economy with annual excess capacity charges of close to US$1 billion. These were basically contracts to supply energy to Ghana in excess of Ghana’s requirements, but we were obligated to pay for the power whether the country uses it or not,” he stated.
The excess capacity payments, he indicated, includes GHC 7 billion of payments for gas resulting from the previous government signing an offtake agreement for a fixed quantity of gas with ENI Sankofa on a take or pay basis which was way in excess of what was needed at the time.
He disclosed that Ghana’s banking system was on the verge of collapse, and not dealing decisively with it would have meant disaster for the economy with millions of people losing their savings.
“Direct COVID-19 expenditure amounted to GHC 12.0 billion, made up of GHC8.1 billion in 2020 and GHC 3.9billion in 2021. The three items of expenditure cumulatively amounted to GHC 54.0 billion (the equivalent of some US$7.0 billion), which was borrowed. Without the GHC 54.0 billion debt for the three exceptional items (COVID-19, Financial Sector and Energy), Ghana’s debt to GDP would be within the sustainability threshold of some 68% instead of the 76.6% at the end of 2021,” he pointed out.