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Press Release
NPP, May 8, 2012
NPP RESPONSE TO GOVERNMENT ON DR. BAWUMIA’S
“STATE OF OUR ECONOMY” LECTURE
Dr. Bawumia’s lecture on the state of the economy was a
considered and detailed analysis of the State of Ghana’s
economy based on official data. Not a single statistic can be
or has been challenged. It was a lecture devoid of insults or
personal attacks.
Nonetheless, Dr. Bawumia’s lecture left the Government’s
claims of unprecedented achievements and its economic record
in tatters and exposed.
While such exposure of the true facts relating to the state of
the economy has no doubt caused discomfort to and incurred the
displeasure of government, the response of the Ministry of
Finance is unfortunately unbecoming of such an important state
institution. Rather than sticking to the facts, the Ministry
of Finance on behalf of Government has misrepresented the
facts and continued to obfuscate and mislead rather than
dealing with the substantive issues raised by Dr. Bawumia. It
is important that we shield our hardworking civil servants
from politics because they have to work with all governments.
The following main issues were raised by the Ministry of
Finance:
1. GHANA STATISTICAL SERVICE
Dr. Bawumia categorically stated in his lecture that:
“The key question that is on the minds of many Ghanaians is:
“Do we really have single-digit inflation in Ghana today?”
While I do not want to argue with or question the integrity of
our hard working officials at the Ghana Statistical Service
who do a good job under very difficult circumstances, and
should indeed be resourced (and given more independence) to do
the work they do, I will like to state that the available
evidence indicates that statistically reported single digit
inflation is not consistent with the economic fundamentals and
developments in some key economic indicators relating to the
cost of living, interest rates and exchange rates. It could be
a measurement issue, but the established relationships between
inflation and key economic variables appear to have gone
missing for now”. (Page 15)
This is by no means an attack on the Ghana Statistical
service. Dr. Bawumia is pointing out that what the Statistical
Service is capturing or measuring is not being reflected in
price developments in our shops and markets and most people in
Ghana cannot relate to the talk about single digit inflation
when they get to the market.
2. PRICES AND INFLATION
Dr. Bawumia’s lecture went further to note that the
developments in prices of some common items, even within the
last year (e.g. maize prices in Bolgatanga market which have
risen by 60% between 2011 and 2012) appear inconsistent with
single digit inflation.
With regards to the price changes of selected consumer items
presented by Dr. Bawumia, he was careful to note as follows:
“I should add that these price changes do not necessarily mean
that single digit inflation is not possible. It would depend
on what is being measured and over what period. What we see of
price increases for basic commodities in our markets over the
last year is that they are increasingly volatile and
definitely at rates beyond single digits”. (Page 16)
Somehow, the NDC has conveniently forgotten this statement by
Dr. Bawumia in their attempt to distort the facts.
Dr. Bawumia further points out that:
“It is clear that when it comes to established relationships
between the cost of living, interest rates and exchange rates,
the single digit inflation in Ghana is not consistent with
what we expect to see. If single digit inflation is
meaningless for cost of living, interest rates, exchange
rates, and jobs, what is it for? ......I would however leave
the judgement on whether we actually have single digit
inflation to Ghanaians who shop in our markets every day.
Nevertheless I think it is time for Ghana to have a truly
independent and well-resourced statistical service”. (Page 19)
It is therefore clear that the attempt by the Ministry of
Finance to use the Ghana Statistical Service (GSS) as a fig
leaf to hide from its own embarrassment following Dr.
Bawumia’s revealing assessment of the true state of the
economy is an attempt to court public sympathy by misleading
Ghanaians. Dr. Bawumia is calling for more resources and
independence of the Statistical Service in the same way that
NPP Government granted independence to the Bank of Ghana.
Indeed, the very attempt by the Ministry of Finance to defend
the GSS only buttresses Dr. Bawumia’s call for independence of
the GSS. Is the GSS not able to defend itself if it feels
under attack? Raising questions about data anomalies is
normal. Were we all not in this country when after questioning
our data, the IMF found out that in 2000 the Bank of Ghana
deliberately misreported data to the International Monetary
Fund for which the country was fined some $38 million dollars?
