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Bolgatanga Central MP Mr. Isaac Adongo called on Vice President Dr. Mahamudu Bawumia to “put an end to naivety and classic economic theories” after mismanaging Ghana in what he describes as a “debt trap, high fiscal risks, external vulnerabilities and extreme hardship.
Mr Adongo says he watched a video of Dr Bawumia during a TESCON program at the University of Cape Coast (UCC) trying in an “absurd way to justify the mess he put the economy into. Ghana, in a way similar to his malaise. fatal attempt to escape his technically flawed analysis of the evolution of exchange rates and the fundamentals of the economy.
Dr Bawumia, in the video, said that although the public debt is high, careful management of the debt by the government will lead to low inflation, low interest rates, a stable currency, economic growth and improvement. of the standard of living of Ghanaians.
In response, Mr. Adongo said, “Dr. Bawumia is so naive.
“Will he use inflation and the exchange rate to pay off the debt?” He asked.
In a statement, the Bolgatanga Central lawmaker said actual practice over the past two years has exposed Dr Bawumia’s lack of appreciation and technical shortcomings in risk-based public debt management.
According to him, Dr Bawumia “slyly misleads people into committing to a less important variable of debt sustainability and the risks of debt dynamics by neglecting key factors of debt quality. and their impact on debt sustainability, fiscal risks and external vulnerabilities. ”
Here are the details of Mr. Adongo’s statement:
Stop naivety and classic economic theories.
You have clearly mismanaged Ghana in a debt trap, high fiscal risks, external vulnerabilities and extreme hardship.
I watched a video of Dr Mahmoud Bawumia during a TESCON program at UCC trying so hard in an absurd way to justify the mess he put Ghana’s economy into, the same way he tried unhappy to run away from her technically deficient. analysis of the evolution of exchange rates and the fundamentals of the economy. Isn’t that the same man who once said, “If you’re in doubt, look at the exchange rate”? And that, “if the fundamentals of your economy are weak, the exchange rate will expose you”?
We can all now see how badly the exchange rate exposed Dr Mahmoud Bawumia. Under Dr Bawumia the exchange rate was everywhere before it was saved by Covid-19, the dollar even breaking the prison and Bawumia PhD made an unsuccessful U-turn with his concept of distorted logic.
In the video that has gone viral, Dr Bawumia is heard admitting that public debt is high but at high risk of debt distress, but then he sought to imply that if you borrow unsustainably like they did, it it is prudent debt management and it leads to;
1. Low inflation.
2. Low interest rates
3. Stable currency.
4. Economic growth
5. Improvements in the standard of living of Ghanaians.
Dr Bawumia is so naive. Will he use inflation and the exchange rate to pay off the debt?
I find it hard to see how unsustainable debt levels that present high risks of default could reach any of the variables he listed above.
Actual practice over the past two years has revealed Dr Bawumia’s lack of appreciation and technical shortcomings in risk-based public debt management. Hence its constant reliance on the rate of debt accumulation and the debt-to-GDP ratio, although important, are intermediate variables to measure the performance of risk-based debt management.
Dr Bawumia artfully misleads people into committing to a less important variable of debt sustainability and the risks of debt dynamics, by neglecting the main factors of public debt quality and their impact on debt sustainability, fiscal risks and external vulnerabilities.
For example, what is the relevance for debt sustainability and fiscal risk if you claim that the NDC recorded a debt build-up of 200% and a rate of accumulation of 60% of the NPP, but the NDC did not ” used 56% of tax revenue to service this debt with 44% budget space to finance the budget while the NPP with lower accrual rate uses 91% of tax revenue to service the public debt with only 9% to finance the budget as in 2021.
It is important to stress that even the debt service at 91% excludes for 2021;
1. Interest payments suspended by some official creditors as part of Covid-19 relief in Ghana.
2. It also does not include deferred interest payments on zero coupon bonds.
Which of these two economies is the healthier; the one with 56% debt service but with a higher accrual rate or the one with 91% with a lower accrual rate?
Ironically, like the reality of how his naivety and technically flawed analysis led us, Dr. Bawumia now finds help in inflation and other variables to throw dust in our eyes.
If Dr Bawumia has forgotten, he needs to be reminded of some of his technically deficient understanding of how major economic drivers work. To see ;
1. “Mallam-Atta Market Inflation”. This is where Dr Bawumia only used one or two markets and prices below 1% of the total basket of goods normally used by GSS to calculate inflation, to extrapolate for the whole country. What serious economist is doing this?
2. Even though it is common knowledge that no currency can depreciate beyond 100%, Dr Bawumia, while in opposition, used the erroneous “rate of change” method. to calculate the Ghanaian currency depreciation and got about 200%. Any competent economist should have known he was wrong. But he didn’t even notice his technical deficiency. Ironically, he was still confident to send the same cedi to the market to buy tomatoes and onions for Hajia Samira to cook okro soup for her.
3. Dr Bawumia attributed fluctuations in exchange rates to economic fundamentals without giving due consideration to exogenous shocks.
4. When COVID-19 hit, the pressures of demand for currencies eased significantly because Ghanaians were not importing due to foreclosure etc. resulting in relatively lower demand for the dollar. The exchange rate has become stable as a result and Dr Bawumia attributed this COVID-19-induced stability to what he described as prudent economic management, but dishonestly refuses to accept that the same prudent economic management is blamed. for the 0.4% growth of the economy in 2020.
This is the height of dishonesty.
I am extremely worried that Dr Bawumia is not thinking about how our children are going to pay for his mess and the economic implications of the unsustainable debt burden on public money, crowding out fiscal space to finance the infrastructure of which we have great need and the hardships on Ghanaians that will result from the difficult budgetary corrections that will have to be made to bring the country to debt sustainability.
As Ghana continues to be in the hands of an ignorant Dr Bawumia, its continued ignorance and lack of appreciation of the risks the country faces, we must pray and seek spiritual support to save it from ‘demons and principalities ”.
Let Dr Bawumia stop hiding the reality of his mismanagement;
1. Ghana’s debt is confirmed by the World Bank, IMF and other rating agencies as being at high risk of debt distress.
2. Ghana’s debt trajectory over the next 4 years threatens to expose the country to challenges in financing or accessing international capital markets.
3. Ghana is the third country in Africa and emerging economies with the most outstanding Eurobonds.
4. Ghana is the country most exposed to exchange rates in Africa and emerging markets, as around 64% of its debt is denominated in foreign currencies with very low levels of net international reserves to cover bonds. debt service and portfolio reversals. The average in Africa is 20%, which makes Ghana 200% above the African average.
5. Ghana has the highest Eurobonds outstanding for the size of the economy (GDP) of 17.5% in Africa and emerging economies. This means that, because our peers have correctly applied their Eurobonds to grow their economies, we do not borrow or borrow beyond our weight.
It is so strange, but not surprising, that a distraught Bawumia thinks this is prudent debt management.
It becomes evident why he ditched the economy and is now embarking on secondment missions in systems improvement projects of government agencies related to IT.
Isaac Adongo,
Deputy, Central District of Bolgatanga
— classfm —
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