Vice President Dr. Mahamudu Bawumia says part of Ghana’s current economic challenges can blamed on “the previous government.”
In a speech at the Accra Business School, the vice president listed what he described as the “quadruple whammy” the current government faces – excess capacity payments, banking sector crisis, Covid-19 and the Russia-Ukraine war.
But Dr. Bawumia says the excess capacity payments and the banking sector crisis were inherited from the previous administration.
“Covid-19 expenditures alone were not reason for the large increase in Ghana’s debt stock by the end of 2021,” he said.
“If you take out the fiscal impact of this quadruple whammy, Ghana will not be going to the IMF for support because our fiscal, debt and balance of payments outlook would be sustainable. Of the four factors, two (COVID-19 and the Russia-Ukraine war) were external and the other two (the banking sector clean-up and the excess capacity payments) were the result of policies of the previous government.
“Let me give you an analogy to make my point. If you ask a carpenter to roof your house and suddenly the roof collapses without any wind or rainfall, will you not blame the carpenter who did the roofing? But if a carpenter roofs your house and the roof collapses because of a tornado and a storm which has also blown away the roofs, windows and walls of many houses, will you blame the carpenter?”, Dr. Mahamudu said.
Dr. Bawumia said the government has spent over GHS54bn on the energy sector excess capacity payments, banking sector crisis and Covid-19 compared to only GHS15.62bn spent on the government’s flagship programmes – Free SHS, one district one factory, planting for food and jobs, development authorities, Ghanacard, Zongo Development Fund, NABCO, and teacher and nursing trainee allowances.
The vice president also stressed the impact of the Russia-Ukraine war and the Covid-19 pandemic on the economy and why the government needed IMF support.
“Furthermore, as a result of increases in interest rates in developed economies and increased perceived risk of emerging market economies, investors have pulled $50 billion from emerging market bond funds in 2022 alone. Non-resident holders of bonds in Ghana were not rolling over maturities resulting in a decline in foreign exchange reserves as repatriations increased. With the challenges in accessing the international capital market, balance of payments support was needed to bridge the financing gap, stabilize the economy and create space to implement structural reforms and restore debt sustainability. Hence decision to seek IMF support,” the vice president said.