…as World Bank rep signals economy may lose it
Former Finance Minister Seth Terkper has charged government to implement programmes that will keep the country in its current middle-income status, after the World Bank Country Director reportedly signalled that a review of the economy in some six months’ time may downgrade it to ‘developing country’ status if the debt situation is not checked.
The World Bank Country Director, Pierre Laporte, reportedly said on Accra-based Joy FM that a debt sustainability assessment will be carried out on the country mid next year, to assess if the debt figures require the country maintains its middle-income status or be downgraded to a developing economy.
However, in an engagement with the media in Accra yesterday, Mr. Terkper said the country meets the primary requirement to classified as a middle-income country as the main focus is on per capita GDP [which according to the World Bank, should be between US$1,026 and US$12,475]; hence, there should be no tolerance for other secondary factors like the debt situation to reverse Ghana back to developing-economy status.
“Ghana is a middle-income country and we must not accept anything less than that. Let us work toward retaining our middle-income status. So we should not accept the ambivalence that in some six months’ time the economy will be reviewed to assess whether we are still a middle-income country or not. Let us be proud that we are a middle-income country, and let us find solutions on what is required to keep it.
“We should implement programmes to keep that status. We should work toward our own austerity to keep the middle-income status. We should manage our debt well; borrow reasonably, finance recurrent expenditure from the budget and keep the status of a middle-income country. The primary index qualifies us to a middle-income status, so we shouldn’t allow the secondary indexes to take us back to a developing-country status. It is a wake-up call for us,” he said.
He further urged the World Bank and IMF to come up with a blue-print that will help the country know what steps to take to keep the middle-income status rather than resort to downgrading – a move which he says will hurt the economy as it will affect the country’s dealings with the international community.
“The World Bank should rather give us a blue-print for becoming a middle-income country and find ways of helping us on how Ghana can consolidate its middle-income status. They should give us the techniques on how to run middle-income countries. Part of their role should rather be how to guide us to retain the status,” he added.
Economy in debt distress
Commenting on the raging debate on the economy’ debt situation as some argue debt levels have not yet reached unsustainable limits, the former finance minister said there is no doubt the country is in debt distress as only three budget items – compensation, interest payment and government offices’ expenditure – exceed total tax revenue, requiring borrowing to take care of them.
“When you add both compensation and interest payment, they exceed our tax revenue and it means we have to borrow to pay for these items. So, if you are borrowing to pay these items, what other signals do you need to show that the country is in debt distress?
“Ordinarily, you should be able to finance compensation, interest, and running government offices from your own recurrent incomes. You only borrow for capital expenditure – and even with that one, you must be able to finance part of it,” he said.
He further called on the multilateral institutions, specifically, the IMF and World Bank, to be plain with figures and call the situation as it is, rather than to play diplomacy with issues like debt which have significant effects on the country’s economy.