Lead partner of tax firm, PFM Tax Africa, Seth Terkper, has told the World Bank to be candid to managers of the economy and Ghanaians in general, the country’s true debt-distress status.
According to Mr Terkper, local offices of the two Bretton Woods institutions, especially the World Bank, is sending mixed signals to Ghanaians about whether it is still a high risk debt-distress or debt-distressed country.
His assertion follows a media engagement involving World Bank Country Director, Pierre Laporte, in which he stated that he does not foresee Ghana becoming a debt-distressed country anytime soon given the fact that a larger portion of its public debt are long term multilateral loans.
He also noted plans by the World Bank to review Ghana’s classification as a high risk debt distress country mid-next year.
The debt sustainability assessment of Ghana’s economy by the World Bank, comes on the back of Ghana surpassing the 70 per cent debt-to-GDP benchmark and being classified as a high risk debt distress status.
The assessment exercise to be carried out mid-2021 by the World Bank, will look at Ghana’s ability to meet its debt obligations as well as challenges affecting the country’s revenue generation efforts.
Reacting to comments made by Mr Laporte, the local representative of the World Bank, Mr Terkper who served as the nation’s Finance Minister in the previous government, advised the Bretton Woods institutions particularly the World Bank to stop making managers of the economy feel complacent about the country’s debt status, especially when everything shows the country’s debt issues are getting out of hand.
“Why is the Fund and World Bank making us feel complacent, why the ambivalence when the situation is clear given our debt issues,” he questioned.
“Ghana’s debt is going to be unsustainable if it is not already unsustainable, I mean we are already in debt-distress and the World Bank has classified Ghana as a high risk debt-distress country but the line between debt-distressed and high risk of debt-distress is a thin one,” he stated.
“If you are going to end 2020 with 76.7 per cent as projected by the IMF and if you also look at the financing of the Expenditure in Advance of Appropriation Budget, which the Eurobond alone is between $3-$5 billion excluding domestic market financing and other loans to be disbursed, looking at the spate of projects to be implemented by government and all that, the difference between 76.7 per cent and 80 per cent is only 3 per cent. So Ghana will definitely exceed the 80 per cent debt-to-GDP mark in the first quarter of 2021 and at that level, no one should tell the nation that we are debt-distressed,” he told norvanreports.
According to Mr Terkper, the use of all the nation’s tax revenues and even borrowing to finance interests and compensation payments alone and not to talk of debt servicing shows the nation is already debt-distressed.
“Again we are using over 50 per cent of our tax revenues for interest payments, adding compensation payments gives you 143 per cent of tax revenues. And these are items we are borrowing to pay when originally they should be catered for by our tax revenues,” he noted.
“And then there is debt servicing….so with all these what again do you need to be told you are debt-distressed,” he posited.
