The Minority in Parliament has described government’s debt exchange programme as unacceptable.
Government has slashed interest payments for domestic bondholders to zero percent in 2023 and pegged 2024 interest payments at 5 percent.
It has, however, announced that there will be no haircut on the principal of bonds, adding that individuals with government bonds will have their full investments upon maturity.
Finance Minister, Ken Ofori-Atta made the announcement on Sunday but the Minority in Parliament is concerned about the government’s latest move.
They say it is an imposition and, therefore, they are kicking against it.
"We expect major expenditure cuts to achieve fiscal consolidation. The size of Government must be reduced drastically. We demand responsible spending," Minority leader Haruna Iddrisu said at a press conference on Monday, 5 December 2022.
Below are details of the press statement:
STATEMENT READ BY MINORITY LEADER, HON. HARUNA IDDRISU ON 2023 BUDGET AND DEBT TREATMENT PLAN BY THE AKUFO-ADDO/BAWUMIA GOVERNMENT
Good morning, ladies and gentlemen of the press.
We welcome you all to this press encounter, prompted by some very disturbing and urgent developments on the economy. Our economy is indeed in crisis.
As is now trite knowledge, the Ghanaian economy has been terribly mismanaged in the last five to six years by the Akufo-Addo/Bawumia administration leading to our request for a 17th IMF program to renew confidence and policy credibility on our failing economy despite haughty initial denials.
The severely ailing economy has been characterized by unsustainable debt, very high inflation, unprecedented and disastrous depreciation of the cedi, high budget deficits and unprecedented credit rating downgrades.
The economic situation is so bad that we are currently ranked side by side with Sri Lanka, which is considered the worst economy in the world and has defaulted on its debt.
Our public debt hovers above the GHS 500 billion mark with a corresponding debt to GDP ratio of about 105% having inherited a total public debt of GHC120billion in 2017.
Inflation for the month of October is 40.4% and is destined to rise for the month of November. The cedi has lost 54% of its value in the last ten months alone.
The combined effect of these grim macro-economic indices has been devastation and disappointment for Ghanaians and households.
The Minister of Finance Hon. Ken Ofori-Atta has just this morning announced "Major Policy" blue prints on government's debt restructuring on domestic debt restructuring promising to announce for extension for debt restructuring in due course.
To put our unsustainable debt on the right path, we were told categorically by the President of the nation, Nana Addo Danquah Akufo- Addo "THERE WILL NO BE HAIRCUT", at least we now know there is.
The form and structure of this debt restructuring is unacceptable to the NDC Minority, we simply cannot agree to this as it has dire consequences on the financial sector, on pension funds and on jobs. We are all at risk.
According to Ken Ofori-Atta, Ghana's DEBT is UNSUSTAINABLE and we cannot SERVICE it FULLY if we do not restructure some GHC 137 billion of our Domestic debt.
Ghana is the first country in Africa to announce domestic debt restructuring or as they put it domestic debt exchange!
We have OFFICIALLY DEFAULTED in the repayment of the terms of our existing Domestic debt.
Ghana joins Greece and Jamaica in the last 10 years.
The NDC MINORITY has been consistent on this matter, we cautioned and warned the government about engaging in reckless borrowing and expending it wastefully! How come contours of this exchange program was not announced in Parliament during the 2023 budget presented on 24th November 2022. Will it require legislation? How come that a major policy step of this dimension was not part of his presentation to Parliament?
While we agree that Government is still negotiating the potential and inevitable IMF Program, it is necessary that conclusive Government plans be brought to the House for approval.
This is consistent with the Constitution:
(a) The terms and conditions of an IMF Program support constitute a loan and finance agreement under the Constitution;
(b) As implied, any other debt restructuring exercise constitutes a variation of the terms and conditions of past loans authorized by the House;
(c) All loans to support the Budget and Appropriation Act approved by the House, to finance Projects and Programs; and
(d) The House needs to know the socio-economic impact of any loan and program agreements, to the extent that these are not appropriately and specifically espoused in the economic policy section of the Budget.
It is now obvious that BoG is heavily financing the Budget, in open defiance of existing laws and policy approvals by the House.
I wish to reiterate my call on the Governor to desist from flouting the laws and for him to appear before the House to explain the form and implications of the Central Banks monetary and, not least, its aggressive and defiant fiscal stance.
