Yanamla Ramakrishnudu, the former finance minister of the Indian state of Andhra Pradesh, has cautioned that if Jagan Mohan Reddy remains as chief minister, the state may soon resemble another Nigeria.
India’s south-eastern coastline region is home to the state of Andhra Pradesh. With a total size of 162,975 km2, it is the seventh-largest state by area. With 49,386,799 people, it ranks as the tenth-most populous state.
It won’t be a surprise if Andhra Pradesh becomes another Nigeria or Zimbabwe, according to Ramakrishnudu, a senior leader of the Telugu Desam Party (TDP), given the state’s economic situation, the state’s stagnant development, and the people’s heavy financial burdens, according to Indo-Asian News Service.
As he plunged Andhra Pradesh into a critical crisis, many people who worked in a variety of professions lost their jobs, according to Ramakrishnudu.
“The state will experience unthinkable calamity if similar circumstances persist for an extended period of time,” he said.
The state’s total debts have reached abnormal levels, according to the most recent Comptroller and Auditor General (CAG) report.
He noted that the GSDP level has plummeted to a single digit and that the state revenue has also decreased.
The former finance minister claimed that because the overall debts are not disclosed in the budget, the public is being misled.
He added that over the last three and a half years, the state government’s borrowings reached a staggering Rs 8 lakh crore, for which the state has to pay over Rs 50,000 crore in interest. The 15th Finance Commission has criticized the state administration for these difficulties.
The former minister voiced grave concern that the interest payment could soon reach Rs 1 lakh crore and questioned how development could proceed with such a high rate of interest payments.
What is even worse, according to him, is that the majority of the money collected through loans—nearly 81 percent—is used for revenue spending.
Ramakrishnudu recalled that prior investments in the state had been very significant, which led to the creation of jobs and the publication of job notices.
Additionally, special incentives were offered to women in the form of DWCRA loans that helped them find employment. SCs and BCs were also granted loans to start businesses. But today, he added, things have changed, and finding work is difficult.
In fact, the TDP leader claimed, those who had previously expressed interest in establishing units in the state are now completely withholding them, which has the effect of inverting the mood there.
He asserted that the Jagan Mohan Reddy administration has adopted a policy of expanding borrowing, which has plunged the state into a serious problem.
According to the FRBM Act, the state’s total indebtedness should not exceed 35% of GDP, but in 2021, the burden of the state itself exceeded 44.04%.
Ramakrishnudu believed that the state government needed to recognize the reality of the situation and move quickly to save the state entering a financial emergency.
Due to the Federal Government of Nigeria being led by President Muhammadu Buhari borrowing money to pay salaries, the country’s economic situation has gotten worse.
Anamekwe Nwabuoku, a former acting accountant-general of the federation (AGF), bemoaned in June that the government had been obliged to borrow money to pay salaries because of an increase in government spending brought on by escalating security threats and the social requirements of the populace.
We must borrow more money to supplement the payment of salaries and wages, Nwabuoku stated. This demonstrates how difficult our times are. Government revenue is severely limited.
According to data from the Nigeria Bureau of Statistics (NBS), the borrowing rate for the West African nation was an average of 16.590% pa from January 2006 to July 2022, with 199 observations. In November 2009, the data reached an all-time high of 19.660% pa, and in March 2021, it hit a record low of 11.130% pa.
One of the risks affecting the Nigerian state’s very foundation has been noted as the government’s growing reliance on internal and external borrowing to finance its activities. Recent criticism of the Buhari administration’s appetite for borrowing and warnings about the danger to the Nigerian state of allowing the situation to spiral out of control have come from a number of international organizations, private entities, senior government officials, and former government functionaries.
The International Monetary Fund (IMF) is one of them, and it predicted that by 2026, “the Nigerian government may spend nearly 100 percent of its earnings on debt servicing.”
Despite appearing to be manageable, the World Bank warned that the country’s debt is “vulnerable and expensive”.
A group of business executives, the Nigerian Economic Summit Group (NESG), claims that future governments may have to shoulder “a debt burden.”
Local and foreign federal government borrowings increased by 658 percent between 1999 and 2021, from N3.55 trillion to N26.91 trillion.
Last month, Zainab Ahmed, the minister of finance, budget, and national planning, disclosed that the government was N300 billion in the red due to debt service costs that totaled N1.94 trillion compared to N1.63 trillion in retained income.