Government’s decision to use almost 97% of its supplementary budget to pay debts may be described as better late than never.
That is the position of the Director of Economics at the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey.
His comments come on the back of analysis by Citi Business News that the government is using almost all the amount that it is seeking approval from Parliament, to clear maturing debts.
The Finance Minister, Ken Ofori Atta has stated that the government will need an additional 6.37 billion cedis to meet critical expenditure targets for the remaining five months of the year.
This, he said, include the urgent need to save the country’s energy sector which he described as a state of emergency considering the numerous take or pay clauses which are impacting on the nation’s finances.
But Citi Business News’ analysis revealed that the government is scheduled to spend 6.15 billion cedis or 96.6 percent of the supplementary budget on debt servicing or interest payments in the revised 2019 budget.
A breakdown of the figures shows that the amount comprises 5.1 billion cedis and 952.7 million cedis from take or pay contracts due to IPPs and fuel producers as well as interest payments on the government’s debts respectively.
Though Professor Peter Quartey admits that the development is worrying, he tells Citi Business News the decision may have been inevitable.
“Initially there was a promise that energy prices were not going to be increased so one option was to increase the cost of energy prices but that was not carried out and so it is about time for it to be cleared than to leave it for later,” he intimated.
Professor Quartey added, “As you pile up the debts, what is going to happen is that the system will come to a crush and we may be going back to the dumsor days and nobody wants to go revisit that period where businesses were suffering and even banks were not able to recover their loans…So in my view, I think it is better late than never.”
As a result of the impact of increased expenditure on clearing outstanding debts, the Finance Minister has since sought approval for the introduction of some new taxes such as increasing the communication service tax, price stabilization levy on petrol, diesel and LPG as well as increase in the road fund levy.