The John Dramani Mahama-led National Democratic Congress (NDC) has been put in a particularly dire situation with the release of a report on Ghana’s further decline in credit worthiness by Fitch, an international rating agency.
Ghana’s credit worthiness has been affected since February 2013, when Fitch dropped Ghana’s profile from ‘Stable’ to ‘Negative’. The latest drop from B+ to B makes Ghana’s credibility on the international debt market a little worse than negative.
With a debt profile of almost GH¢50 billion, the Mahama administration’s appetite for borrowing may reach the end of the road as the country gradually inches towards Highly Indebted Poor Country (HIPC) tag with Ghana’s debt profile nearing 50 percent of GDP mark.
This means that even though President Mahama, at the Fourth Policy Fair in Accra on Wednesday stated unequivocally that “…there is a strong need to borrow to satisfy the high demand for infrastructure development,” the ratings would make it difficult for the government to source loans abroad, especially concessionary ones.
According to financial analysts, even if the country succeeds in sourcing these loans, the interest on them would be unbearable, because of the perceived risk associated with lending money to Ghana.
At the policy fair, President Mahama conceded to this difficulty by stating; “…I want to assure the country that we would do our best to keep our debt profile within reasonable limits.”
But it is unclear how his government would reconcile the high interest it will begin to pay on loans and the need to borrow more to boost infrastructural development.
Currently, every cedi available locally has been scooped by the Mahama administration either to pay loans or salaries, leaving virtually nothing for development.
Statutory payments to the District Assembly Common Fund; Ghana Education Trust Fund (GETFund); National Health Insurance Levy, Road Fund for the payment of contractors and Communication Tax, otherwise known as Talk Tax for the payment of Youth Employment, among others are in arrears, depriving the affected agencies of resources to operate.
Pension Cash Missing
The worst of all, even pension funds have been spent by the administration, making it difficult for pensioners to be paid on time.
The money for second-tier pension operators under the new Pension Scheme deposited at the Bank of Ghana is no longer there with report that the government had borrowed it with rather lower interest.
Recently, government workers and bodies that had registered with fund managers under the new Pension Law could not have their contributions credited to their second tier operators because of the inability of BoG to credit them with the cash.
Yesterday, Daily Guide’s office was inundated with calls from pensioners lamenting that their pension had not been paid as at yesterday. It is supposed to be paid on the fourteenth day of every month.
Enquiries made by Daily Guide indicated that cheques had been issued by the Social Security and National Insurance Trust (SSNIT) for the accounts of pensioners to be credited but he Bank of Ghana said there was no money.
BoG Bounce Cheques
According to reports, evidence of the country’s insolvency is epitomized by the unprecedented rejection of BoG cheques.
The bouncing of BoG cheques has become regular rather than an exception.
Within rating of Fitch downgrading Ghana to a lower level, it is only a matter of time before the country is declared bankrupt.
Usually, such negative testimonial from rating organizations makes international borrowers skeptical about the ability of countries to pay back the monies they borrow.
The situation has dealt a significant blow to the Mahama-led government’s estimation that Ghana has the capacity to borrow more to develop infrastructure to alleviate poverty in the country.
In a statement released by Fitch on Thursday, the international rating organization gave reasons for taking off a notch of credibility from Ghana. “The authorities continued to overrun on wages, interest costs and arrears… Policy credibility has been significantly weakened, following two years of large-than-expected budget deficits,” the agency said in its statement.
Fitch slammed Ghana for its insatiably urge to overshoot budget, thereby further worsening its indebtedness.
Source: Raphael Ofori-Adeniran/Daily Guide