Something inside Me Kept Saying This When I Read that: “GHANA and China signed project loans and another deal together totalling $16bn.....” [Ghanaweb, Sept. 20, 2010].

By: Otchere Darko

Three phrases associated with national debt have fed themselves into Ghana’s vocabulary of public finance since the overthrow of Ghana’s First Republic. These three phrases are “kafodidi” reinvented by Dr Kofi Abrefa Busia during the Second Republic; “yentua” coined by General Kutu Akyeampong during Ghana’s Second Military Junta; and finally the phrase “heavily-indebted nation” into which Ghana recently allowed itself to be conscripted in order to qualify for “debt cancellation”.

By “kafodidi”, our emeritus Oxford professor, Dr Busia, was alluding that national debt should not debar Ghanaians from their right for basic life. Two factors influenced Dr Busia to use this Akan adage. The first was that Ghana’s first President, Dr Kwame Nkrumah, who undertook the fastest and the most ambitious economic development in Ghana but who had been overthrown three years earlier, had before his overthrow undertaken a national debt control “belt-tightening” exercise that had started to create shortages of basic essential goods in Ghana and provided collaborative justification for the coup leaders who removed him from power. The second factor was that Dr Busia needed money for his own “rural development programme” to which his new Government had tasked itself to counter Dr Nkrumah’s economic development programme, which had essentially been urban-centred. If you inherited an indebtedness which was being confronted through “belt-tightening” that was having a crippling effect on domestic supplies, how would you justify more borrowing for importation to offset such domestic shortages, or to promote your own “rural development programme” without being accused of worsening the nation’s indebtedness? This was the dilemma that faced Dr Busia. The way out for the Oxford professor was to use the powerful Akan adage to justify further borrowing which, in those circumstances, looked “reckless”. Two years into his reinvention of the adage and its application that allowed him to borrow more money for the “milk and butter” that urbanised Ghanaians cried for, as well as for his own rural development programme, Dr Busia was overthrown by General Akyeampong and that made it difficult to assess the economic viability, [if any], of the “kafodidi” philosophy of the Oxford professor.

By “yentua”, the Koforidua Moses Commercial College graduate, General Akyeampong, was alluding that the debts he inherited were “tainted by corruption”, [apparently with the connivance of lenders], and therefore non-binding and cancellable. The question as to under which specific international law those so-called “tainted debts” became cancellable was for the army General and his legal advisors to answer. In any case, this “bold action” by General Akyeampong back-fired and contributed later to shortages of basic goods in the country and made his junta very unpopular, and subsequently led to persistent public demonstrations calling him to return the country to civilian rule.....calls that, in their turn, led to the invention of his “UNIGOV” idea and his subsequent removal from power by his deputy in government, General Akuffo, when the UNIGOV concept was rejected by Ghanaians.

The “heavily indebted nations” concept which was born out of the combined efforts of some Western leaders, NGOs, the UNO, the World Bank, IMF, etc, was intended to assist third world countries that had been trapped in the cage of “international indebtedness” and were spending so much to service their external debts that they found it difficult, after debt servicing, to support their own national sustenance and future development. To help such impoverished nations, the Governments of those rich Western countries together with the two major international financial institutions came out with the idea of agreeing to cancel the debts of heavily-indebted countries that signed up to a pre debt-cancellation scheme that would force participants to meet certain budgetary discipline requirements. To qualify for debt cancellation, Ghana had to sign to participate in the scheme. Kufuor’s Government decided that it was in the country’s best interest to bring Ghana under the scheme and accordingly signed to it and subjected the nation’s financial administration to the required tough budgetary conditions before finally having those of our external debts that formed part of the scheme cancelled.

After this financial self-cleansing exercise that led to the subsequent debt-cancellation and its associated debt-relief, Ghanaians heaved a sigh of joy, with the belief that this nation would from that time onwards be free from the horrendous “debt-entrapment” that we, developing countries, put ourselves through as a result of our own “foolishness”. We nurtured the hope that no Ghanaian leader will again be forced by “circumstances on the ground” to concede the “pile-more-debt-to-survive” idea of “kafodidi” and borrow more, and more to worsen Ghana’s national debt; nor will a situation ever arise again that will force any future Ghanaian Government to question any loan agreements contracted with any foreign lenders by any previous Government of Ghana with a view to cancelling such agreements; nor will we, Ghanaians, ever find ourselves so much in more debt and further need that this country can once more be forced to put around its neck the humiliating “label” of being referred to as a “heavily-indebted nation”. In a nutshell, Ghanaians thought that debt cancellation would usher into Ghana a new future of SENSIBLE FINANCIAL PLANNING that will no longer make us dependent on external borrowing. We were very very wrong! Not long after debt cancellation, our two post debt-cancellation leaders who are both well-educated have returned Ghana to its borrowing spree. “Borrow and borrow, after all, ‘kafodidi’!” Again? Wow!