The government is simply breaking contracts according to the plans revealed by the Finance Minister this morning. This development will deter investors, without first informing and consulting them. The best way to manage a crisis is to anticipate it, to reduce its impact, or at best to prevent it from happening.
We have been thrust into the worst cost of living and cost of doing business crisis in recent memory and horrendous suffering and pain have been the portion of Ghanaians.
And to be clear, the suffering we are all going through is a direct consequence of recklessness and mismanagement on the part of this government and their appetite for excessive borrowing.
It was the expectation of many that the crisis we face would elicit the most urgent and far-reaching steps by government to ensure a reversal of our dismal fortunes.
We had hoped that the opportunity of the presentation of the 2023 budget would seized to show real commitment to proposing and implementing economic policies and measures that will mitigate the suffering.
Instead, we have observed with dismay, a shocking lack of urgency and commitment to tackling the crisis.
To begin with, the Budget was completely devoid of any convincing plan to get us out of the economic mess and turmoil.
The same “business as usual” posture that landed us here in the first place is on display. The Budget to offer comfort to anyone that we will be out of the woods in the short to medium term provided no evidence.
In addition to the lack of convincing proposals, we have been utterly shocked at the show of disrespect and disinterest in the Budget process by the very government that presented it.
We have been left dumbfounded as Cabinet Ministers who double as MPs and who form part of the government that has superintended over the greatest economic crisis of our time abandoned the important Budget debate and approval process only to be seen in Qatar making merry and taking selfies during the world cup.
Never in our history has a government exhibited such poor judgement and they have by this singular act placed beyond any doubt, that they have no respect for the people of Ghana, or the mandate bestowed on them to govern.
We are particularly stunned that President Akufo-Addo allowed this to happen.
We expect major expenditure cuts to achieve fiscal consolidation. The size of Government must be reduced drastically. We demand responsible spending.
We will not accept the outrageous GHC1.4billion allocation as contingency vote contained at page 209 of the 2023 Budget statement. We note that, this allocation is an additional GHC400million compared with last year’s allocation of GHC993million. This cannot be happening in a period of austerity.
We are also opposed to an allocation of GHS10 million for what has been strangely described as Defense Advisory Services. We also strongly denounce plans to increase the staff strength at the Office of Government Machinery by a staggering 1,570 at Page 230 of the 2023 Budget. This will increase total staff strength at the OGM to 3,681. This is unconscionable at a time Government has announced a total freeze in public sector jobs.
If ever there was proof that this government has lost its way and shown itself unworthy of the trust of the people of Ghana, this would be it.
We in the Minority wish to make it very clear, that if we do not see significant improvement in the attitude of the Majority side and sector Ministers do not turn up to lead the Budget process on their sectors, we will withdraw from the Budget process.
We will no longer countenance this embarrassing gross dereliction of duty to the people of Ghana.
On the Budget itself, we note that far from offering hope and assurance of a quick turn-around in our gloomy economic situation, it is packed with measures that will exacerbate the suffering we are already enduring.
We also note that no lesson has been learnt on how reckless and unrestrained expenditure have undermined the Ghanaian economy.
The 2023 Budget continues on the same spending trajectory that has led to our collective economic doom.
Instead of cutting down on non-essential expenditure, we have rather seen an increase with additional spending of up to GHS 82 billion. Some of the envisaged expenditure items are entirely wasteful and needless.
NATIONAL CATHEDRAL 80 MILLION GHANA CEDIS
Despite huge public outcry and in defiance of prudence, another GHS 80 million has been earmarked for the National Cathedral, which does not constitute a spending priority at this time.
This will bring the total amount spent on the project to about GHS 420 million, the total amount of tax payer funds so far spent. The estimated total cost of the project is around 400million dollars. Is this project a national priority?
For a government that is unable to print textbooks for basic school pupils several years after introducing new curricular unable to pay NABCO arrears and that is indebted to contractors and suppliers to the tune of over GHS 40 billion, this is most imprudent and unacceptable.
2.5 % INCREASE IN VAT
Whilst whittling away the little we have as a country in this intransigent manner, the Akufo-Addo/Bawumia government has decided to pile more hardships on the people of Ghana through the introduction of more taxes in the 2023 Budget presented to Parliament.
The most punitive among these taxes is the addition of 2.5% to the VAT rate bringing it to a cumulative 21.5% (made up of 2.5% GETFund, 2.5% National Health Insurance, 1% Covid Levy and 15% VAT all levied under the terms of Value Added Act, Act 870) the highest in Africa. What moral right does President Akufo-Addo have to increase VAT by 2.5% when he led the “KUMI PREKO” demonstration in 1995 resulting in the loss of five lives.
