Economist and a Senior Fellow at the Institute of Economic Research and Public Policy, Dr. Kwasi Nyame-Baafi, has refuted claims by the Finance Minister, Cassiel Ato Forson that, amongst other things, the Mahama government’s fiscal prudence is to be credited for the downhill spiral of the country’s debt.
In a post made on his Facebook timeline, the economist indicated that the main reason for the strong debt to GDP ratio is as a result of the DDEP which resulted in debt forgiveness of the country by those Ghana was indebted to.
“You owe a number of individuals ¢50,000 and let’s assume for simplicity there’s no dollar component involved. Six months later, that debt drops to ¢30,000. Then you claim the reduction is due to fiscal discipline meaning you’ve cut down on your expenditure or spending wisely.
That’s a big insult to our intelligence!” he wrote. “Cutting down on your expenditure or spending prudently, in other words, fiscal discipline means you’re no longer borrowing as much. It helps to prevent your debt from increasing further, not necessarily reduce the debt you already owe” he further explained.
“For your debt to substantially decrease from ¢50,000 to ¢30,000, something else must have happened:• Either some of the people you owe forgave part of the debt which is debt relief,• Or you made significant repayments beyond your usual budget which, clearly, is not the case here. So no! this isn’t just a result of spending less or wisely” the IERPP Senior Fellow further noted.
“This significant reduction in Ghana’s public debt is the direct result of the painful debt restructuring programme initiated by the previous government. Just give credit where it’s due. Simple” he indicated in his concluding remarks.
