The Economy Is In Danger…The True Message On The State Of The Nation By The Minority In Parliament
- Last Thursday, February 21, 2013 President John Dramani Mahama delivered a regulus to this nation, what is supposed to be his work programme. Mr. John Dramani Mahama’s budget proposal for the next fiscal year is expected next week Tuesday, March 5, 2013. For the record, the NPP Minority group was not in Parliament, to the delight of many Ghanaians but also to the angst of some others. To the mostly laughing and cheering NDC crowds which populated the public galleries of Parliament the President delivered a comprehensive, bold and spot-on statement. Others were less enthused and thought it was a rehash of the NDC 2012 manifesto document with no new initiatives. Many people who listened thought the President was still campaigning.
- A President’s delivery of the message is an obligation imposed by Article 67 of the constitution.
- Article 34(2) of Constitution provides a glimpse on the contents of the message which should capture the policy objectives of the chapter 6 of the constitution. These are in the areas of political, economic, social, educational, cultural and international objectives. In particular, the address, according to Article 34(2), must relate to the state of steps being taken in respect of basic human rights; a healthy economy, the right to work; the right to good health care and the right to education.
- A. THE ECONOMY
Ladies and gentlemen, evidence of the true state of the economy can be found in our everyday lives; in the industries, in the markets, and in the streets. The cost of doing business has shot up, and so unemployment in both the formal and informal sectors are widespread. High cost of living is taking its toll on all of us, and justifiably, public sector workers are demanding pay rise from government. In brief, standards of living are falling, life is becoming unbearable, and our people are getting poorer. Public financing are out of control and the economy is in trouble, to put it simply. What are the causes of the sharp decline in the economic circumstances of ordinary Ghanaians?
First, public debt: The Mills-Mahama administration inherited a total public debt of US$8 billion (paragraph 94 of 2009 budget statement), the equivalent of GH¢9.5 billion at the beginning of 2009. Within just 4 years, this debt has escalated to GH¢33.5 billion. It means every year, from 2009 to 2012, the NDC led government added GHC 6billion to our public debt, 55% of which was borrowed locally. This means that government has been competing with the private sector for money domestically. This causes interest rates to rise thereby making it harder for domestic businesses to borrow and create jobs. The effect is that our youth are roaming the streets without employment.
Sadly, it is these unemployed youth who are expected to repay this debt some day. At Ghana’s current debt, each of us (25 million Ghanaians) owes GH¢1340, that is, over 13 million old cedis per person. This debt does NOT include the US$3 billion Chinese loan. If we include the yet-to-be-disbursed Chinese loan, each Ghanaian would owe about ¢1600, that is about 16 million old cedis. The question is, what is there to show for all these funds being borrowed in our name? Not much, except dubious payments to Woyome and Construction Pioneers, and other NDC cronies. Ladies and Gentlemen, this is the true state of the nation’s economy.
FISCAL DEFICIT AND ARREARS
Ladies and gentlemen, our fiscal deficit and arrears do not suggest any better state of the economy. In 2012, indiscipline in government expenditure reached levels never experienced in this country. We would recall that, in 2008, the NDC lamented loudly that they had inherited a fiscal deficit of GH¢2 billion (6.6% of GDP). Well, in 2012, this government ran an unimaginable, gargantuan, unprecedented deficit of GH¢8.7 billion (12.1% of GDP or 20% of GDP in the non-rebased era). It is the highest recorded deficit in the history of this country i.e. from 1957 – 2009. What does this mean? It means in 2012 alone, government spent GH¢8.7 billion in excess of the income the nation generated. Government spending increased astronomically to 34.5% of GDP even though government revenues amounted to 16.1% of GDP (a gap of over 100%) for the year. Why this recklessness from an administration that claimed it would fight “profligate expenditure”? The NDC government has to answer to the point that these excessive expenditures went to finance the purchase of vehicles, laptops, sewing machines, sound systems and the many things the party lavishly distributed around during the elections. The nation needs answers because in the 2012 budget including the supplementary budget government targeted a deficit of GH¢4.7 billion i.e. 6.7% of GDP. Even that was questionable. And the figure gets bloated by GH¢4 billion or ¢40 trillion in one year!
Ladies and Gentlemen you will recall that in 2009, the NDC Government told Ghanaians the NPP Government had engaged in profligate spending and left them with a unprecedented arrears amounting to GH¢1.8 billion. Guess what? At the end of 2012 the stock of arrears had increased to a whopping GH¢5.4 billion (and still counting). This includes amounts owed to COCOBOD, SSNIT, GETFund, DACF, NHIS, road contractors, among others. The large stock of arrears results partly from indiscipline on the part of government, especially from ministries, departments and agencies engaging in unbudgeted expenditures and not the extra wage expenditures that the government is attempting to use as the reason for the reported record deficit of GH¢8.7 billion. After all, additional wage expenditures account for only GH¢1.9 billion cedis of the GH¢8.7 billion reported deficit.
