At the crossroads of development and under-development

Some economic analysts and ordinary Ghanaians have been alarmed over the last two weeks over the seeming rise in the public debt stock of the country.
Although the public debt has seen only a steady growth averaging around US$24 billion, its equivalence in Ghana cedi terms has been staggering after the fluctuating behaviour of the exchange rate. The cedi exchanged for GH¢3.24 to the dollar in January, reached GH¢4.33 to the dollar in June, before receding to GH¢3.46 to the dollar in July.

At this pace, the public debt stock had been moving between GH¢79.9 billion in January and GH95.09 billion in June, before receding slightly to GH¢83.17 billion in July 2015, in direct correlation with the cedi-dollar exchange rate.
This means that the country’s debt as a ratio of the total value of goods and services produced within the economy (GDP) settled at 71.32 per cent for that month.
At this level of delicate swings, the debt is in a danger zone and requires urgent steps to avert a relapse into debt unsustainability, as was the case in 2001.
The Ministry of Finance has come out quickly to dispel fears that the country’s debt is becoming unsustainable, citing the restructuring of the public debt profile as one of the measures in place to check a relapse.

In any case, it is not as though there is any opportunity for a concessionary bail-out for the country when its debt reaches unsustainable levels because it has already exhausted that window of opportunity when it reached the completion point of the Heavily Indebted Poor Countries (HIPC) initiative in 2003.
Much as moves at fiscal consolidation by the Finance Ministry are in the right direction, there are more pressing reasons to approach issues more aggressively and with dispatch if we must turn the fortunes of the economy around.

Ghana finds itself at the crossroads where haphazard expenditure, with politicians and their cronies being the only beneficiaries, instead of the state and its citizens, competes with golden opportunities to achieve growth and development through prudent, value-for-money expenditure.
We need to choose the path for achieving real accelerated growth and development to increase the number of people in the middle class and lift a lot more out of poverty.

The GRAPHIC BUSINESS believes that it is not enough to use oil inflows as an index and collateral for reckless borrowing and spending. They should be purposefully applied to pro-poor growth areas.
The first gas processing plant, Ghana Gas, has come five clear years after the production of oil and gas started in the country, instead of two clear years ahead of first oil in December 2010. With such lessons in hand, why should the authorities still wait months on end before constructing a second gas processing plant to receive more anticipated gas from the country’s offshore fields.
The government’s transformation agenda has been hailed as the way to go. What is left is the dispatch with which the initiatives are carried out. Three years on, the Ghana Infrastructure Investment Fund has not taken off, nor has the Export Import (EXIM) Bank, which will finance efforts to increase exports from the country.

These are crucial interventions that can help rake in more foreign exchange to keep the local currency stable and hold the debt stock in check. The solution lies in increasing exports to increase the stock of forex supply.
It is the belief of this paper that a multi-approach should be used in managing the country’s debt, with the ultimate purpose of reducing it to the most feasible minimum, especially now that the country has an additional resource which could serve as a catalyst for unlocking the potential of other sectors for economic growth and development.