But The Government Can Limit External Borrowing To “Exceptionally Compelling Situations”!
By Otchere Darko
I always feel sick when I think about the on-going excessive borrowing by the current so-called [and misrepresenting] pro-Nkrumahist Government of Professor John Atta Mills and Mr John Dramani Mahama. But worst of all, I felt exceedingly sick when I read the Ghanaweb General News of Saturday, 16 July 2011 captioned “We can’t stop borrowing – Finance Ministry” [ Source: citifmonline].
I have written a couple of times in the past to condemn Ghana’s over-dependency on external loans for the nation’s development. Before coming to office, Professor Mills and his NDC party used to criticise the Kufuor administration over its record of “extensive external borrowing”, especially in the latter part of the administration that had led to a re-soaring of Ghana’s post “debt-cancellation” public debt and the consequential rising inflation and falling standards of living. So Professor Mills’ record of rather “excessive external borrowing” has shocked me, to say the least. It will be naive on my part, however, to pretend that there is any government in our modern world today that does not borrow for national development from either internal or external sources. The statement that “even the advanced countries issue infrastructure bonds”, [which is a form of borrowing by their governments], attributed to the Deputy Minister for Finance, Mr Seth Terkper, is basically correct. However, using that argument as a justification for the Government’s excessive external borrowing is wrong. What Mr Terkper and the Government should understand is that it is never considered a good behaviour for a poor country to follow the example of a rich country and borrow excessively to meet its needs, because it is much easier for a rich country to pay back its debts than it is for a poor country. Apart from the wrongness of the effort of the Government to justify its use of external borrowing to finance projects by using the argument of the universality of that method of public finance, especially the argument that even the developed countries use the same method of public financing, the well-informed Deputy Minister for Finance immensely weakened his argument when he himself added in the same justification that “one of the reasons for the debt crisis in the US is that they fund their budgets through borrowing”. If US, the richest country in the world, has plunged itself into a “debt crisis”, [according to Mr Seth Terkper], why shouldn’t Professor Mills and his team of eminent economists at the Ministry of Finance learn from the painful crisis in the US or in other developed countries like Greece, the Republic of Ireland, Spain, Portugal, etc? Do Professor Mills and his team think that the “debt crisis” in US is a “good experience” that should be copied by Ghana?
All governments borrow, but the sensible ones only borrow after setting out well planned long-term development programmes spanning over long periods, usually five, ten or more years; costing them from stage to stage from year one to the final year of completion; and at all stages, identifying the sources of finance and how to tap those sources to ensure that the programmes proceed smoothly, once they take off. *Dr Kwame Nkrumah, whose numerous urban and industrial development projects continue to speak loudly for themselves to this day, did exactly that. *Professor KA Busia, whose rural projects were supposed to complement and balance Dr Nkrumah’s urban projects, also laid down a well-planned long-term and integrated rural development programme that would have yielded tangle economic results, had he not been removed too early. Good leaders do not go round the globe from rich country to rich country looking for loans from different sources to finance ill-planned and isolated projects that are not part of some well-planned integrated development programmes that have clear goals and fixed stages of progression and completion. Today, soon after taking office, our new governments merely trot round the globe, seeking loans on piecemeal basis and holding their lists of uncoordinated projects, without any clearly laid-out complex and integrated economic programmes spanning, and viewed over the long-term period. “The Government has succeeded in securing a loan from this or that country to build this or that road,” their party propaganda departments broadcast every now and then.
The discovery of oil a few years back has compounded our loan-dependency dilemma. “Foreign loans” are now traded in for Ghana’s oil in the same way that European traders of the fifteenth century who visited our coastal communities bartered European alcohol, tobacco and guns for gold and diamonds from our pre-colonial community leaders. Oil has now become Ghana’s new international “economic bait” with which parties in government in Ghana entice rich nations to lend money to Ghana, so that they, the Ghanaian parties in government, can get money to pursue “political agendas” that improve and ensure such parties re-election. The result of this is that the “Shylock nations” of today’s world are taking advantage and using their “economic power” to “access” Ghana’s oil and control its economy, with the connivance of our greedy politicians who are not ashamed to “sell” their nation’s freedom and dignity to satisfy their parochial political interests.
