Ghana will spend 23% of total expenditure on interest payments in 2016. The interest expenditure is about twice the amount which will be spent on capital expenditure (roads, hospitals, schools, etc – see the pie chart). Many Ghanaians and organisations have expressed worry over the level of borrowing which currently stands at about 70% of GDP.
The unrestrained appetite of John Mahama was/is driven by his wrong ideology that the oil revenue can pay for the interest and debt.
We have republished below what the then Vice-President John Mahama said in 2010 and you may understand why we are in this high debt position.
Vice-President John Dramani Mahama has said it will be foolish not to collateralize Ghana’s oil revenues for loans for infrastructural development.
He was defending the government’s decision to use the oil wealth as collateral to raise credit. Clause Five of the Petroleum Revenues Management Bill – currently in Parliament – clearly states that the oil wealth cannot be used as collateral to raise credit but the government is believed to be pushing for an amendment to allow the use of the country’s oil resource as collateral for loans – something the Minority in Parliament is against.
The Vice-President however stated that the necessity of an aggressive pursuit of infrastructural development makes the Minority’s opposition to the legislation misplaced. “Our brothers in NPP are supportive of this clause (Clause 5) and say the oil is a blessing, we should not collateralize it in advance. What the hell!”
Mr Mahama said the provision must have been influenced by the Norwegians who helped in the drafting of the bill but maintains the prevailing conditions in Ghana – unlike Norway – makes the application of that provision problematic.
“I have spoken to the Norwegians and they say at the time they drafted their bill, their infrastructure was all done – they had their hospitals, they had their schools, they had their highways, the roads and everything and so they didn’t need to collateralize their oil wealth to raise credit for infrastructural development.
“But you live in a country where women are dying because the road from their village to the health facility is not done and you say that the oil God has blessed us with, we should leave it to generations and generations but she must die today because she can’t go to the hospital. I mean that is …absolute baloney,” he noted.
To keep developing the country in a piecemeal manner as and when oil money is available, in spite of the dire need for infrastructure, in the Vice-President’s view, “will be the most foolish thing for us to do.”
He expressed the hope that “well meaning and well-intended MPs will amend that Bill to allow government to raise the credit that is necessary to put the infrastructure of this country in place.”
The Minority Leader, Osei Kyei Mensah-Bonsu said the Vice-President got it wrong because it was not only NPP MPs who were against the amendment of the Bill.
He said countries such as Equatorial Guinea, Mexico, UAE, Nigeria, Gabon amongst others “who have done this, have realized that it is not good to do this and are pulling out.”
Mr Kyei Mensah-Bonsu argued that “If we allow for oil-backed loans, we will be abandoning whatever participatory and consultative arrangement that must be observed in order to ensure prudent management of the petroleum revenue.”
Credit: GCP based on original publication by myjoyonline.com on August 29, 2010. [See the original story here on myjoyonline]