According to Dr. George Domfeh, a development economist at the University of Ghana’s Centre for Social Policy Studies, the 2025 Budget Statement is “very usual” and devoid of surprises.
He said that rather than offering a daring new vision for the nation’s economy, the budget that Finance Minister Dr. Cassiel Ato Forson delivered to Parliament last Tuesday was more of the usual political platitudes.
In a Daily Graphic interview, Dr. Domfeh responded to the budget by stating that it followed a well-known pattern of complaining about the economy and pointing the finger at the previous administration.
“The first thing that I think pushes what we saw is that anytime there’s a change in government, the new one will try to lament, complain, and paint the old government black,” he said.
“Figures gave him away,” Dr. Domfeh said, adding, “For example, as soon as he said the economy was in crisis, Dr. Cassiel Ato Forson immediately talked about debt. And when you talk about debt, you can see that NDC doesn’t have a good record.
“The economist also expressed surprise that the minister’s presentation did not provide a clear explanation for the economy’s supposed crisis, citing examples of previous governments that used similar tactics to describe the state of the economy, such as the opposition New Patriotic Party (NPP) and the ruling National Democratic Congress (NDC).
Debt
Giving the nation’s debt crisis a historical backdrop, Dr. Domfeh stated that it was not a recent occurrence and emphasized the notable rise in debt under the first Mahama government.
“We had $7.1 billion in total debt when President Kufuor succeeded Rawlings. The development economist stated, “Kufuor pushed it to $8 billion due to the Highly Indebted Poor Country (HIPC) initiative, but the net addition was below $1 billion.”
However, he added that the debt rose from $8 billion to $22.2 billion during President Mills-Mahama’s first government.
Ghana’s debt-to-GDP ratio has changed over time, according to Dr. Domfeh.
“At the time Rawlings was exiting, our debt-to-GDP ratio was 182 percent, which is above the West African Monetary Institute threshold of 70 percent,” he said. However, due to the HIPC initiative, Dr. Domfeh said the debt-to-GDP ratio declined to 26 percent by 2006. Despite this improvement, he said the NDC administration under President Mahama increased the debt-to-GDP ratio from 32 percent to 71 percent by 2014. “This plunged the country into a debt crisis,” Dr. Domfeh stated, adding that “the debt-to-GDP ratio further increased to 72.8 percent in 2015 and 73.1 percent in 2016.”
Rebased
Dr. Domfeh claims that when the nation rebased its economy in 2018, going from 2006 concern pricing to 2013 concern prices, the debt position improved.
The GDP increased by 24.2% as a result of this adjustment, lowering the debt-to-GDP ratio.
He pointed out that following the rebasing, President Mahama’s debt-to-GDP ratio, which was 73.1% in 2016, dropped to 55.9%.
Nonetheless, Dr. Domfeh noted that during Ken Ofori-Atta’s leadership, the debt-to-GDP ratio marginally rose to 62.5%.
He emphasized that, given the positive primary balance at the time, this rise was manageable.
In 2020, the debt situation deteriorated, as the debt-to-GDP ratio increased to 76.1%.
Dr. Domfeh ascribed this rise to a large disparity between revenue and expenses as well as excessive borrowing.
He said that the nation’s debt has increased from $29 billion in 2016 to $60 billion by 2021.
Payment issues resulted in the necessity for debt restructuring.
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