BAWUMIA CHALLENGES ECON. GAINS
By: Daniel Nonor
The running mate for the New Patriotic Party (NPP) flagbearer, Nana Addo Dankwa Akufo-Addo, Dr Mamudu Bawumiah, has raised serious concerns about the credibility of figures being churned out by the Mills administration as indicators for a booming economy.
In a Ferdinand O. Ayim memorial speech he delivered in Accra yesterday May 2, 2012 on the subject, “THE STATE OF OUR ECONOMY,” Dr. Bawumia bemoaned the manner in which the Ghanaian economy was being managed on pure propaganda.
According to him, the economic indicators and figures being touted by the government of the day do not simply add up, as it does not reflect the true state of the economy.
He argued that to be able to do anything substantial about the economy, you need to know what the real state of the economy is. And to understand the state of Ghana’s economy today, we first have to understand where we are coming from, where we are, and where we ought to be going.”
Dr. Bawumia furthered his argument by tracing the fiscal and monetary policies of the country since independence, with major initiatives being the Highly Indebted Poor Countries (HIPC) initiative adopted by the Kufuor Administration, which provided Ghana with a debt relief of about $4 billion out of a debt stock of $6.1 billion.
Dr. Bawumia gave a comprehensive list of about 55 structural reforms and policies introduced between 2001 and 2008 that laid the foundation for a major expansion in economic activity, access to credit, and macroeconomic stability.
He described this as a phenomenal record of reform that resulted in a major economic recovery, with macroeconomic stability and significant deepening of the financial sector.
He notes that between 2000 and 2008, without oil, the size of Ghana’s economy increased from some $5.1 billion to $28.5 billion, a six-fold increase.
“Now that is what can be described as unprecedented! Even in the face of a global economic and financial crisis in 2007/8 (with oil prices reaching a record high of $147/barrel), economic growth in 2008 rose to 8.4%.”
Tackling the National Democratic Congress (NDC) party’s incessant attempt to compare its first three years in government with the eight years of the New Patriotic Party (NPP) rule, Dr Bawumia contested that: “What is undeniable is that Ghana was transformed during the period of the NPP’s tenure (2001-2008), from a low income HIPC economy to a lower middle income economy on the frontiers of emerging market status.”
“In this regard, I am very amused when I hear our political opponents on the NDC side try to argue that they would like to compare the first three years of the this government with the first three years of the NPP. How can one even suggest such a comparison? By analogy, if you hand over to me a Tico car, and a few years later I work hard to buy a Metro Mass vehicle, which I then hand over to you, how can you turn around to say that you want to compare the performance of the Metro Mass vehicle with that of the Tico you originally handed over to me? The NDC inherited a very different economy from the NPP.”
Dr. Bawumia argued further that the Mills/Mahama administration inherited an economy well oiled by petro dollars, with cocoa and gold prices virtually doubling over the last three years of their administration.
Again, “It has also borrowed so much money on our behalf, and in the process, has more than doubled Ghana’s total public debt. With this set of economic opportunities, Ghanaians should as a matter of right expect a much better Ghana.”
Dr. Bawumia says the apparently rosy picture painted by an oil-driven GDP growth rate in 2011 masks some worrying developments in the real economy. He cites the drastic reduction in agriculture growth from 7.4% in 2008 to 0.8% in 2011.
On the issues of the government’s claim of single digit inflation as a mark of good management of the economy, Dr. Bawumia points out that such a feat must reflect in the living conditions of the people.
To him, governments aim at low and stable inflation to reduce the cost of living, reduce interest rates, and stabilise the exchange rate.
“We do not seek to achieve single digit inflation just for the sake of beautiful statistics. The statistics must have meaning in people’s lives. Unfortunately, most people in Ghana cannot relate to the talk about single digit inflation when they get to the market.”
On the effect of inflation on interest rates, Dr. Bawumia stated that the attainment of reduced inflation to single-digit levels should reflect in reduced interest rates.
He noted, for example, that between 2001 and 2008, inflation was cut by more than half, from 40.5% to 18.1%. In the process, average bank lending rates were reduced by almost half (from 44% to 27%) by 2008, a reduction of 17 percentage points.
Between 2009 and 2011, inflation has also been cut in half, from 18.1% to some 8.8%. Currently, average bank lending rates have declined marginally, from 27% in 2008 to 26%, a reduction of 1 percentage point.
“Why the missing link now? Why have interest rates become suddenly so sticky downwards? …where are we collecting our price data for the computation of inflation? Which markets are we visiting,” he queried.
Dr. Bawumia has recommended that Ghanaians give the NDC, the “red card” for its abysmal performance on the economy.
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