Ghana’s Economy Is In Tatters
“The economy is in tatters, and things are getting worse. Government is no longer in denial. There is now consensus that the economy is in bad shape. This is why it is lamentable that the president is sounding from the rooftop that wherever he has gone to, he is being commended for managing the economy well.”
These words were contained in a press conference on “Ghana’s Troubled Economy” addressed by the Economic Team of the New Patriotic Party headed by Yaw Osafo Maafo.
The former Finance minister, under the Kufuor-led NPP administration, explained that Ghana’s economy under the John Mahama-led National Democratic Congress government is facing a myriad of problems including “the huge public debt; the lamentable fiscal deficit, the humongous arrears, unbridled overspending, worsening unemployment, deteriorating utility services, and failing social services.”
These problems, according to Mr Osafo Maafo, are largely as “a result of the reckless expenditures of the 2012 election year” now catching up with all of us, for which the ordinary Ghanaian is now having to bear the brunt of the bad expenditure behaviour of the Mahama government during the 2012 elections.
He explained further that the problems confounding the economy were expressly stated in the Bank of Ghana’s Monetary Policy Committee (MPC) report of 22nd May 2013, where the governor of the Bank of Ghana admitted that “Economic activities have slowed down, and both business and consumer confidence have weakened.”
Shedding more light on the Bank of Ghana’s report, Yaw Osafo Maafo, stated that the MPC report made it explicitly clear that lending rates are hovering around 30 percent because of excessive domestic borrowing by government; there is rising cost of business as a result of erratic electricity and water supply; and the inability of business to borrow and grow their activities due to the drying up of credit.
To make matters worse, the NPP man also revealed that donor inflows, within the first four months of 2013, have also fallen below target.
“The consequence of the decline in both domestic and foreign inflows is that our deficit in the first quarter has escalated out of target (by 28 percent). What this suggests is that we are unlikely to achieve even the outrageously high deficit of 9 percent programmed into the 2013 budget statement,” Mr Osafo Maafo revealed.
Ghana’s alarming public debt, according to the NPP Economic Team, is one of the signs of the bad economic management this country has been subjected to under the NDC, and “also one of the causes for our economic woes.”
Mr Osafo Maafo noted that the Mills-Mahama administration inherited a total public debt of US$8billion, equivalent to GH¢9.5billion at the beginning of 2009. Within 4 years and a half, Mr Osafo Maafo stated that this debt has escalated to GH¢38.5billion, meaning that under the NDC, Ghana is adding GH¢6.4billion every year to its public debt.
“A great chunk of this total debt, indeed, 55 percent, is from domestic borrowing”, Mr Osafo Maafo stressed, adding that this development means that government has been competing with, and squeezing out private enterprise from borrowing from the banks.
“This trend explains the reason interest rates on government bills (91-day, 182-day and 1-year fixed note) have risen from about 11 percent in December 2011 to about 23 percent in December 2012. This has caused lending rates to rise. Private enterprises cannot access capital to grow their business in order to employ the youth,” Mr Osafo Maafo maintained.
He continued, “Unless we change cause, the unemployed youth will continue to roam the streets without employment with all the attendant social vices.”
Recounting how the NDC stigmatized the NPP for “distressing the economy” with “huge arrears” amounting to GH¢1.8 billion, Mr Osafo Maafo revealed that in 2012 government arrears had hit GH¢5.4 billion of which GH¢4.8 billion was incurred in 2012 alone.
These debts, according to Mr Osafo Maafo, are owed to suppliers of goods and services, including small and medium businessmen and women such as road contractors, health service providers, students on scholarship abroad, capitation grant to schools, COCOBOD, NHIS, DACF, GETFund, SSNIT, BoG, OMCs, among others.
SPENDING OUTSIDE BUDGETED APPROVALS
Another sign of the mismanagement of the Ghanaian economy by the NDC government, according to Mr Osafo Maafo, was the spending outside budgeted approvals, which occurred in every year of the NDC’s rule.
Mr Osafo Maafo revealed that in 2009, the NDC government overspent the approved budget by GH¢300 million; shot to GH¢800 million in 2010; increased to GH¢1.3 billion in 2011; and at the end of 2012 stood at a “stomach churning and mind-blowing GH¢4.8 billion.”
“Within this shell of a figure, the respective overshooting by the respective MDAs is as follows: Ministry of Interior GH¢19 million; Ministry of Health GH¢27 million; Ministry of Education GH¢60 million; Ministry of Environment, Science & Technology GH¢60 million; Ministry of Energy GH¢70 million; GYEEDA GH¢200 million,” Mr Osafo Maafo noted.
He continued, “Ministry of Roads and Highways GH¢270 million; Ministry of Youth and Sports GH¢350; Office of Government Machinery GH¢650 million, including GH¢15 million for guinea fowl business, and GH¢33 million for tree planting, all in the name of SADA.”
DECLINING ECONOMIC GROWTH
Touching on the slow growth of the economy and its attendant decline in both business and consumer confidence, Mr Osafo Maafo noted that this negative development is not new.
He maintained that over the past four years and half, there has been unsatisfactory economic growth in spite of the fact that the nation has had so many opportunities, including oil revenues.
Mr Osafo Maafo recounted how in 2008, the economy grew in real terms by 8.4 percent, without the nation benefitting from crude oil exports.
However, as at 2012 Mr Osafo Maafo noted that the economy grew by 7.9 percent, both oil and non-oil sub-sectors put together, adding that “the oil proceeds are not being used to grow the economy.”