Ghana has now moved from HIPC to ‘HIMIC’ – Dr Bawumia

Economist and the New Patriotic Party’s Vice Presidential Candidate Dr. Mahamadu Bawumia has sought to rubbish Finance Minister Seth Terkper’s claims that government was engaged in “smart borrowing.”

Some economists and financial analysts have raised serious issues about government’s rate of borrowing, ostensibly for capital expenditure.

Speaking at a lecture dubbed “The IMF Bailout: Will the Anchor Hold?” at the Central University College Tuesday, Dr Bawumia said the most significant reason Ghana resorted to the International Monetary Fund (IMF) for a bailout was because of unsustained borrowing and debt stock. 

He described Ghana as a Highly Indebted Middle Income Country (HIMIC). 

According to Dr Bawumia, at 67 per cent of GDP, Ghana’s debt stock has crossed the critical 60 per cent of GDP level that developing countries with limited access to capital flows should worry about in terms of debt sustainability. 

The former Deputy Governor of the Bank of Ghana said “In fact, Ghana is right back to the debt unsustainability that led to HIPC. 

However, HIPC debt relief will not be available again.” He revealed that Ghana has recently been sanctioned by the African Development Bank (AfDB) for non-payment of debt obligations due and this means that signature of new AfDB loan agreements, disbursements on all AfDB on-going projects and the granting of any new loans have been suspended until the situation is rectified. 

The sanctions according to him were effective in January 2015. “In this regard, Ghana regrettably joins an exclusive list of nations currently under AfDB sanctions. The other countries are Somalia, Sudan, Zimbabwe, and Djibouti. 

Ghana’s arrears on its AfDB debt obligations only serves to emphasize the pressure on government cash reserves as well as the poor debt management.” 

The interest burden of this high public debt stock has proven to be extremely high and that in 2015, interest payments alone on the debt would amount to GHC9.57 billion.