Vice presidential candidate for the opposition New Patriotic Party, Dr Mahamadu Bawumia has warned criticised government’s program with the International Monetary Fund stating the fiscal regime of government stands the chance of crippling the macro-economic standing of the country.
Ghana is currently enjoying a $918 million bailout from the Bretton Woods institution over a three-year period as the John Mahama-led administration weighs options to salvage the economy.
Excessive borrowing destroying benefits of oil discovery – Bawumia
The 2012 vice presidential candidate of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia has stated that Ghana’s excessive borrowing has put the country’s oil discovery in danger.
“Over the last five years, the accelerated borrowing, the massive increase in debt has basically compromised Ghana’s oil discovery and the benefits that we could have gotten from it,” he said.
Addressing a public lecture on “Restoring the Value of the Cedi” at the Central University College in Accra, Dr. Bawumia stated that the servicing of Ghana’s accumulated debts “is absorbing 36.3% of total government revenue.”
According to him, the declining growth and an increase in the payment of interests has taken up “critical fiscal space or cushion that previously existed. We are really in a very tight corner.”
Ghana started producing crude oil in commercial quantities on the Jubilee oil field in 2011 and currently produces about 102,503 barrels of oil per day(bopd) for the first three quarters of 2013.
Ghana earns five percent of royalties, a carried interest of 10 percent, an additional or paying interest of 3.75 percent and, petroleum income tax of 35 percent, while additional oil entitlement and also comes to the government, with the law allowing the International Oil Companies (IOCs) full cost recovery.
According to him, government “appears to have over-estimated Ghana’s capacity to borrow by ignoring the fact that the re-basing of the economy statistically that took place did not increase while it increased our GDP. The numbers look good, but it did not increase the cash flows.”
Dr. Bawumia likened the current economic situation being experienced in the country feels like “we are travelling in a bone shaker…if you are traveling on our roads and you are sitting on a seat that has no cushion, you will feel every pot-hole in your bones.”
‘Ghana is tired of borrowing ‘he said.