As sure as night follows day, this will worsen the hardship faced by Ghanaians, as the prices of almost all items will increase instantaneously once this tax comes into effect.
In addition to the increase in VAT, we have detected twenty-two additional tax and revenue measures that will make life even more difficult and unbearable for every Ghanaian.
As Social Democrats, we of the NDC stock have never been against taxation per se, but we are simply unable to agree with the steep increase and timing of the introduction of these tax measures.
At a time when people are facing the worst economic crisis and hardships in their lifetime, the last thing that is desired is further taxation.
The high rate of inflation has already eroded the disposable incomes of Ghanaians and we can no longer bear to give more to a government that is determined to waste our resources on extravagant living
Our position on E-levy remains unchanged. It is a setback to this cashless economy. We are also astonished to learn in the Budget that the GHS 100 threshold for e-levy deductions has been abolished. How come that the threshold is being abolished. How do we protect the vulnerable poor? At least a 300gh threshold with a reduction in the principal from 1.7 to 1%. You recall my suggestion of a 1% levy at a threshold of 500, which was out-rightly rejected by Government at the negotiations. This was part of the discussion when we rejected “AGYAPA”.
UNPRECEDENTED INFLATION AND DEPRECIATION OF THE CEDI
Again, inflation, which has ballooned from 13% in January to over 40% in October, has diminished the value of GHS 100 and therefore the exemption threshold for e-levy should be increased to GHS 200 and not removed.
This a clear example of insensitivity on the part of the Akufo-Addo/Bawumia government.
We in the NDC have already stated our intention to abolish the e-levy when we come back to power but before then, we wish to serve notice that we will fiercely resist the removal of the GHS 100 threshold.
Inflation has also wreaked havoc on personal income taxpayers and therefore removes any justification for the introduction of the additional band of 35% as announced in the 2023 budget.
Ladies and gentlemen of the press,
Yesterday, Finance Minister, Ken Ofori Atta announced the commencement of a debt-restructuring program, which he cynically dubbed a “debt exchange program”.
The debt-restructuring program launched today, Monday, 5th December 2022 has the following details:
For Domestic Bond holders, there will be a drastic slash in the agreed interests on their existing bonds which have been replaced by four new instruments maturing in 2027,2029,2032 and 2037 as follows,
1. In 2023, there will be 0% interest paid them on their bonds
2. In 2024, only 5% interest will be paid
3. In 2025, 10% interest will be paid until maturity.
This means that for those who have invested their lifetime savings in government bonds and depend on the interests for their livelihood and regular upkeep, you will suffer a drastic reduction in the rate of interest, which will significantly diminish your source of livelihoods.
A few weeks ago, after coming under a barrage of public criticism for failing to show leadership and failing to address the nation in the wake of the harrowing hardships and economic crisis. President Akufo-Addo took to the airwaves and categorically denied every credible information we in the Minority caucus in Parliament, had put out about an impending drastic debt restructuring and very painful haircut for investors in government bonds and other creditors.
The President stated clearly that there would be “NO HAIRCUT”.
The measures referred to above show steep cuts in interest rates and this clearly exposes the falsehood and hollowness of the President’s claims in the said address.
Beyond a terse claim that principals of domestic bondholders would not suffer haircuts, the finance minister failed to provide details of what would happen to the principals.
We have become aware of the emergence of details of a briefing given by the Finance Minister and officials of the Finance Ministry to stakeholders in the Banking Sector.
It was clearly disclosed at the briefing that bondholders who look forward to having their principals paid upon the maturity of their bonds, are also in for a very rough ride as the Akufo-Addo/Bawumia government has decided not to pay in full when the bonds reach maturity.
The principal payments are to be done according to the under listed formula.
1. In 2027, which is five years from now, only 17% of the principal will be paid.
2. In 2029, seven years from now, only 17% will be paid
3. In 2032, ten years from now, 25% will be paid and
4. In 2037, fifteen years from now, 41% will be paid.
This arrangement is set to derail and disrupt the plans of bondholders who have planned their lives and expenditure around the expected timely and full payment of their principals in consonance with the terms of purchase of the original bonds.
It will no doubt lead to hardships for bondholders, not to mention the breach of the original instruments.
