“Our economy is in tatters, largely because it is self-inflicted. The government inflicted it on us and failed to act.” Dr Cassiel Ato Forson, Minority Leader in the Ghanaian Parliament, made the statement quoted above in the House, in response to President Addo Danquah Akufo Addo’s State of the Nation Address (SONA) on March 8, 2023.
Seconding the motion for adjournment, Dr Forson said: “Mr President, there is, indeed, widespread disenchantment among our people.
“Millions of Ghanaians are going through unbearable hardships and excruciating pain.
“Our economy is in the worst shape it has been in decades.
“Ghana’s economy is bankrupt or insolvent.
“Mr President, this is your score time and this is the true shape of our nation.
“Our position is that inflation is currently rising. Monetary policy rate is also at 28 percent. Ghana Cedi has depreciated by 20 percent in January alone.
“Mr President, unemployment is exceedingly high at record levels and, as we speak, Mr President, lending rates are at 40 percent,” he added.
President Akufo Addo had earlier presented the State of the Nation Address in a different way.
He dispensed with the usual SONA format and concentrated on the national economy.
The President spelt out, in detail, how the present economic crises happened and the measures his government had and would take to solve the problems, stabilize the economy and bring it back to the path of continued growth.
“Our currency has been buffeted; our inflation rate has been very high and, for the first time in our lives, debt exchanges have become the language of everyday conversation.
“I have said and many others, including the Managing Director of the International Monetary Fund (IMF), have said that our economy was doing well until COVID-19 and the war in Ukraine took us off course.
“Maybe because of the severity of the present difficulties or maybe because it suits their preconceived agenda, some people are unwilling to accept that we were on a good trajectory until the arrival of COVID-19.
“This is what I told the House (Parliament) on 20th February, 2020 and I quote: “Mr Speaker, in three years we have reduced inflation to its lowest level, 7.8 percent in January 2020, since 1992.
“For the first time in over 40 years, we have had a fiscal deficit below 5 percent of GDP for three years in a row.
“For the first time in over twenty (20) years, the balance of trade (that is, difference between our exports and imports) has been in surplus for three (3) consecutive years.
“Our current account deficit is shrinking, interest rates are declining and the average annual rate of depreciation of the cedi is at its lowest for any first-term government in the Fourth Republic.
“Our economic growth has rebounded to place Ghana among the fastest growing economies in the world for three years in a row, at an annual average of 7 percent, up from 3.4 percent in 2016, the lowest in nearly three decades,” he added.
President Akufo Addo dwelled on the COVID-19 pandemic and the havoc it had caused the country and the economy. He dismissed suggestions that the COVID-19 funds were spent recklessly.
On borrowed money, he said that the loans were applied to provide public infrastructure and others.
“There were massive developments in agriculture, education, health, irrigation, roads, rails, ports, airports, sea defence, digitisation, social protection programmes, industrialisation and tourism,” he added.
Is Ghana’s economy bankrupt?
What is bankruptcy? What is insolvency?
According to Wikipedia, bankruptcy is “the legal process through which people or other entities who cannot repay their debts to creditors, may seek relief from some or all their debts.
‘’In most jurisdictions, bankruptcy is imposed by a court order often initiated by the debtor.”
Insolvency is the term used to describe a situation, according to Hutchinson online, “when an individual or company cannot pay their debts as when they are due”.
Can a country become bankrupt?
According to a writer of an article published in India Times, “It is incorrect to say that a country is going bankrupt”.
Referring to the recent near collapse of Sri Lanka’s economy, the writer stated, “We ought to understand that when a country fails to pay its debts, it does not declare bankruptcy; instead, it defaults on loans.
“And one should remember that the defaulter is the government, not the country.”
Government, in this wise, means all governments of a country that had borrowed money, cumulatively, and that led to debts default.
In the Ghana case, the records show that the National Democratic Congress (NDC) government had borrowed more money than the New Patriotic Party government.
For example, in January 2009, Ghana’s debts were GHC9 billion. The debts increased to GHC 122 billion in December 2016.
The NDC should, therefore, be honest and bold to accept not only moral, but also actual responsibility, for part of the debts its government had incurred.
On developed countries’ debt defaults, the Indian Times writer cited Greece as a country that had been in loan defaults a number of times.
Greece had its first default in 377 BC.
Since independence in 1829, Greece’s government had defaulted on loans for more than half of the nation’s history”.
He mentioned Spain as another developed country with the highest rate of loan defaults in Europe.
Spain, he added, defaulted in its debts 15 times throughout the 18th and 19th centuries.
He recommended the IMF approach as a way of seeking help to avoid loan default.
An IMF member country could resort to the IMF for bailout or technical assistance, but also engineering skills to monitor the bailout package.
“When people or institutions go bankrupt, lenders acquire their assets.
“However, a country’s assets cannot be purchased nor can foreign lenders be forced to pay the money owed to the government,” he added.
On the causes or origins of Ghana’s current huge debts and other financial problems, it is not correct for Dr Ato Forson to imply that Ghana’s present financial crises were self-inflicted.
The IMF Managing Director, Kristalina Georgieva, and the German Minister of Finance, Christian Lindner, had confirmed that the financial problems confronting Ghana were caused by external factors, such as, the COVID-19 pandemic and the Russian-Ukraine war.
In their 2022 Bali summit communique, the G20 member countries acknowledged the fact that COVID-19 and the war in Ukraine were causes of the high-indebtedness of developing countries, including Ghana.
The final analysis is that a country cannot declare itself bankrupt or be declared bankrupt by a court.
A country cannot become insolvent to the extent of it being liquidated and its assets sold out by its creditors.