Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye has said that it is a fact that Covid-19 and the ongoing Russia-Ukraine war impacted negatively on the Ghanaian economy.
Also, he said, it is a fact that the New Patriotic Party (NPP) administration inherited economic challenges from the previous National Democratic Congress (NDC) government.
But, he indicated that the country had gone to the International Monetary Fund (IMF) for a programme under the NDC administration, a programme which the NPP extended and subsequently exited.
Exiting, he said, meant the country’s economy was in the best of shape therefore, he finds it surprising that the Vice President of the 4th Republic of Ghana, Dr Mahamudu Bawumia continues to blame events of five and half years ago for the current challenges.
His comments come after Dr Bawumia has said that analysts who say that Covid spending alone cannot be the reason for the increase in Ghana’s public debts are right.
Dr Bawumia said the banking sector cleanup exercise, as well as the excess energy capacity payment by the government, are also contributing factors to the rising debt.
He said these while justifying the decision by the government to go to the IMF for support. He explained while speaking at the launch of the Accra Business School IT programme in Accra on Thursday, July 14 that an amount of ¢17billion was spent in paying for the excess energy that Ghana did not need but had to pay for due to the agreement signed by the National Democratic Congress (NDC) administration.
“Some commentators and analysts have argued that the Covid 19 expenditure by the government alone could not be the reason for the increase in the fiscal deficits and the debt stock. In fact, they are right, Covid 19 expenditures alone were not the reasons for the large increase in Ghana’s debt stock by the end of 2021.
“In fact, as I stated in my April 7 lecture, this year, in addition to Covid-19, there are two major items of expenditure that are critical in understanding the evolution of the fiscal deficits and the debt stock. These two items are the banking sector cleanup and the Energy Sector excess capacity payment.
“The excess capacity payment of 17bn cedis relates to the legacy of take-or-pay contract that saddled our economy with annual excess capacity charges of closed to 1bilion US dollars a year. These were basically contracted to supply energy to Ghana in excess of our requirements at the time. We were obligated to pay for the power whether we used it or not.
“The excess capacity payment of this 17billion includes the 7 billion cedi payment for gas resulting from signing of an off-take agreement for a fixed quantity of gas with ENI, Sankofa on take-or-pay basis which was way in excess of what we needed at the time.”
Speaking on the public address by the Dr Bawumia in an interview with Eric Mawuena Egbeta on the Hot Edition on 3FM, Thursday July 14, Dr John Kwakye said “I can grant some of them, the impact of Covid 19, the impact of the Russia-Ukraine war. Of course, the NPP came to meet a channeling economic situation when they took over in January 2017, there were a lot of arrears, the energy sector arrears, arrears to contractors and then of course they implemented the financial sector bailouts which also brought additional cost to the budget .
“But we were in an IMF programme and then we exited from the programme, so one would have thought that when we exited at least we were in a pretty comfortable position, that is why we exited. So I am not comfortable that we have to go back five and a half years and bring things that happened so many years ago to the present.”
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