To ensure financial stability, the government of Ghana is drawing funds from all sources unimaginable through its Domestic Debt Exchange Programme (DDEP). However, vehicle insurance funds should not be included as one of these sources and should be exempted from the DDEP.
The DDEP is an invitation involving GHS137 billion exchange for domestic notes and bonds and promises to deploy all regulatory and supervisory tools to mitigate risks to financial stability. Despite the agreement with the Ghana Insurers Association caution needs to be taken as the entities that watched on for the government to excessively borrow into this current crisis are the same entities to supervise risk mitigations hence, we cannot afford to risk vehicle insurance that would be needed to during an eventuality.
The National Road Safety Authority (NRSA) reported that a total of 17,272 vehicles were involved in accidents of which about 1,900 lives perished in 2022. Therefore, there is a need for the readiness of funds to compensate victims during any eventuality.
In Ghana, insurance penetration is low due to a widespread notion of unwillingness to pay claims to subscribers. According to our Driver Mo 2022 report, the benefit of vehicle insurance is yet to be realized because most subscribers have reported that they subscribe to third-party to avoid police harassment and also to fulfill statutory obligations, making most Ghanaians reluctant to report for insurance claims.
Also, exempting vehicle insurance would not significantly impact Government’s DDEP because the government needs to first demonstrate its commitment to ensuring financial stability rather than falling on individuals’ funds safeguarded for unforeseen circumstances.
Our current situation with debt to GDP hovering around 97% was not a sudden event but an accumulation of reckless borrowing and spending. Statutory bodies and regulators have watched on for the government to over borrowed. It is trite that we cannot as a nation borrow our way to prosperity.
It is time to put a ceiling on government borrowing and provide a transparent and participatory process for the increment of such ceiling if the need arises. Also, the government must approach the crisis holistically and demonstrate commitment by reducing the size of government, employing fiscal discipline, and cutting down not only spending but also reducing government waste.
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