Improvement in economic development by Ghana in the period spanning between 1972 and 2011 is virtually negligible, if not none-existing, despite the country’s mounting foreign debt that culminated in Ghana being described as “heavily indebted nation”, which qualified us for “debt cancelation”, after meeting the strenuous IMF “debt-cancellation” budget compliance regime that needed to be complied with before a poor country could qualify for debt-cancellation. Stagnated economic development in Ghana since 1972 has shown itself through the collapse of nearly the entire Ghana railway system. The quality of our highways and roads has visibly depreciated beyond belief. Ghana now has no national airline to fly the country’s national flag. Many of our rural schools continue to organise classes under trees because of the absence of built classrooms, fifty-four years after independence, and despite the millions of external loans contracted by successive Ghanaian governments during this period. There are more abandoned government projects dotted throughout the country in any particular year than there are new ones financed with new loans. Accra has insanely over-grown in size, with the entire city having now become a “giant territorial sheet of squalor”, with water and electricity lines criss-crossing haphazardly, as if there are no city planners and no engineers in Ghana. No public utility in Ghana works efficiently.
Despite all these negative developments, the Government of Ghana keeps borrowing, while each of the two dominant parties keep accusing the other for the country’s economic inefficiency and woes. Government borrowing in Ghana since the mid-nineteen seventies has done no good for the country, despite the mounting size of our indebtedness. This excessive borrowing has only allowed politicians in government to fill their individual pockets and party coffers through the phenomena of “ten-percent kick-backs” and “elbow-greasing” which these politicians derive from contracting and deploying the numerous external loans and the shabby domestic projects they finance. Of course, our corrupt, greedy and selfish politicians will say that “we can’t stop borrowing”. *Even if we cannot stop borrowing, we can control our appetite for debt to enable us to borrow responsibly. Responsible borrowing by responsible governments helps to solve budgetary gaps, while leading at the same time to “tangible” or “actual” growth to generate “real” income that is far in excess of the interest payments that result from borrowing. Irresponsible borrowing by irresponsible governments dissipates budgetary prudence, creates false economic hopes, multiplies a country’s public debt, compounds interest payments, leads to mounting inflation, erodes consumer and public confidence and dampens economic development and prosperity in the affected economy. The on-going crises in Ireland, Greece, Spain and other European countries, as well as in US, should teach Ghana’s Ministry of Finance, in particular, and the Government of Ghana, in general, that excessive and irresponsible borrowing by governments does not promote economic wellbeing anywhere in the world. Rather, it leads to future budgetary crisis and national humiliation, irrespective of whether we are dealing with a developed or developing country.
*Our country, Ghana, will never get out of the “cycle poverty”, if it does not end its over-dependency on foreign loans. *Dr Kwame Nkrumah’s 6th March 1957 declaration that “Ghana is free and free forever” will continue to remain an illusion and laughable, unless our contemporary political leaders end their shameful culture of always “going round the world with “beggar’s bowl” in hand and begging for loans”. *Ghana will never quit the humiliating “third-world country” syndrome and classification, unless our political leaders stop wasting Ghana’s resources on servicing of interest on external loans that keep mounting from year to year, and from government to government. *Ghana will never become financially self-dependent and economically progressive, unless we get rid of our visionless political leaders and replace them with a new crop of leaders who believe in the use of less external borrowing and more internally generated funds (IGF).
Source: Otchere Darko; [This writer, {who is not the same as Gabby Otchere-Darko}, is a centrist, semi-liberalist, pragmatist, and an advocate for “inter-ethnic cooperation and unity”. He is an anti-corruption campaigner 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”. He is against “a two-party only” system of democracy {in Ghana}....... which, in practice, is what we have today].