Ghana’s former Deputy Finance Minister and Member of Parliament for Obuasi West, Kwaku Kwarteng, has recently stirred a controversial conversation about the state of the nation’s economy.
The Ghanaian politician made a statement on Thursday, July 25, 2024. In the statement, he likened the management of Ghana’s economy to a Ponzi scheme. This comparison has sparked widespread debate on Ghana’s economic practices over the years.
Kwarteng’s comments come at a time when both national and household levels in Ghana are grappling with severe economic challenges. According to him, these challenges are not a recent development but rather the result of decades of poor governance. He highlighted that political mismanagement and economic inefficiency have plagued various administrations since Ghana gained independence. This historical context sets the stage for understanding the depth of the current economic issues.
In his statement, Kwarteng did not shy away from criticizing his own party, the New Patriotic Party. As the immediate past chairman of the Finance Committee in Parliament, his insights carry significant weight.
It is worthy of emphasis also that Mr. Kwarteng served as Government Spokesperson on finance from 2006 to 2009 under President J.A Kufour. After the John Agyekum Kufour administration left office, Mr. Kwarteng was made the policy advisor for the New Patriotic Party from 2010 to 2013.
A common Ghanaian adage says: “when the frog comes from the water to report of the crocodile’s death, we do not doubt him”. Many Ghanaians say, Mr. Kwarteng’s significant role within the NPP and his deep understanding of Ghana’s political and economic landscape, makes him someone who might have insider knowledge or reasons for making such strong statements about the country’s economic situation. His position within the party and his experience give weight to his comments.
Ghana has consistently spent beyond its means and relied heavily on borrowing to cover the excess. This practice has led to a cycle of borrowing more, offering higher interest rates to lenders, and using a portion of the borrowed funds to repay previous debts. The remaining funds are then used to cover the current year’s overspending. This cycle mirrors the operations of a Ponzi scheme.
kwaku kwarteng, former finance minister and member of parliament
What is a Ponzi Scheme?
A Ponzi scheme is a type of scam where an investment facility promises high returns with little risk. It works by using money from new investors to pay returns to earlier investors, instead of making profits from a real business. Eventually, the scheme falls apart when no new money comes in, leaving many people with big losses.
Ponzi scheme gets its name from a swindler named Charles Ponzi, who in 1920 became a millionaire by promoting a nonexistent investment opportunity.
Kwaku Kwarteng compares this to Ghana’s economy, saying that the country is facing tough times because lenders are no longer willing to give out more loans. This is similar to how a Ponzi scheme falls into trouble when people stop investing.
Kwarteng’s analysis is a sobering reminder of the long-term implications of fiscal irresponsibility.
The past few days have seen many media platforms across the length and breadth of Ghana discuss the economy, politicians, and the future of Ghana under diverse perspectives, thanks to Mr. Kwarteng’s controversial comment. His remarks has triggered critical evaluation of Ghana’s economic policies and a commitment to sustainable financial practices.
The analogy to a Ponzi scheme metaphorically serves as wake-up call to all policymakers to break the cycle of borrowing and overspending.
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