Has the independence granted the Bank of Ghana in 2002 not
helped?
3. REBASING OF GDP AND THE DEFICIT
On the issue of rebasing of Ghana’s GDP the NDC government is
again disingenuous and has clearly sought to misrepresent the
facts.
In Dr. Bawumia’s lecture he pointed out the misrepresentation
of the NDC government of Ghana’s deficit numbers between 2008
and 2011. Any look at the NDC Government Budgets of 2009,
2010, 2011, and 2012 (which the Ministry of Finance produced)
would see the continued misrepresentation of the facts on the
deficit by the NDC government. In these budgets, the NDC
Government continuously misled Ghanaians about the true state
of the budget deficit by comparing deficits based on
non-rebased figures with deficits based on rebased figures
when they had both sets of numbers. How can the Ministry of
Finance suddenly want to accuse Dr. Bawumia of doing what he
pointed out in his lecture that they were doing? It is clear
they either did not listen to or read what Dr. Bawumia wrote
or there is a deliberate attempt to mislead the good people of
Ghana.
In fact, on the fiscal deficit, Dr. Bawumia stated in his
lecture as follows:
“With regards to government finances, we recall that at the
end of 2008, as a result of the global financial crisis the
government budget deficit to GDP ratio stood at 6.5% (after
the rebasing of GDP) or 11.2% (before the rebasing of GDP).
This outcome was described by the NDC as bad fiscal
management. By 2010, with improved external economic
conditions, after claiming that the economic fundamentals had
been restored, the government budget deficit to GDP ratio
stood at 6.5% (after the rebasing of GDP) or 11.7% (before the
rebasing of GDP), slightly higher than it was in 2008). So
where was the improved fiscal performance? Or as we say in
Ghana, did we come or did we go?” (Page 20)
4. ECONOMIC EXPANSION
It is not the case that Dr. Bawumia compared apples with
oranges as the NDC government was clearly exposed as doing
between 2009-2012.
The issue was also raised about the fact that Dr. Bawumia
pointed out that the Ghana’s economy had expanded from some $5
billion in 2000 to $28.5 billion in 2008 (a six-fold
increase). This is a fact. The fact that the figures of GDP
from 2006 onwards were rebased does not change this fact. The
rebasing took place to correct errors that were present in the
data and there is no reason why the correct data should not be
used. There was no rebasing between 2000-2005 for example
because the figures were presumably adjudged to be correct. If
the GSS believes that the GDP series before 2006 needs to be
rebased, then why was the rebasing limited to just 2006 and
beyond? We will all welcome such a rebasing if there is a
rationale for it but until then we will assume that the data
officially reported is correct. Ghana’s nominal GDP in US$
terms was some $5 billion in 2000. In 2008 it was $28.5
billion.
5. PUBLIC DEBT
Dr. Bawumia ‘s lecture revealed the alarming rate of the
increase in public debt from GHS 9.6 billion to GHS 25.3
billion between 2008 and 2011. Dr. Bawumia noted that:
“The stock of public debt that has been accumulated over the
last three years alone is higher than the total stock of
public debt accumulated by all other governments since
independence through to 2008!” (Page 22)
Dr. Bawumia cautioned that but for the rebasing of Ghana’s GDP
(which did not increase Ghana’s foreign exchange reserves)
Ghana’s debt to GDP would have exceeded the 60% threshold of
what is regarded as the threshold for increasingly
unsustainable debt.
The NDC’s response is that this debt has been incurred for
investment in productive projects so we should not worry.
Where are these projects all over the country? Would the STX
housing project have been one of those productive investments
that would have yielded revenues to service the $10 billion
debt? The NDC should realize that Ghana and many other
countries became HIPC because of this thinking. Were the loans
taken during structural adjustment period not for “productive
investments”? The European countries that are in trouble now
they borrowed more than 100% of their GDP. Why did Ghana then
end up as HIPC?
