A 20-year review of judgment debt payments in Ghana — Impact, causes, remedies (I)
JUDGEMENT debt payments in Ghana continue to be a recurring issue in an economy currently saddled with rising public debt, persistent fiscal deficits, a high youth unemployment rate, and over 30 per cent of its population living in poverty.
Relative to the Sub-Saharan African (SSA) region and lower-middle-income group, Ghana has made strides in most socio-economic indicators when the decadal averages over 2000-2009 and 2010-2019 are compared.
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The country, however, lags behind in several other indicators, including health expenditures, under-5 mortality rate, maternal mortality ratio, secondary school enrollment, and gender parity index for secondary school enrollment when compared with the lower-middle-income group averages
As a result, the country cannot afford to waste its limited public resources on judgment debts when faced with enormous development challenges.
This report provides a brief review of judgment debt payments made from public funds on behalf of the State from 2000 to 2019.
These judgment debts arose from alleged contractual breaches, failure to promptly pay compensations for compulsory land acquisitions by the State/Government, and alleged tortuous/statutory breaches committed by public officials in the course of their public duties.
The following are the general findings of the review: In equivalent 2019 Cedi terms, the total judgment debts paid from 2000 – 2019 amounted to GH¢1.8 billion million, equivalent to about 135 per cent of new multilateral loans contracted by the government in 2019, 112 per cent of total central government grants received in 2019, and about 30 per cent of total health expenditures in 2019
Of the total, judgment debt payments arising from contractual breaches was GH¢1.38 billion (73 per cent), GH¢479.2 million from failure to promptly pay compensation for compulsory land acquisition by the State/Government million (25 percent), and GH¢29.9 million (about 1.5 per cent) from tortuous/statutory breaches by public officials.
Judgment debts
Judgment debts has occurred under every Government and evidence from the Sole Commissioner’s report shows that illegal abrogation of contracts involving huge amounts of money, which is part of judgment debts arising from contractual breaches, have mostly followed political transitions.
Most judgment debts occur due to negligence, blatant disregard for public procurement laws, illegal abrogation of contracts, corrupt activities by public officials in their line of duty, all of which have resulted in the payment of huge sums from the public coffers.
Outstanding judgment debts
It is important to note that while these findings were based on actual payments made between 2000 and 2019, our review of the Auditor-General’s reports from 2013 to 2019 also showed that staggering amounts of judgment debts awarded against the State remain outstanding.
For example, in 2017 alone, the amount outstanding as shown in the Auditor-General’s report was GH¢411.6 million.
With government revenue failing to keep pace with expenditures, which has contributed to the persistent fiscal deficit, and the incredibly enormous development challenges the country faces, it becomes imperative to address the underlying issues of the recurring judgment debts, close the loopholes of these inordinate payments from public funds, and avert excessive financial losses of a financially hemorrhaging economy.
The report is organised as follows: Following this introduction, the next section reviews the total judgment debt payments made over the past two decades, their composition, and the total payments made in terms of relevant 2019 economic indicators.
Section 3 presents a review of selected cases. Section 4 presents highlights of the recent judgment debt: Ghana Power Generation Company (GPGC) Limited vs. the Government of Ghana. Section 5 examines how delays in the execution of government business contribute to judgment debt amounts.
Section 6 presents the legal reflections on selected cases. Section 7 gives the limitations of the study. Section 8 concludes with recommendations.
Judgment debts payment over past two decades
According to the 2015 Sole Commissioner's report, a 'judgment debt' is "a debt for the payment of which a judgment has been given," and the judgment "arises on account of a decision by a court of competent jurisdiction or an authoritative pronouncement of an umpire or an arbiter as a result of arbitrational proceedings or through mediation and negotiated settlement as agreed upon between the parties in litigation."
Ghana's judgment debt payments often fall in one of three main categories: Category 1: Judgment debts arising from alleged contractual breaches by the Government and its agencies (Ministries, Departments and Agencies (MDAs) and the Metropolitan, Municipal and District Assemblies (MMDAs);
Category 2: Judgment debts arising due to the Government's failure to promptly pay compensations for its compulsory land acquisitions;
Category 3: Judgment debts arising from alleged tortuous or statutory breaches committed by public officials in the course of their official duties.
Over the past two decades, the payment of judgment debts has occurred under every Government, but with varying degrees.
Judgment debt payments arising from alleged contractual breaches by the Government and its agencies comprise about 73 per cent of the total payments made over the past two decades in 2019 equivalent cedi terms and it is a recurring feature of judgment debt payments.
Evidence from the Sole Commissioner’s report suggests that illegal abrogation of contracts, part of the category of judgment debt arising from contractual breaches, have mostly followed political transitions. Judgment debt payments arising due to the Government's failure to promptly pay compensation for land acquisitions comprise about 25 per cent of the total payments made over the past two decades and are least frequent.