Government responds to IEA’s statement

SETH-TERKPERThe government has rejected the Institute of Economic Affairs’ (IEA) report on Ghana’s public debt situation.

Mr. Seth Terkper, Minister of Finance, in a statement issued in Accra on Sunday, February 22, 2015, said that the IEA’s claims contained “general and sweeping assertions”.

The institute last week attributed Ghana’s economic crisis to poor management of the country’s finances, and warned that the national debt could grow to about 70 per cent of Gross Domestic Product (GDP) by next year.

But the finance minister disagreed with the IEA saying that, “All nations borrow for major capital or infrastructure development; therefore, the current focus of government policy is on “smart-borrowing” to sustain Ghana’s growth and development without unduly increasing ‘pure’ public debt.”

The statement said, “The cocoa sector also looks very promising as well as the prospects of the import substitution measures being implemented in the rice, poultry and pharmaceutical subsectors in line with President Mahama’s transformation agenda.”

“Furthermore the analysis fails to consider the optimum impact of projects such as the gas processing plant at Atuabo in the Western Region, which has the capacity to supply 120million standard cubic feet of gas per day from the Jubilee Fields to off takers for the generation of 500MW of power,” it said.

“The more relevant question to ask ourselves is how do we meet our energy, road, water, harbour, airport, etc. needs without falling into excessive debt—and at a time when our access to “soft” or concessional loans will fall substantially over time?” the statement asked.

It said the traditional practice of putting the total cost of huge infrastructure projects or costs on the country’s budget had also failed the country woefully over the years.

“For example, prior to 2009, a significant value of infrastructure projects (notably the roads that we now call “Gang of 6”) were put on the national budget. Indeed, part of today’s fiscal pressure with high cost of domestic debt service emanates from the bonds that were issued between 2010 and 2012 to finance these projects,” it said.

The government, it said therefore, had started to correct the unsus-tainability of our traditional debt management approach with specific strategies that were approved by Cabinet and Parliament in the 2013 through 2015 budgets.

“We note that there is no reference to the budget measures and policies in the IEA statement and publications,” it said.

“Finally, it is erroneous to assert that Ghana does not have fiscal rules or laws by simply pointing to gaps and ignoring the overall status quo. Ghana has a comprehensive statutory framework to support sound debt and public financial management including the 1992 Constitution (Act. 174 to 189), the Financial Administration Act (Act 654) and the Financial Administration Regulations (LI 1802). The BOG law includes limits on borrowing from the central bank,” the statement said.

Furthermore, it said ECOWAS single convergence criteria to which Ghana had subscribed—contains several fiscal rules.

“We wish to assure that the Ministry of Finance is available to provide information to all researchers who require information to support their work. With this statement, we believe subsequent publications and commentary thereof will adopt a symmetrical approach to the subject,” it said.

By Times Reporter

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