6. CORRUPTION
On Corruption Dr. Bawumia notes with regards to judgement
debts and overpricing of supplies contracts that:
“When monies are paid for no work done, as is the case of some
judgment debts, it creates a liquidity overhang (i.e. too much
money relative to output), which finds its way into prices and
ultimately results in the depreciation of the cedi”.
The Ministry of Finance has conveniently ignored the payment
of judgements debts at its behest and for no work done and the
liquidity overhang that this has created in our economy
resulting in pressure on the exchange rate. We would like to
hear more from our Ministry of Finance on the issue of the
payment of some $400 miilion in judgements debts.
7. EXCHANGE RATE
Dr. Bawumia’s lecture revealed and explained the alarming
exchange rate depreciation we are seeing today. Ghana’s cedi
is currently Africa’s worst performing currency. Again, the
Ministry of Finance response ignores this substantive issue
and rather seeks to throw dust in the eyes of the good people
of Ghana. Dr. Bawumia points out that blaming speculators for
the current depreciation of the cedi is the wrong diagnosis:
“Unfortunately, rather than tackling the fundamental causes of
exchange rate depreciation, there is an attempt to blame
speculators for the rapid exchange rate depreciation we are
seeing. With all due respect, this is not a good explanation.
Where have the speculators always been? Were the speculators
also responsible for the depreciation observed for 1997-2000?
Why did the speculators disappear between 2001-2008? Why the
speculators are suddenly back in 2012? Unfortunately, a wrong
diagnosis of the underlying reason for exchange rate
depreciation would result in policy errors that could worsen
the rate of depreciation”.
For some strange reason the cedi exchange rate seems to
depreciate at a faster rate during periods of NDC economic
management. Throwing foreign exchange reserves at the problem
is also futile. Can the Ministry tell Ghanaians how much of
Ghana’s Foreign Exchange Reserves have been spent so far to
prop up our depreciating currency in 2011 compared to
2007-2008 considering their criticism of the Bank of Ghana at
the time?
KEY CONCLUSIONS
Overall, the import of Dr. Bawumia’s lecture backed by
official data is as follows:
• The period between 2001 and 2008 saw the Ghanaian economy
move from low income HIPC status to a lower middle income
status in a record time of 8 years! This was underpinned by
major structural reforms and policies.
• Ghana has recently benefited from an almost doubling of
cocoa and gold prices and has also seen the become an oil
producer. Ghanaians should therefore expect much better.
• Notwithstanding claims of unprecedented growth since 2009,
growth in agric (non-cocoa crops and fishing in particular)
and industry sectors are declining,
• The slowdown in the growth of critical sectors has created a
situation of jobless growth
• Daily reports from the ground on the National Health
Insurance Scheme indicate a virtual return to the cash and
carry system in some parts of the country. The education
system is also suffering with high school drop-out rates and
high failure rates at the BECE, with the number of students
achieving pass mark, dropping from 62.16% in 2008 to 46.93% in
2011.
• The claim of single digit inflation over the last 24 months
is practically meaningless as far as the cost of living, bank
lending rates, exchange rates and jobs are concerned as
Ghanaians continue to see significant increases in their cost
of living, high interest rates and a rapidly depreciating
exchange rate.
• There has been no significant fiscal adjustment since 2008.
• The rate of accumulation of public debt is alarming and if
not properly managed could quickly result in unsustainable
debt levels
• Ghana’s gross international reserves are currently not
sufficient to cover three months of imports notwithstanding
the major improvements in external conditions. It can only
cover 2.4 months of imports.
• The economy cannot be managed with propaganda.
The economy has been exposed by Dr, Bawumia as being in a weak
position despite all the claims and attempts by the NDC to
hoodwink Ghanaians.
Dr. Bawumia has woken Ghanaians up to the NDC’s mismanagement
of the economy and they will be shown the red card come
December. It is clear that the only option left for the NDC is
to attack Dr. Bawumia’s credibility but they have failed
miserably and will continue to fail.
As Dr. Bawumia said, “YOU CANNOT MANAGE AN ECONOMY WITH
PROPAGANDA”.
......Signed......
Nana Akomea
NPP Communications Director
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