Adnan Adams Mohammed
Ghanaians are facing a period of economic harshness never experienced after the periods of the military junta in 1980’s.
While inflation is beating about three decades records to record over 54.1 percent for December 2022 year on year, the Ghana cedi is losing its value by over 50 percent and had been adjudged as the worst performing currency as at November last year and current ranking second worst performing currency according to Bloomberg data.
Also the country defaulted in debt servicing to both domestic and foreign debtors as the country’s accumulated debt surpassed its Gross Domestic Product recording over 105 percent debt to GDP ratio. All these compounded with already global slowdown in economic growth and business activities and as well as drop in remittance to the sub-Saharan regions.
A finance expert has done a deep postmortem analysis of Ghana’s current economic woes and attributed the ‘big factor’ to reckless borrowing and expenditure.
In a question and answer session with a former executive director with Standard Chartered Bank, Alexander K. Mensah Mould, he outlined the causes and solutions to our current economic challenge leading us into a ‘killer’ debt restructuring arrangements under the Domestic Debt Exchange (DDE).
“The financial crisis was largely a result of structural problems that ignored the loss of tax revenue and the slow down in growth in key sectors in a sustainable way”, the analyst responded to a question on why the government is aggressively implementing the a debt exchange.
“Government was simply not bringing in enough money to cover its growing expenditure including its debt service. This has been exacerbated by high inflation, high physical deficits, low growth in key sectors ,and problems with the exchange rate.”
In explaining what happened that got us into this mess, Mr Mould alluded that, “Financial indiscipline and taking wrong bets via ill-thought through policies emanating from populist manifesto promises.
“Government also was not constrained in its financial management and violated many covenants it signed up for, namely; Deficit not more than 5% of GDP and Public debt to below 60% of GDP. It also misrepresented its ability to keep the exchange rate under control by supporting the Cedi via sustainable strong exports and a strong trade surplus. As long as borrowing cost remained relatively cheap and the economy was still growing then issues like current account deficit continued to be ignored.
“What government did not do was to stress test the economy to see the vulnerabilities and address them by putting some risk management measures in place to address these vulnerabilities.”
