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Visiting Professor of Economic Governance, Central University College, and 2016 NPP Vice-Presidential Candidate
with the numbers. Our view is that the 6.9% real GDP growth reported by
the Ghana Statistical Service is, putting it mildly, counter intuitive and
needs to be re-examined. Otherwise, the government should explain the
reason for this sharp decline in real GDP growth in 2015. This is important
because if the real GDP numbers for 2014 are overstated, it would have
implications for the 2015 projections and policies. In that case, the 2015
budget would be out of gear ab initio.
This, notwithstanding, the fact remains that the economy that was inherited
by the NDC government in 2009 was growing at 8.4% without oil. Having
become an oil producer, the government has superintended over a
precipitous decline in real GDP growth from 15% in 2011 to a projected
3.9% in 2015. Let us put this into perspectivethe economy has lost steam
equivalent to 11% of GDP since 2011 suggesting that for a $50.0 billion
dollar economy, almost $5.0 billion dollars worth of economic activity has
dissipated, and this is worrying. Slow growth means higher unemployment,
higher prices and declining revenues. In this respect, the NDC
administration has woefully failed Ghanaians and one is deeply worried
about the depth to which the economy is sinking.
Using current exchange rates in determining the equivalent amount borrowed is misleading because it ignores
the value of the debt at the time it was borrowed. Using current exchange rates would underestimate the value of
the borrowing because of exchange rate depreciation. We are here concerned about the value of the projects that
could have been financed at the time the money was borrowed.
payments in 2014 are more than three times what was allocated to these
six key ministries combined! The story is no different for 2015.
Given the precarious nature of Ghanas debt situation, one would have
expected some decisive measures to fundamentally reduce the building
debt overhang which, if not dealt with would push Ghana into the high
debt/low growth trap. The budget basically dodged the issue.
The evidence is that 94% of the increase in government spending has been
for recurrent expenditure! The increase in government debt over the last
five years is an amount that could have built at least 15,000km of tarred
roads, for example. It is an amount that could have solved Ghanas energy,
water, and sanitation problems. However, the increase in oil revenues
notwithstanding, capital expenditure as a percentage of GDP has actually
been on the decline from 7.1% of GDP in 2009 to 5.2% by 2015. It is, in
fact, a travesty that Ghana before the discovery of oil was spending a
higher proportion of its income on infrastructure investment than after the
discovery of oil.
In the 2015 budget the Minister of Finance mentioned a number of
signature projects that have been financed by the borrowing. These
include:
COST $
PROJECT
MILLION
i. Ghana National Gas Processing Plant to help solve the energy crisis,
850
306
217
273
95
46
200
172
xii. 200 Buses for the Metro Mass Transit, and an additional
40
94
102
180
iv. First and Second phase of the Tamale Teaching Hospital after the
110
68.4
339
21.5
21.1
20.8
35
38.7
172.5
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stock of debt and oil receipts. This again emphasizes the case for the
passage of an internationally an acceptable Right to Information Bill.
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In 2008, the price of a litre of kerosene (which is largely used in rural areas)
was Ghp70. At that time it represented 31% of the daily minimum wage.
The NDC said the price was too high. Before the 2015 budget the same
litre of kerosene had increased to GHC3.23, representing 53.8% of the
daily minimum wage. It is clear that an additional special tax of 17.5% will
only further increase the burden on Ghanaians. The government, through
the NPA, in applying the automatic price adjustment formula should have
reduced the price of petroleum products following the recent global
reduction in oil prices. Rather than doing this, the NPA, with the tacit
support of Government, has refused to do so. The Automatic Price
Adjustment Formula has apparently now become an Automatic Upward
Price Adjustment Formula under this NDC government. While consumers
are still trying to figure out what is going on, they have now been hit by a
Special Tax. Ghanaians can now understand that this NDC government
cannot be trusted. Is the government going to implement a Special Wage
Increase to compensate workers?
This Special Tax on petroleum products is bound to also increase the
already high cost of doing business in the country. At the time when many
businesses are having to pay for diesel to run generators as a result of
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load-shedding, they are being asked to pay more taxes on fuel. This would
increase the cost of production.
We strongly believe that that this tax measure is unwarranted. If the deep
seated waste and reported corruption in payroll administration is corrected
swiftly, enough savings could accrue to the budget and this tax measure
could have been avoided. If the leakages are not plugged, then no amount
of tax increases would solve the problem. We have reached a point in our
developmental trajectory where value for money should be demanded by
all stakeholders and partners.
http://www.numbeo.com/property-investment/rankings_by_country.jsp
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Propaganda Achievements
In search for tangible achievements by this Government, the Minister of
finance included the following as achievements:
virtually eliminating the spectre of long queues for fuel as well as the
huge budget overruns of about GH339 million in 2012 and GH135
million in 2013 that resulted from past failures to adjust prices through
the automatic adjustment pricing formula;
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Who created the long queues for fuel in the first place and budget
overruns? How can you create a problem and then consider it an
achievement to revert to the status quo ante?
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If the 2015 budget cannot answer any of the above questions in the
affirmative, then it may just be meaningless to the ordinary Ghanaian. At
the end of the day if the fundamental problems with the economy are not
dealt with, then there remains a threat to macroeconomic stability going
forward.
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