In fact the people of Ghana want to know why the Office of Government Machinery (The office of the President), last year spent in excess of GH¢600 million or ¢6 trillion above its approved budget? What did the office of the President spend this money on. We want to know why the Social Protection Programs (SPP) spent over GH¢700 million or ¢7 trillion? The nation want to know why and how the Ministry of Youth and Sports last year spent over GH¢300 million above its budget. What has been so perfectly defined? Ye be dii keke! Is it also true that NADMO spent over GH¢300 million cedis just in the last quarter of 2012?
As a result of the huge fiscal deficit and arrears the international credit rating agency Fitch has downgraded Ghana’s credit rating from B+ stable to B+ negative. Ladies and Gentlemen this is the true state of the nation’s economy.
SINGLE DIGIT INFLATION
Now, fellow Ghanaians, permit us to comment on the strange single digit inflation. Instead of dealing with the practical economic challenges ordinary Ghanaians are grappling with, government is busy praising itself for achieving single digit inflation for so long. But here is an extract from the February 2013 report of Bank of Ghana’s Monetary Policy Committee:
- The 91-day Treasury bill rate rose from 10.7 percent in December 2011 to 22.4 percent in June 2012, and to 23.1 percent in December 2012.
- The 182-day bill increased from 11.1 percent in December 2011 to 22.0 percent in June 2012, and increased to 22.7 percent in December 2012.
- The 1-year fixed note went up from 11.3 percent in December 2011 to 22 percent in June and to 22.9 percent in December 2012.”
The question is, how come that at the time inflation is supposedly dropping in single digits, interest rates are more than doubling over a period of just twelve months? Which economic theory explains this strange observation, and in which country has this ever happened? Is it not mystical that today, while the inflation rate stands at 8.8% lending rates hover around 30%. No wonder the private sector the engine of growth cannot ignite its engine. What kind of economic comedy is this?
Government must abandon this single digit inflation propaganda, stop borrowing unnecessarily and unreasonably from the domestic market, and let interest rates drop so that businesses can borrow and create jobs. People need jobs, not propaganda. People want prices on the market to be genuinely stable. Government must listen to the concerns of the people.
For most parts of the last four years, our economy has had so many opportunities, but there has been so little economic growth. This NDC government inherited an economy that was growing at 8.4% even without the benefits of crude oil export. In 2011, the crude oil discovered under the Kufuor administration came on-stream. So in 2011, economic growth was reported to be 14.4% (the same as the targeted rate of 14.4% which in itself is a rather rare occurrence). Assuming that this reported figure is accepted then a large part of this growth (over 40%) is associated with crude oil production and export). Any good government would have been concerned about the slowdown in the non-oil sectors of the economy, but government was all over the place boasting about “unprecedented economic growth”. The NDC deliberately refused to acknowledge that almost half of the 14.4% was coming from the export of crude oil that did not result from any effort of government.
Ladies and gentlemen, the sad report is that in 2012, our economy grew by only 7.1%, both the oil and non-oil sectors put together. In the last three years of the NPP led government, 2006, 2007 and 2008, the economy grew by 7.6%, 7.5% and 8.4% respectively when commercial production of oil had not commenced. In 2012 we are growing more slowly than in periods when we did not have crude oil. It is obvious that proceeds from Ghana’s oil export are not being used to grow the economy. What proportion of the 7.1% GDP growth is oil sector generated and what proportion is due to the traditional economy? Is the commercial discovery of oil a curse or a blessing?
But this NDC government is lucky not just for having crude oil revenues that previous Ghana governments did not have; it is also lucky to be managing the economy at a time prices of our major exports (gold, cocoa and crude oil) are at near-record high levels. What is happening to the windfall benefits?
In short, this is a government that has been so lucky to have so much resource at its disposal, and yet all the blessings have been eaten up by economic mismanagement.
Additionally, this government has borrowed much more money than all previous governments put together. Unfortunately, there is very little to show for the huge debts we are piling up.
Ladies and Gentlemen this is indeed the true state of the nation. We have more to say about this when the budget gets read next week.
- B. FOOD, AGRICULTURE AND COCOA
The true state of food, agriculture and cocoa sub-sector is one of stagnation. Real growth in agriculture has consistently nosedived from 7.4% in 2008 to 0.8% in 2011. The share of agriculture in total budgetary allocation has fallen steadily from 3.0% in 2009 to 1.9% in 2012. This has resulted in reduced food security for consumers and low productivity and income for farmers.
The production of basic food staples (cereals, legumes, roots and tubers) has seen stagnant growth in the last few years. This has reduced food security in farming communities and among the poor in urban areas. The large yearly fluctuations witnessed in the production of maize and rice and the sharp increase in the imports of rice from 395,400 metric tonnes in 2008 to 543,465 metric tonnes in 2011 attest to the deepened food insecurity in Ghana.
