A Deputy Minister of Finance Kweku Kwarteng has defended government’s decision to borrow exceedingly more than the previous government six months into office.
He said government has been compelled to borrow more in order to defray the debt the Mahama government left behind.
Dr. Mahammudu Bawumia at Monday’s press interaction justified government’s quest to borrow more money from the international and domestic markets.
The Vice President who in time past lambasted the Mahama government for its voracious appetite for loans which he said bloated the country’s debt stock when asked why six months into office they [NPP] have had to borrow over GH40 billion, Dr. Bawumia said under the NPP government, the debt to GDP ratio is instead stabilizing.
“…If you are borrowing rampantly in the domestic market, you will see that interest rate declines. So the simple answer is that, the debt stock in terms of its impact burden on the economy is not actually increasing. The debt to GDP ratio is actually stabilizing and we are hoping to bring it down by the end of the year even if marginally,” he added.
Speaking on the Citi Breakfast Show on Wednesday, Kwaku Kwarteng said securing the loans was necessary to retire mature debts the NPP government inherited from the previous administration.
Mr. Kwarteng further explained that government’s decision to borrow more prevented it from defaulting on its debt payments.
“We are having to measure the rate at which we are trying to reduce the borrowing. We are measure that with the need to expend on certain critical expenditures. When we assumed office, there were people who have been engaged to do things for the state, the contracts have been signed. In the case of vehicles, some have been telling us that have already procured the vehicle and we stand the risk of incurring judgment debts and other obligations if we abrogated these contracts.”
“We’ve met cases where in the last quarter of the year, so many people were engaged, we cannot dismiss them, we need to look at where the law allows us to do that. So we met those commitments. There were also people from who we had taken short term instruments – Treasury bill; there are some which are three months, six months, one year,” he said.
Kwaku Kwarteng further said government’s hands a tied because of debts and that they are working assiduously to put the economy back in track.
“You come into office you have a policy to reduce borrowing but after three months the people are coming to you that it is due and you have to redeem. What you do is that yes, I will keep my broad objective of succession of borrowing in place, but you may need to do some critical borrowings to deal with this immediate burden. That is what has, if you ask me; reduce the rate at which we wanted to reign in borrowing. But we will get there. When you inherit an economy in a shape that we did, you are not in a position to do things just as quickly as you would have love to do. But we are confident giving what we are seeing that ultimately, we will get there,” he added.