Let our country adopt a new policy of “saving to spend”, instead of continuing with our policy of borrowing and borrowing and borrowing!

By Otchere Darko

*[This writer is just one of hundreds, and possibly thousands of Ghanaians who use the name “Otchere Darko”, either on its own, or in combination with other names. Some users spell this same name as “Okyere Darko”, while other users conjoin it with the help of a hyphen to become one single compound name, “Otchere-Darko” or “Okyere-Darko”, depending on which spelling-mode they choose. This writer, who has officially used this ‘simple name’ from his school days to this very day, attended the School of Administration of University of Ghana where he finally left in September 1977...... the year students embarked on the UNIGOV demonstration. He has never before or after September 1977 been a student of the Ghana Law School. Up to the end of 1981, he worked as a senior public servant in and for one of the mainstream Ministries in Ghana. He is not currently working for the Danquah Institute; and has also never worked for that institute. He is not a member of NPP or any other party currently registered in Ghana. *May readers please take note of this clarification and stop blaming, and sometimes even insulting another person for something that does not concern him.]

Basis of My Appeal to NDC & NPP: Politicians and political parties often disagree with one another over two opposing methods of public finance, in situations where the public has nothing in its coffers. The first of the two methods is “government deferring spending today and saving money to spend tomorrow”. The second alternative is “government borrowing to spend today and accumulating public debt for tomorrow’s generation to take care of”. It does look clear from this simplified dichotomy that the more prudent choice any fair-minded group of people would make in a situation of inadequate public funds would be the first alternative, because such fair-minded people would not like to saddle tomorrow’s generation with today’s debt, even if the loan that created the debt is used to finance a project that benefits tomorrow’s generation as much as it benefits today’s generation. However, a look around the world in general and Africa in particular gives a different picture that shows that governments today, as a general rule, “borrow to spend today and accumulate public debt for tomorrow’s generation to take care of”. Does this general trend of governments borrowing to spend, instead of governments saving to spend, make the practice sensible and commendable?

My answer to this simple question is “NO”. The practice of borrowing to spend is certainly not sensible, UNLESS it fulfils two conditions namely: (1) “absolute need” and (2) “economic justification” for it. By “absolute need”, I am referring to an expenditure that ought to be made, given the dire situation; and by “economic justification”, I mean an expenditure that leads to long term economic benefits that clearly exceed the long term economic costs that generate the benefits. Government borrowing should only be seen as sensible, in my opinion, where these two conditions are met. Our habit of borrowing all the time to finance almost every government project in Ghana does not seem right and should therefore be stopped.

All public debts have huge costs that include quantifiable economic costs such as interest payments, and non-quantifiable political and social costs such as the surrender of one’s national sovereignty and personal pride. Secondly, apart from the problem of costs associated with public debts, government borrowing is cumulative in nature, because it creates a situation whereby a country has to continue borrowing always, in order to be able to meet both the interest-payment and capital-repayment arising from pilling debt, while at the same time providing to meet the real future needs that get over-shadowed and short-circuited by debt servicing....... a situation that makes deficit budgeting an accursed permanent feature of government finance in all debt-addicted countries. Thirdly, “borrowing to spend” creates the tendency to impoverish nations concerned, because of its cumulative nature that creates a “snowball-debt” effect and keeps worsening the finances of debtor nations concerned. Fourthly, loans today are being used by financially powerful nations as political and economic weapons to ‘control’ poorer nations and make them perpetually subservient to lender nations, because conditions attached to loans given to poor countries always include the surrender of such poor countries’ rights to manage their fiscal and monetary affairs by themselves. If a country loses its right to manage its fiscal and monetary affairs, then it loses its nationhood and sovereign power. *If government borrowing, as a general rule, tends to have negative economic and political impact, why then do governments keep borrowing and risk tying their nations to perpetual mounting public debts that ultimately plunge such countries into decapitating debt crises?

One obvious answer to this question is that “loans” have become commodities that are packaged, presented, sold and bought..... just like manufactured goods. Banks, other financial institutions and rich nations create ‘loans’ and market these like all other economic goods and services. As with all economic goods and services, supplying such scarce commodity under appropriate marketing conditions creates demand for it. Banks, other financial institutions, and rich lending nations are therefore responsible for the culture of borrowing all over the world. Another reason why government borrowing has become popular is because party-politics in multi-party democracies tends to favour the culture of “borrowing to spend today”, instead of “saving to spend tomorrow”. “Borrowing to spend today” helps parties in government to sell themselves favourably to the electorate through projects they embark on. Parties in government propagate the benefits from the “government projects” they undertake with borrowed money; but they never tell voters the short and long term costs of the projects they finance with the borrowed money. Sensible though it looks from cost-benefit and cost-management analyses, “saving today to spend tomorrow” is politically suicidal and ‘unmarketable’, because the policy deprives parties in government today of the opportunity to embark on immediate projects that can improve their electoral chances in future elections. The savings that parties in government make today from a “saving to spend tomorrow” policy work for the benefit of parties in opposition, because the electorate generally judges government performance by the physical projects the government undertakes, and not by the additional savings they make towards the nation’s ‘reserved fund’. Until the competing parties in Ghana’s multi-party democracy work together to commit all future Ghanaian governments to a “national policy of saving today to spend tomorrow” and thereby end the practice of “government borrowing to spend today and accumulating public debt for tomorrow’s generation”, the ominous cancer of Ghana’s mounting public debt will get worse, and our nation will be caught in a “debt-trap”, out of which it can never ever free itself in future.

This is why I am making this direct appeal to NDC and NPP, currently the only two parties in the country that have high alternate chances of forming governments in Ghana in the foreseeable future, [irrespective of what you and I would have preferred]. Ghana cannot, and must not go on “borrowing to spend”, because every new loan that our government contracts increases our public debt disproportionately, because of the additional burden that arises out of interest payments on such a loan. Ghana may have to borrow in some situations. There is no running away from this reality. However, we can, and must cut out our addiction by limiting government borrowing to ‘the barest national economic needs’, weighed against a consideration of the long-term net benefits accruing to the nation from the application of such “economically necessary loans”. *Let the two dominant parties put party politics aside and think about Ghana and our future children. *Let the two parties understand that the countries and financial institutions that are ‘generously’ giving us loans today are not doing that because they love Ghana. They are giving all these loans to us because they want something bigger from us in exchange. *Let the two main parties in parliament set up a cross-party and an evenly balanced parliamentary committee charged with overseer’s role of controlling government borrowing and managing the national debt in the best interest of the whole nation. *Also, let the on-going Constitutional Review Commission set a constitutional ceiling for the size of borrowing permissible, as well as the level of public debt in relation to Ghana’s GDP that can be tolerated and above which no Government in Ghana should be permitted to exceed at any given parliamentary term.

If ‘Almighty USA’ has been downgraded and humiliated by the S&P credit rating agency because of that country’s huge public debt, then poor and ‘Insignificant Ghana’ cannot hope to be spared future humiliation and destruction, if our nation’s addiction to borrowing is not controlled now to allow our mounting public debt to be kept under permanent check and ultimately reversed. *[NB: This appeal is not an indictment on NDC or NPP. Rather, it is an indictment on the whole nation that has allowed this ‘culture of indebtedness’ to persist in Ghana to the detriment of our dear country.]

Source: Otchere Darko; [Personal Political Views].