Government borrowing to nowhere – Dr. Kofi Amoah

It is high time government tamed its strong appetite for borrowing which has left the country reeling under a huge public debt in excess of GH¢110 billion and interest payments of more than GH¢10 billion per annum, business magnate, Dr. Kofi Amoah, has said.

In an interview with the B&FT, Dr Amoah said quite apart from the rising public debt stock, it is worrying to note that the debt, mostly short-term, is not being invested in projects what will yield immediate returns to be used in repayments.

Much of government short-term borrowing, he argued, have been spent on consumption expenditure or projects that will take a long time to pay for themselves – leaving the country struggling to repay those debts with either fresh borrowing or tax revenues.

“We must become honest with ourselves and admit that borrowing to this extent was a mistake and discontinue the trend. After the debt forgiveness of the 2000s, the country returned to market to borrow from China and the Eurobond and what have you, and these loans have now become an albatrosses around our necks. If we must borrow at all, we must do so to invest in agriculture or agribusiness which yields immediate returns,” he said.

“Are we making the right judgements in our selection of projects for capital expenditure so that five years from now we will not be saddled again with another prospect of going HIPC -- begging for debt forgiveness?”

Dr. Amoah’s comments come in the wake of parliament’s approval for government to spend some GH¢1.9 billion in interest payments for the first quarter of next year – an amount which dwarfs the GH¢1.2 billion to be spent on critical infrastructure.

“You must always be cautious about what you put borrowed money into. We are borrowing to spend on consumption such as health service, education among others. These are important investments but they are rather long-term investments and if care is not taken the country may not be able to service debts used in taking them,” he said.

The gap between the monies spent on infrastructure and interest paid on government debt has been growing, with this year’s gap expected to be about 33 percent and next year’s, using the first quarter alone, points to more than 50 percent.

According to Dr. Amoah, debt is not a bad thing, so long as it ends up in areas that can yield immediate returns and help in repayments.

“We should look at other areas where we could invest borrowed money where immediate returns would be accrued to service the debts and used to finance other forms of infrastructure. When we borrow, or use tax revenue and invest in agriculture, the returns will be almost immediate,” he said.

“For instance if we buy hybrid seeds or invest in agric extension officers to go to assist in good farming practices, the returns will be almost immediate. When we produce enough food, we will be able to curtail the US$1.5 billion food import bill – that’s revenue. And most important apart from reducing the food bill, this will create jobs,” he added.

Without creating value in tpeople through job creation via manufacturing or agribusiness or any other means, some of the infrastructure being put up will not only be outside the means of the people but also maintenance will be a huge burden on government, Dr Amoah argued.

“In fact, with all these infrastructure being put up, without a strong domestic economy to generate wealth to support them, in 5 or so years they will all face severe maintenance issues. So, all these infrastructure we are putting up we must ensure that they are generating enough returns to help maintain them.”