Vice President Amissah-Arthur and Dr. Mahamudu Bawumia
VICE PRESIDENT Paa Kwesi Amissah-Arthur has finally responded to the lecture delivered by the vice presidential candidate of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia, in which he jibed President John Mahama for his abysmal management of the economy.
Mr Amissah-Arthur said Dr. Bawumia’s pronouncement about the interest payment exceeding capital expenditure was very wrong, and needs to be corrected.
Speaking at the Greater Accra Regional Zonal campaign launch of the National Democratic Congress (NDC) at Mandela Park, Ashaiman yesterday, the vice president, who felt bitter about the lecture, wondered why the NPP bigwig should make such a statement about the interest payment.
“I heard one thing which I have to correct, on TV some three to four days ago, I heard our opponent saying something which is very wrong so let me correct the first one because we will continue to correct him when he goes wrong.”
“He said interest payment has exceeded capital expenditure; ah even everybody knows that if you borrow money to pay for a road and it is going to take me 10 years to pay that loan, every year I have to take one-tenth of the money to pay back to the person I borrowed the money from. If you borrow to build a road you have to pay back that money,” Amissah-Arthur charged.
Borrowing
Data provided by Dr. Bawumia indicates that strangely, Ghana is today dolling out more to pay interest rates than it spends on infrastructural and capital projects annually.
Dr. Bawumia revealed that while the norm is to have a situation where infrastructure expenditure is far above interest payments, Ghana today is faced with the peculiar situation of paying more in interests than what it pays on infrastructural expenditure in the year as a result of the unbridled borrowing the NDC has done in the last eight years.
“The data also shows that during the NPP period of governance, capital expenditure far exceeded interest payments. This is because low interest payments allow room for more capital expenditure. Infrastructure expenditure as a percentage of GDP declined sharply after 2008 as interest payments increased. From 2014 to date, interest payments have now incredibly exceeded infrastructure expenditure. How can an economy be on an upward growth path when interest payments exceed infrastructure expenditure? This is the result of NDC’s economic mismanagement,” the NPP vice presidential candidate said.
Interest payments in 2016 are estimated at GH¢10.5 billion; and it would be five times what was allocated to six key ministries combined, according to him.
“As interest payments go up, the space for development shrinks, and this is all due to financial indiscipline. At the end of 2008, Ghana’s total interest payments amounted to GH¢680 million,” he explained.
Debt
Touching on the unprecedented borrowing and the high debt levels Ghana is saddled with at the moment, Dr Bawumia stated that interest payments alone in 2015 stood at GH¢9.6 billion, more than the total debt of Ghana at the end of 2008.
He noted that Ghana’s total debt had ballooned from GH¢9.5 billion to GH¢105 billion at the end of May 2016.
Full Response
However, Mr Amissah-Arthur, a former Governor of the Bank of Ghana, and currently head of the economic management team of the Mahama administration, noted that the money borrowed was purposely for projects so there was nothing wrong with payment of interests at whatever rate.
“So whenever you take money and pay interest or repay the amount you have collected, it is for the road that you have borrowed the money for so that is the one that you are paying, so there is no way you are paying interest for nothing at all; you are paying interest for projects that you have borrowed money for.”
“So how can you say that you pay interest more than capital expenditure? It is that capital expenditure money that you are paying as interest. This one is a simple thing in primary school; you learn it. I don’t know how people with higher qualifications cannot understand this simple context,” he charged.
He was of the view that since the moneys were not borrowed for nothing, he saw nothing wrong with the payment for more interests than expenditure.
The vice president explained, “In economics we call it classification. You have to classify that interest payment for the thing you use that money for. You do not pay money for nothing but you pay interest if you have not borrowed money. When you have borrowed money you are paying interest for that by saying this one for this road, for that hospital, this one for the project you have borrowed money for.”
“You cannot come and say that interest payment has exceeded capital expenditure so we have made a mistake.”
He promised the gathering that at the appropriate time he would respond in full measure to what he described as ‘lies that Dr. Bawumia has told.”
From Vincent Kubi, Ashaiman