RESPONSE OF THE MINORITY NPP TO THE 2015 BUDGET STATEMENT AND ECONOMIC POLICY OF THE GOVERNMENT AND CURRENT EVENTS – JANUARY 8, 2015 Fellow Ghanaians, on Wednesday, November 19, 2014 His Excellency John Dramani Mahama, in line with article 179 of the 1992 constitution, caused to be laid in Parliament the Budget Statement and Economic Policy of the Government of Ghana for the 2015 financial year. The Minister for Finance Mr. Seth E. Terkper performed the act on behalf of the President. Countrymen and women, the theme for the 2015 Budget Statement and Economic Policy is “Transformational Agenda: Securing the Bright medium Term Prospects of the Economy”. The word “secure” means “to be free from danger, trouble, worry or uncertainty”. That is according to the Chambers 21st Century Dictionary. This theme that the President chose for the budget derives from the President’s attempt to buttress his own assertion in his 2014 State of the Nation Address that “our economic fundamentals remain sound and the mid-term prospects are bright”. The President emphasized his bold declaration with statistics on economic growth. If one were to assume rather erroneously, as the President did, that economic growth rate alone make up economic fundamentals, then it becomes relevant to analyse the facts to enable one to properly judge the President’s descriptions of the state of our economy which this budget statement borrows a leaf from. ECONOMIC FUNDAMENTALS 1. GDP GROWTH INDEX The GDP growth rate which was inherited by President Kufuor, i.e. in 2000, was 3.7%. In 2001 the GDP grew at 4.2%; in 2002 it grew at 4.5% rising to 5.2% in 2003 and to 5.6% in 2004. It rose to 5.9% in 2005; 6.4% in 2006; 6.3% in 2007 and to 7.3% in 2008 which was later reviewed to 8.4% after the rebasing of the economy. This is steady growth which occurred without the benefit of crude oil exports. This is how a really sound economic growth aggregate looks like. Now compare with the rather convulsive growth rates achieved under the Mills-Mahama administration. In 2009 GDP growth rate swung down to 4.0%; in 2010 it grew at 8.0% and upped to 14.4% in 2011 when, for the first, time oil output was added to the GDP. It is important to underscore that for 2011 the non-oil sector registered a 7.8% growth. The provisional GDP growth for 2011 was 13.6% (see pg 4 of the 2011 budget). That was later reviewed to 14.4%. The 2015 budget document indicates that GDP growth for 2011 was 15%. The basis for these multiple reviews must be questioned (ref to Pg 158 of the 2015 budget). We were told the GDP (with oil) grew at 7.6% in 2013. The figure was later reviewed downwards to 5.8% with the non-oil sector registering 4.1%. In the 2015 budget the GDP growth rate of 2013 has been revised again to 7.2%. The 2014 growth rate is 6.9% (ref. page 11 of the 2015 budget). This figure is according to the Ghana Statistical Service. Ironically, the Ministry of Finance itself has projected the 2014 GDP growth to be 4.6%. The differences between these estimates of GSS and MoFEC shows the uncoordinated nature of the management of the country’s economy under President John Mahama. Notwithstanding, it is important to stress that all these rebased figures since 2011 have oil components. What is crystal clear is that the non-oil sector of the economy has never managed to grow at 8.4% since 2009 under the Mills-Mahama administration inspite of the pontifical high mass that they have every year organized to celebrate what they deem as “bright economic prospects”. 2. OTHER ECONOMIC INDICATORS Ladies and gentlemen, let us consider the other economic indicators: Exchange Rate: The cedi depreciated by 17.6% in the first quarter alone in 2014. As at the end of August 2014 the cedi had depreciated by over 75% since December 2013. As we speak now the cedi has made some recovery from ¢3.85 to $1 to ¢3.30 and that represents a depreciation of over 50% from the December 2013 level even though we are told that officially it is about 31%. The Bank of Ghana may have to explain to us what the basis of their calculation is. For in December 2013 the exchange rate was GH¢2.20 to US$1 and the 2014 budget projected that the cedi will get to GH¢2.35 to US$1 in December 2014. Today, it is GH¢3.30 to US$1. In the 8-year administration under President Kufuor, the cedi moved from GH¢0.72 to US$1.0 to GH¢1.1 to US$1. Thus the cedi depreciated by 53%. Six years into the NDC administration the cedi has depreciated by 200.0% and we are still counting. Interest rates now hover around 30%. Kufuor brought it down to 25% from the 42% that it was in December 2000. Our gross international reserves, we are told, have since August 2014 recovered from 2.2 months of import cover to 3.3 months but the net international reserves covers less than three weeks. But again, there are questions to ask: what is the quantum of our international reserves? In Paragraph 74 of the 2014 Budget the Minister of Finance stated that it decreased from $5.35billion as at December 2012 to $5.2billion as at September 2013 which provided for 2.9months of import cover. The projection then was that it would go further down. Indeed, the Governor of the Bank of Ghana reported in March 2014 that the reserves had decreased further to $4.88billion as at February 2014. Clearly, therefore when the Minister of Finance now states that the stock position of our gross international reserve as at December 2013 was $5.6billion (par 62 of 2015 budget) it must be taken with a pinch of salt. The Minister and his Governor of the Bank of Ghana must be truthful to Ghanaians with figures. Our trade deficit was US$1.3billion. The country’s fiscal deficit and current account deficit have all escalated since 2008. The public debt stock is over GH¢70billion from GH¢9.5billion in December 2008. Even at GH¢70billion it means each Ghanaian, including the child delivered as I speak now, owes GH¢2,800.ØØ. Last year at this time the burden for every Ghanaian was GH¢2,000. One year on, the debt per capita has increased by 40%, no thanks to “y1ntie obi ara” government. Fellow Ghanaians, the 2008 debt stock of GH¢9.5billion represented 33% of GDP. Today, 6 years into the Mills-Mahama administration the GH¢70billion debt stock is almost 7½ times or indeed 636% increase in the debt stock. The GH¢70billion figure means our debt stock has risen to 60.8% of GDP as at September 2014. 3. INFLATION Inflation, meanwhile, has risen to 17%. The NDC propagandists have their tails in between their legs. There is no more talk about single digit. The country is over borrowing and astronomically increasing our debt pile up which has crossed the 60% threshold and that should be extremely worrying as it shall, before long, plunge us into the league of countries with high risk of debt distress. These represent the gory circumstances of our economic fundamentals and if these in the eyes of President Mahama, represent bright medium-term prospects of the economy which must be secured, then we need God Almighty to rescue us. 4. WAMZ COUNTRIES Countrymen and women, the 2013 economic growth in countries in the West African Monetary Zone (WAMZ) most of which are non-oil producing averaged 6.7%. The countries in that league are The Gambia, Guinea, Sierra Leone, Liberia, Ghana and Nigeria. In the third-time revision of the GDP growth rate for 2013 Ghana’s non oil sector grew at 5.8% or 6.5%? (ref paragraph 43 of 2014 Budget and pg 158 of 2015 Budget). Either of the figure was less than the average growth in the sub-region. In 2013 Ghana placed last in the WAMZ league as it was the only country to have met only 3 out of the 10 primary and secondary criteria as at September, 2013. Indeed, by December 2013 the country had slipped also on “exchange rate stability, “real interest rate” and the “Central Bank (BoG) financing of the country’s deficit for 2013 must be less than 10% of the previous year’s tax revenue”. Hence at the close of 2013 the country met none of the 10 criteria. Ghana’s abysmal record of fiscal year 2013 was the worst performance by Ghana in 20 years. Accordin
Posted on: Fri, 09 Jan 2015 03:40:32 +0000
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