The use of borrowing to support the financing of government budgets has become an important part of modern public administration. The government of the richest country in the world, America, even borrows. This is a fact which Ghanaians cannot be ignorant of. But this fact cannot be a licence for Ghanaian leaders to borrow “FOOLISHLY”. When leaders borrow to build dams like the Akosombo or Bui Dam, then the debts they create are considered “sensible”. When leaders borrow to build good and durable roads like the Tema Motorway, then the debts they create are considered “sensible”. When leaders borrow to make railway extensions to enable existing lines to reach more places in the hinterland to ease travelling and haulage, then the debts they create are considered “sensible”. Et cetera. *Ghanaians are aware of the crying need for electrification in many places in Ghana’s hinterland to facilitate and accentuate economic development nationwide, but most especially in the three Northern regions. *Ghanaians are aware of the crying need for irrigation projects in the three Northern regions, in particular, to facilitate a modern agricultural development that will not be a slave to the weather and which will make Ghana an exporter of food crops, including rice which we have been importing in large quantities every year from particularly America, India and China.....three of the most populous countries in the world. *Ghanaians are aware of the crying need for a new town and street drainage system that allows our open street gutters to be covered in, not only Accra and its suburbs but all the regional capitals and possibly every town in the country. *Ghanaians are aware of the crying need for the modernisation of our dilapidated railways that have become an eyesore to watch in the few places where they continue to exist, such as between Accra and Nsawam where dirty and rickety trains can once or twice in a day be seen crawling like caterpillars, with people clinging to them like steel dusts caught on the surfaces of passing magnets.

*In spite of all these more pressing and more important national needs, our leaders borrow huge money from abroad to build an UNNECESSARY “presidential palace” which subsequent Presidents can refuse to use and, accordingly, render such capital expenditure “doubly wasted”. *In spite of these more pressing national needs, our leaders borrow money from abroad to buy expensive but NON-ECONOMICAL “presidential jet” that can carry only twelve passengers, when the President with his security and press team who usually accompany him on foreign visits alone may exceed that number.....not to mention the extra Presidential travel mates, like ministers and technical staff who also often accompany every President who makes any economically important and useful official foreign visit. *In spite of all these more important national needs, our leaders directly or indirectly borrow billions of dollars to build NON-PRIORITY residential houses, using foreign contractors, for the benefit of security personnel who are only good at arresting opposition supporters who “incite fear and hatred”, but who are useless when it comes to dealing with corrupt politicians who, for example, accept bribes of “$2000 each” which they, the politicians, choose to call “gifts given to them for shopping”. When our leaders borrow such huge monies from abroad to spend on “unnecessary”, “non-priority”, or “non-economical” projects, etc, we cannot describe debts created as a result of borrowing for such expenditures as “sensible debts” that should be passed on to our children, grandchildren and others of tomorrow’s generation.

I do believe that our constitution makes it TOO EASY for our leaders to go abroad to arrange and get loans which then become burdensome for future governments and future generations. Unless we tighten the conditions under which our leaders can saddle Ghana with public debt, it will not be long before this country finds itself and all its assets sold to pay off our foreign debts. In theory, selling a “mortgaged country” to pay off its debts does not seem feasible but, in practice, that is what happens when we become so much indebted to foreigners that they, the foreigners, have to plan everything we do in our country to enable them to use the plans they set for us to force us to pay debts owed to them without caring about the suffering of people in our country. That, in practice, is called “repossession” [of Ghana’s sovereignty]. When that moment of “repossession” comes, Dr Busia’s “kafodidi” philosophy will not work, because it will be foreigners who will be calling the tune, not Ghanaians anymore. When that moment comes, we cannot unilaterally cancel our foreign debts anymore, because we would have learnt already that the “yentua” approach is more painful than carrying the debt burden itself. And again when that moment comes, there will not be any more arrangement to cancel the debts of “heavily indebted nations”, because the Western countries that developed it would have realised that the idea of cancelling debts today without the means to stop nations whose debts were cancelled from borrowing tomorrow is an ineffective way to encourage such countries to manage their economies well, as long as there are other rich countries that want to use loans to “entice” vulnerable poor countries into “economic slavery” in order to “control” them and gain access to their vital natural resources such as oil.

*In my view, the on-going constitutional review should be used to deal with the ease with which future governments of this country can borrow and tie the nation to perpetual debt, by amending both Article 181 and 182 of the 1992 Constitution. I suggest that Article 181 should be amended to make it tougher for Parliament to approve foreign loans by raising the approval vote from the current simple majority to a two-third majority in favour of a loan agreement before it can be endorsed. Secondly, Article 182 of the Constitution should also be amended to set an upper ceiling in terms of the percentage of Ghana’s GDP that should be taken by the external component of our public debt and above which borrowing from outside this country by any Ghanaian Government should become unlawful. Another ceiling higher than the ceiling for the external component of public debt can also be set as a bigger percentage of the GDP to constitute the total public debt limit, made up of both the internal and external components of our national debt put together, above which no future Ghanaian Government can continue to borrow from either inside or outside Ghana. These two amendments, which should further be made “entrenched”, will stop irresponsible Ghanaian politicians from mortgaging Ghana’s future on politically-motivated borrowing sprees that give them the chance to generate “secret funds” for themselves and their parties through the corruptive elbow-greasing “gifts” by negotiating foreign companies and governments, and the “10% kick-backs” from local contractors engaged on loan-financed projects.

A man who lives by “borrowing to survive” puts his life, his future, and those of his children on sale. Nations are not different from individual human beings when it comes to indebtedness. I therefore fervently pray Ghanaians to use the on-going constitutional review to stop our dear country from pursuing the path of “chronic indebtedness” that is being forced on us by our selfish and greedy politicians. Let us stop the sale of Ghana’s future, NOW, before posterity blame us tomorrow!

Source: Otchere Darko. [This writer is a centrist, semi-liberalist, pragmatist, an advocate for “inter-ethnic unity and cooperation” and a “community-based development” protagonist. He opposes the negative, corrupt and domineering politics of NDC and NPP and actively campaigns for the development and strengthening of “Third Parties” in Ghana.]