Isaac Adongo, the Member of Parliament (MP) for Bolgatanga Central constituency, has called on government to consider the concept and realisation of domestic borrowing instead of foreign borrowing.
Mr. Adongo also a member of the Finance Committee of Parliament, said the challenge was that when a country borrowed a lot from external sources, it needed to find the currency in which it borrowed to pay for it.
“So if you borrowed in dollars, you need to pay in dollars. When you need to pay, you will realise there is pressure on you but if you borrowed on your domestic market and Ghanaians gave you the money, you can pay in Cedis and by that, you eliminate the pressure on you to get dollars,” he said.
He said this as the Keynote Speaker at a “Debt Advocacy Forum” organised by Grassroots Africa in collaboration with African Forum and Network on Debt and Development (AFRODAD) for stakeholders within the financial sector to discuss ways to manage debt and develop the African economy.
The forum was on the theme, “Interrogating Ghana’s Debt Management Strategy: Lessons for West African States”.
Mr Adongo reiterated that borrowing from domestic sources made the government less pressurised when making policies as it didn’t have to formulate policies that would please any foreign investor.
“But when you have about 67 percent of your debt held by people outside of your country, with only 33 percent owned by your people, then decisions are dictated more by what would satisfy the foreign investor and not the domestic investor,” he said.
“..And that makes you very vulnerable and create problems for your currency and balance of payment, so we need to develop the local capacity to fund government programmes through Ghanaians lending to the government.”
The MP said governments had resorted to borrowing to provide social services to citizens and grow the economy, and the debt builds ups had exceeded the sustainable levels which posed serious threats to the economy.
In recent times, he said Ghana’s public debt grew to unsustainable levels and data released by the Ministry of Finance and the Bank of Ghana put Ghana’s public debt at an all-time high of GH?198 billion in March 2019.
Mr Adongo explained that as a sign of failure of Ghana’s monetary policy and weak development of financial markets to support domestic financial resource mobilization in funding the annual budget, Ghana’s economy continued to be at the mercy of external investors.
He disclosed that Ghana currently had the highest external holding of domestic bond in any country in Africa, adding that, “This means that our economy is the most vulnerable to foreign investor sentiments in Africa.”
He emphasised that Ghana had one of the highest debt service costs in Africa, explaining that the country spent over four billion dollars on debt service between 2017 and 2018 which was equivalent to the 80 percent of the entire five billion dollar Eurobond issued in 2018 and 2019.
Mr Adongo said it was unfortunate how, between 2017 and 2018, Ghana spent about 42 percent of its tax revenue on debt service each year and by the end of March 2019, began to borrow to pay the debt service as the primary balance runs into a negative.
Grassroots Africa is a nongovernment organisation that advocates for women empowerment, improvement on the productivity of farmers and enhanced economic growth.
AFRODAD was created 23 years ago as a pan African platform and organisation for lobbying and advocating for debt cancellation and addressing other debt related issues in Africa.