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Ghana's economy "heading for crash": financial institution head

Xinhua, February 14, 2015 Adjust font size:

Ghana's economy would experience a difficult year and might even collapse, local media quoted a financial institution's head as saying Friday.

Ken Thompson, Chief Executive of Dalex Finance, a Ghanaian non- bank financial institution gave the warning during a public lecture organized by the Chartered Institute of Marketing Ghana (CIMG) Wednesday.

"We are heading for a crash," Thompson said, noting that the Ghanaian government had completely failed to put in place an effective mechanism to control public spending and check fiscal indiscipline.

This, he said, had over the years accounted for the country's growing debt, thereby making the already overburdened taxpayers to live with the worry of financing public debts.

Thompson said Ghana's debt to Gross Domestic Production (GDP) was a little over 60 percent last September and there were indications that the figure might have crossed 70 percent by the end of last year.

The Ghanaian government intended to borrow 25.42 billion Ghana cedis (7.9 billion U.S. dollars) within the first half year from the domestic market, according to him.

The decision, he said, would crowd out funding to the private sector.

As for inflation, Thompson predicted that the rate would increase by 25 percent this year.

Thompson presented figures from the Bank of Ghana which showed that government expenditure exceeded revenue.

"If you earn a thousand cedis and you spend a thousand two hundred cedis, you are broke. Ghana is broke," he said, citing overspending as one of the major factors hurting Ghana's economy.

Ghana's economy grew by 14 percent in 2011, making it among the fastest growing economy in the world. However, it has since 2011 fallen drastically, forcing the government to head for an International Monetary Fund (IMF) bailout.

The local currency suffered a sharp fall in value last year, a 40 percent loss of its value against other foreign currencies like the U.S. dollar and the euro, Thompson said.

As part of the conditions for bailing out the Ghanaian economy, the IMF has stressed the need for fiscal discipline as it said the economy had recorded huge expenditure deficits since 2008.

However, Thompson said that the government would not be able to meet any of IMF's targets in the bailout. Endi