The former Finance Minister, Seth Terkper has stated that borrowing to service the country’s debt is putting pressure on the economy. According to him, the country is faced with a situation where interest payment alone, when added to wages is far higher than total revenues.
Mr. Terkper reveled this whilst speaking on the PM Express on Thursday night. He pointed out that the high interest payments makes it very difficult for the government to undertake other developmental projects. He expressed worry about the fact that almost all the items in the current budget have to be financed through borrowing.
“We are now borrowing to service that debt. This is what is putting pressure on the economy. We should expect more pressure on a budget that has a high deficit”.
He stated that the country’s tax revenues are low. However, wages and interest payment alone, has surpassed 100% of the tax revenues. This, according to him, “means you are borrowing to partially pay wages and interest before we come to servicing government generally”.
Moreover, Mr. Terkper indicated that there will be more pressure on the budget. This is because the wages that had already entered the budget are non-negotiable. According to him, what that means is that “this pressure will increase further” since the government cannot negotiate wages .
“As we speak, the wages that have gone into the budget is non-negotiated wage based on Article 19 of the Public Financial Management Act. It is the old wages that is holding the budget”.
Lessons from other crises
Furthermore, he advised the government to revisit previous crises of this nature and draw some lessons. He cited the global financial crises and the disruptions in the West Africa pipe line as some examples. According to him, these are crises that had similar features as what is happening now in the labor market. He, however, noted that the current crisis has a higher impact on the economy than the previous ones.
Also, he stated that the current pandemic has put pressure on the budget because it has affected the country’s exports especially, cocoa. He explained that if the country is not generating enough revenues, servicing its debt and paying wages become very difficult. Adding that it also puts pressure on the cedi because of excess demand.
“When you don’t get enough from cocoa, budget suffers, Bank of Ghana does not get enough foreign exchange and that put pressure on the cedi”.
Meanwhile, Edward Kareweh, General Secretary of the Ghana Agricultural Workers Union (GAWU) revealed that his union has not had any formal consultations with the government on wage increments. He, however, pointed out that they had some background consultations with the various stakeholders. Yet, they had a hint from a prominent government official that the economy is so bad that the government cannot succumb to wage demands. Seth Terkper Seth Terkper Seth Terkper
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