Chief Executive Officer of Dalex Finance Ken Thompson is pushing for some drastic expenditure cuts to help address the current challenges the economy is faced with.
It is believed the current difficulties are, to a large extent, attributable to serious budget overruns on the part of government.
Ghana has been on debt pressure for some time now but government this month issued a 1 billion-dollar Eurobond at an interest rate of 10.75 percent – a situation which would culminate in the payment of 108 million dollars every year as interest.
This follows recent figures from the finance ministry which indicates that Ghana’s public debt as at July 2015 stood at 83 billion Ghana Cedis, representing 62 percent of GDP.
Finance Minister Seth Terkper hinted this week that Ghana’s public debt now hovers around the dreaded 70 percent mark.
In its latest report however, the IMF forecasts that Ghana could end the year with its public debt hitting 72 percent of GDP.
Some economists have criticised government for borrowing too much and piling up public debt. They fear the country’s debt has the potential to cripple the economy if these monies are not advanced into productive areas.
For Mr. Thompson, the fact that Ghana spends about 70 percent of its earnings on salaries and debt repayments means it would be left with nothing to invest.
“We need to have a credible plan to deal with this issue. Our income cannot meet our expenditure so we have to cut expenditure. We have no choice.”
He added that Greece has been making some savage cuts where it is currently not paying pensions, refusing to pay some workers, including cleaners and even asking some of them to go home as well as closing down some corporations.
They simply don’t have a choice – they are broke” he exclaimed. Mr. Thompson admitted going the Greece way may obviously have some repercussions for the country’s security among others but said that might be the way out. “If you are broke, you are broke” he noted.
But Finance Minister Seth Terpker holds a different view. He thinks that the challenge has come about because of the country’s middle income status
Mr. Thompson believes the present situation calls for some drastic measures.
Source: myjoyonline