The steady growth in the roots and tubers sub-sector can clearly be attributed to policy initiatives undertaken by the NPP administration from 2005 onwards. The production of meat and fish which constitute the bulk of protein supply to Ghanaian consumers has been stagnant in recent years with corresponding increase in imports to meet domestic demand. Imports of livestock and poultry products have risen from about 128,000 metric tonnes in 2008 to just below 140,000 metric tonnes in 2011 in spite of the punitive levy imposed on poultry products. This requires urgent attention if protein deficiency amongst the population is to be arrested.
The Ghanaian farmer continues to suffer from low productivity because of inadequate supply of improved inputs (seeds, fertilizers, and agro chemicals) and lack of market access and farm credit. In spite of the pressing needs of the farmers, the NDC government has not adopted adequate measures to reduce the burden of Ghanaian farmers, contrary to the propaganda. Inadequate provision of infrastructure and marketing facilities is deepening poverty among farmers in our rural areas with all the social consequences. The recurrent promises contained in the Budgets and State of the Nation Addresses of this government to provide irrigation and other infrastructure have remained only a lip service.
The NDC government established the Local Premix Committees (LPC) to ensure a fairer distribution of premix fuel to fishermen to avoid artificial shortages. This policy has clearly failed as persistent reports of shortages abound in all fishing communities. The fisheries laws (Act 164 and LI 1964) designed to protect the dwindling fish stocks in our coastal and inland waters, are not being implemented vigorously for political convenience. This can only deepen the already intolerable poverty levels prevalent in the fisheries sub-sector.
The country attained a peak of one million metric tonnes of cocoa production in the year 2010/2011. This achievement was a result of policies and programmes adopted by the NPP administration under President J.A. Kufuor which witnessed the doubling of production from 360,000 metric tonnes in 2001/2002 to 736,000 metric tonnes by 2004/2005 and then to one million metric tonnes in 2010/2011.
Since the attainment of this record production there has been a fall in output to some 879,000 metric tonnes in the 2011/2012 crop season. It is indicated that production of the current 2012/2013 crop is likely to yield only 800,000 metric tonnes. This steady reduction is a reflection of the poor implementation of policies pursued by the NDC administration in the past four years.
- Unreliable supply of inputs to farmers;
- The politicisation of the mass spraying programme;
- Smuggling of subsidised inputs into neighbouring countries.
- The inability of the government to pay annual production bonus to farmers on a timely basis; and
- Delay in payment to farmers for their produce.
If these measures are not addressed urgently, there is a danger that production could decline further to the 2004/2005 levels.
As we can see from the account so far, it is clear that the state of food, agriculture and cocoa is a deplorable situation. The NDC in 2008 promised Ghanaians that by the end of 2012 they would have sufficiently modernised agriculture to assure food security for the people and dependable raw materials source for industry”. No such deed has happened. The government has to act urgently to avoid Ghana falling into the Dutch Disease with the emerging oil and gas industry.
C. TRADE, INDUSTRY & TOURISM
I. The Terms of Trade
In 2012 it is estimated that merchandise exports was at US$13.5 billion. Total merchandise imports was US$17.7 billion. These developments resulted in a trade deficit of US$4.2 billion compared with a deficit of US$3.1 billion in 2011.
As we all know the amount of money we receive from our exports is influenced by the prices of our exports, which are mainly commodities such as cocoa, gold, diamonds, and other minerals. The prices of these commodities have been relatively high in the last two years on the world market. Our balance of trade position should have improved with the high prices. The deterioration of our balance of trade position is therefore the result of indiscriminate and uncontrolled imports.
This deteriorating balance of trade position contributed in a large measure to the huge current account deficit of $4.9 billion in 2012 compared with the deficit of US$3.5 billion in 2011and the excessive depreciation of the cedi in the last quarter of 2012. As you may recall the cedi deteriorated from GHS1.10 to $1 in December 2008 to GHS1.98 to $1.0 in December 2012. It is worth noting that due to the excessive deterioration in the terms of trade the overall balance of payment recorded a deficit of US$1.2 billion in 2012 reversing the surplus of US$546.5 in 2011.
II. Internal Trade
Because of the recent free fall of the cedi a lot of local traders have had difficulty keeping their shops because of their inability to protect their working capital. This difficulty has been compounded by the invasion of Chinese and other foreigners in the retail trade. The effect is that most Ghanaian retailers are operating at losses and some have had to fold their operations. Another issue facing internal trade is the huge price differential between the farm-gate and the markets in the urban centers. These wide differentials are as a result of huge cost of transportation resulting from previous and current price escalation of petroleum products.
To be Continued in the next Edition
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