Though the Finance Minister stated that details of treatment of external bonds are yet to be disclosed, it is the worst kept secret in Ghana that in the case of external bondholders, the Akufo-Addo/Bawumia government has decided to cut a staggering 30% off both the interest and principal.
In addition, external bondholders will have the maturity dates of their bonds extended by twenty whole years.
We need to stress that this crude haircut will not only affect foreigners or non-Ghanaians as erroneously believed because there is a significant number of Ghanaians who hold external bonds through various Ghanaian financial institutions who made these investments on their behalf.
These harsh cuts in the interests and principals of bondholders stem from a self-inflicted economic disaster.
Incontrovertible information reaching us indicates that this decision has been reached after a Debt Sustainability Analysis (DSA) carried out under the aegis of the IMF and World Bank showed that we in the Minority have always been right that our public debt is no longer sustainable.
We can also state with absolute certainty, that after years of denial and falsification of our debt numbers through the exclusion of debts owed by SoES, contingent liabilities, and debts on the books of dodgy Special Purpose Vehicles, the Akufo-Addo government has finally capitulated and accepted the reality that we owe far more than they have been admitting.
Contrary to the Finance Minister’s claim in the 2023 budget presented barely a week ago, that our debt to GDP ratio was 76%, government has now admitted that it is actually an unthinkable 105%.
This puts our actual public debt well above GHS 500 billion.
With such astronomical debt and how unsustainable it has become, Government is compelled as a precondition to securing an IMF program to reduce the debt and bring the debt to GDP ratio to 55% over a five-year period.
In the circumstance, the Akufo-Addo/Bawumia government has decided to implement these cut-throat debt restructuring measures that will see it failing to pay government bond holders and creditors up to as much as GHS 200 billion.
These haircuts are a complete disaster for those affected and represents an economic atrocity on an unparalleled scale against the people of Ghana.
All this was very avoidable had the Akufo-Addo/Bawumia government not been so hopeless, incompetent, arrogant and intransigent.
They had absolutely no business collapsing our economy and inflicting such a calamity on our people given all the resources and goodwill placed at their disposal.
We are appalled that this government believes that only the people of Ghana, who had no hand in the criminal mismanagement of the economy that has brought us to this sad juncture, should bear the pain of the supposed corrective measures.
We observe that there is no corresponding level of sacrifice on the part of the incompetent bunch whose puerile mismanagement has resulted in this national tragedy.
They continue to be arrogant and unrepentant and are unwilling to accept responsibility for mismanaging the economy.
Even as it is abundantly clear that the managers of the economy like Alhaji Bawumia, Ken Ofori-Atta and the entire membership of the Economic Management Team have lost credibility, proven to be incompetent and cannot be relied upon to salvage the situation, they continue to cling on and are taking more damaging decisions that continue to bring suffering to our people.
President Akufo-Addo is also refusing to show leadership by outlining more credible and deeper cost cutting measures that will signal a departure from the old ways.
He has refused to reduce the size of what has become the largest and most inefficient government in our history.
Government is required to bring both the budget estimates and debt-restructuring plan to parliament for approval.
We wish at this juncture, to state emphatically, that we in the NDC Minority Caucus in Parliament will vigorously oppose and refuse to entertain both the budget estimates and any bill on debt restructuring until the follow conditions are met.
a) The resignation of the entire Economic Management Team and in particular Alhaji Bawumia from his position as Chair of that obviously moribund body.
b) The immediate resignation or dismissal of the Finance Minister, Ken Ofori-Atta
c) Immediate reduction in the number of Ministers and political appointees at the Office of the President by half.
d) Removal of all non-essential expenditure in the 2023 budget including the GHS 80 million allocated to the National Cathedral
e) Reinstatement of the GHS 100 exemption threshold for e-levy payment
We are aware that the Akufo-Addo/Bawumia government have become desperate and is compelled after reckless mismanagement of the economy to achieve fiscal consolidation.
Fiscal consolidation also involves deep expenditure cuts and prudence in the use of scarce resources.
The people of Ghana alone cannot be called upon to withstand the worst of the economic mismanagement and attendant hardships while those responsible for the crisis continue as if nothing happened or they did nothing.
We wish to assure the good people of Ghana that we will continue to fight to preserve their interests and prevent the hopeless Akufo-Addo/Bawumia government from doing more damage to the economy and bringing more pain and hardships upon us.
I thank you for your kind attention.