Speaking to some Ghanaian students studying in various institutions in India recently, President Mahama said that during election years, there is the temptation to open up expenditure because of the pressure from chiefs and voters.
He said labour unions also mount pressure on government during election periods which eventually disorganizes the budget.
“I am going to make myself blind to some of these things.”
Inheritance from fore-runner
The John Evan Atta Mills-Mahama administration inherited a total public debt of $8billion, which translated into about GH¢9.5billion at the beginning of 2009.
It increased from 36.3 percent in 2009 to 48.03 percent in 2012 and further to 55.53 percent in 2013. Thus, within four and a half years, it jumped to a whopping GH¢38.5 billion, which means that GH¢6.4billion was added every year to the public debt, 55 percent of which was domestically borrowed.
As a percentage of GDP, total debt stood at 36.9 percent as at end December 2009, up from 32.3 percent on December 31, 2008. That increased to 49.25 percent of GDP by end December 2012. However, in January 2013, there was a slight reduction in this ratio to 42.3 percent. Thereafter, there was a slight increase to 49.44 percent in August 2013.
Total public debt when Mahama assumed office
The stock of public debt (including Government guaranteed debt) increased by 22.7 percent from $19,150.78 million at the end of 2012 to a provisional estimate of $23,498.76 million at the end of September 2013. At the end of December 2012, it stood at $18,832.77 million, equivalent to 49.4 percent of Gross Domestic Product (GDP), up from $15,350.08 million, representing 40.8 percent at the end of 2011.
Mahama’s reaction to overspending
Presenting his first policy statement in September 2012 after he assumed office as president, Mr Mahama identified overspending, especially in election years as one of the challenges the government had to grapple with.
He told Ghanaians that he had put in place stringent government expenditure management systems with strict directives to Ministries, Departments and Agencies (MDAs) not to execute unbudgeted programmes.
Seth Terkper, Finance Minister, giving a summary of the situation last year, said: “As at end of September 2014, the debt stock stood at 60.8 percent, largely on account of increase in external net disbursements for infrastructure projects and net domestic issuance, and the depreciation of the cedi.”
In March this year, President Mahama reiterated that government would not be coerced into overspending in 2016 owing to demands and strikes of workers.
Speaking to the Ghanaian community in Botswana during a three-day state visit, he mentioned how the various demonstrations in the country had in a way toughened his administration.
He gave assurance that government will maintain fiscal discipline.
Dead goat syndrome
President Mahama said: “I have had the opportunity to experience so many demonstrations and strike actions within my two years in office, so I don’t think it can get worse in the second two years. It is said that when you kill a goat and you frighten it with a knife it doesn’t fear the knife because it is dead already. I have the dead goat syndrome going forward. So we are going to ensure that we have fiscal discipline.
Borrowing to pay debt
This year, Government has planned to receive some GH¢50 billion from both international and local investors and that is expected to increase the country’s debt to GDP to around GH¢115 billion from the GH¢94.5 billion recorded in July this year.
The IMF mentioned that Ghana has crossed the 70 percent debt-to-GDP threshold. Meanwhile, proceeds from Government’s traded securities on both the international and domestic markets are expected to be used to service government’s maturing debts.
In February 2015, Ghana secured $940 million deal from the IMF to help the country turn around the ailing economy by helping to stabilize the cedi and reduce the fiscal deficit.
By Samuel Boadi