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Economy & Trade

Debt Balloons Off the Charts in Ghana, Angering Critics

NEW YORK, Mar 11 2015 (IPS) - The steady nation of Ghana could be heading for a painful train wreck as government borrowing raises the level of foreign debt to sky-high levels.

Last month it was announced that President John Mahama had signed on to a nearly one-billion-dollar loan from the International Monetary Fund. To service the loan, the government will be forced to impose austerity measures very likely to hurt Ghanaian citizens. These include increases in fuel prices, a freeze on hiring public sector workers and an end to energy subsidies.

The plan will be presented to the IMF’s board for approval in April, with the first payment of about $100 million to be made shortly after.

According to Akwasi Sarpong, analyst for BBC Africa, the bailout was considered necessary for the restoration of investor confidence in a struggling economy beset by crippling electricity black-outs.

Then, on the heels of the IMF bailout, more borrowing was announced. State-owned Ghana National Petroleum Corporation (GNPC) is close to signing a 700-million-dollar loan from private commercial lenders led by commodity trader Trafigura as part of plans to recapitalize for expansion, its chief executive said.

It’s the largest loan by the GNPC since the start of oil production in 2010 which many had cheered as a harbinger of prosperity for all.

Unfortunately for Ghana, the world is awash with oil at some of the lowest prices per barrel seen in years. In fact, the world is running out of storage for the oil that has already been pumped.

The mountainous borrowing was defended by Vice President Kwesi Amissah-Arthur who pooh-poohed the figure of one billion as insignificant. “940 million dollars over a three year period is not a lot of money, it is just about 300 million dollars a year,” he told regional ministers at a conference in Cape-Coast.

“Now our infrastructure requirements are in the region of about five billion a year, so infrastructure alone in overwhelmingly bigger than the resources we are receiving from the IMF.”

But critics of the mounting loans are worried.

At a press conference in early January, Minority Leader Osei Kyei Mensah-Bonsu attacked the ballooning of the public debt stock going from 2.6 billion in 2008 to 19.7 billion today.

“Last year at this time the burden for every Ghanaian was 582 dollars. One year on, the debt per capita has increased by 40 percent. No thanks to “yentie obi ara” (we are not listening to anyone) government.

What is the most important issue in Ghana today? asked Stephen Nyarko in Ghanaweb. “It is four letters long. Yes it is DEBT, and it is the unsustainable type.”

Nyarko went on: “Not long ago Ghana had a positive economic future according to the World Bank and IMF. The narrative of Ghana Rising was all over the international financial press. Ghana’s once mighty Ghana new Cedi has now achieved infamy as the worse performing currency in the world. The slumping currency is fuelling inflation. The impact on citizens economic wellbeing has become so that well-meaning citizens who invested in the new Ghana Cedi in 2007, have seen their wealth and savings totally wiped out.

“If we are to get over our current unsustainable debt burden we need to restart the debate about the break neck speed at which Ghana has been borrowing money and using its natural resources, oil, gold, Cocoa, as collateral The old models of just borrowing yourself out of poverty and inefficiencies do not fit.”

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