- ECONOMY
A universally accepted way of determining the state of a nation is by looking at its economy, and its impact on the lives of the people. So, if we want to look at the true State of the Nation, let us look at the true state of our economy. Let us look at what is happening to the big picture in agriculture, industry, services and the macroeconomic indicators, which show the health of our economy.
The people of Ghana have a right to expect a government to improve, at the very least, upon what it inherits from an outgoing one.
Under the leadership of President Kufuor (2001- 2009), Ghana made significant strides. Without the benefit of oil revenues, economic growth increased from 3.7% in 2000 to 8.4% in 2008. In the process, the size of Ghana’s economy increased from some $5.1 billion to $28.5 billion, a five-fold increase which led to more jobs, higher levels of income and improvement in standards of living. Even in the face of a global economic and financial crisis in 2007/8, with oil prices reaching a record high of $147 per barrel, economic growth in 2008 rose to 8.4%. Ghana was transformed during the period of the NPP’s tenure (2001-2009) from a low income HIPC economy to a lower middle income economy.
President Mahama, in his 2012 Manifesto, promised the people of Ghana that he would achieve an average GDP growth rate of 8% p.a, single digit inflation, an overall budget deficit of 5% of GDP and introduce economic policies that would put our average per capita income at 2,300 USD by 2017.
In reporting to the Ghanaian people on the state of the economy at the end of his term, therefore, we all expected the President to tell us how many of his promises on the economy had been achieved, and how much he had built on what he was left with.
Instead, the President paid scant attention to the economy. He told us about one private factory he had inaugurated in Accra and two institutions he hopes will bear fruit in the future. These are a yet-to-be-established EXIM Bank and a Ghana Infrastructure Fund that is yet to take off. He then talked about a specific microfinance company that has caused havoc in the Brong Ahafo, Ashanti and Northern regions through a pyramid scheme, and true to form, the President found someone else to blame, this time the Bank of Ghana.
It is obvious that the President did not want to tell us the True State of the Ghanaian Economy. This is the good-news-story-telling President. Factual account stories do not interest him. If they did, he would have told us that economic growth for 2015 is projected by the budget at 4.1%, but by the IMF at 3.5% and that average GDP per capita income currently stands at $1,342, far from the $2,300 he promised four years ago. He would have told us that the rate of inflation stands today at 19.1%, and bank lending rates are as high as 33%. He could not tell those businesses that are relocating to Cote d’Ivoire that they should continue to engage in Ghana, if they were “smart”, as he has policies in place that will enable their businesses to prosper here in Ghana.
Ghana is where it is today because reckless borrowing by an incompetent government has led to unsustainable debt levels, which have effectively closed the fiscal space for capital investments. Ghana is where it is today because the introduction of amateurish and panic measure financial policies have destroyed confidence in the economy. Ghana is where it is today because of the systematic plundering of the public purse by corrupt officials, which has turned our country into a devastated economic landscape.
Following the discovery of oil, Ghanaians rightly expected more. Indeed, this NDC government has had more in terms of resources than all other governments since Ghana’s independence. In loans and taxes alone, the government had GH¢200 billion in the last seven years. This compares with GH¢20 billion for the NPP’s eight years in office. Notwithstanding this monumental access to resources, the economy is clearly in crisis.
Ghana is now a country at a high risk of debt distress. Government has increased the debt stock from GH¢9.5 billion in 2008 to some GH¢99.0 billion currently. In dollar terms, this NDC government has, therefore, borrowed some US$37 billion in 7 years! In contrast, President Kwame Nkrumah borrowed the equivalent of some $2.5 billion between 1957 and 1966 and President Kufuor borrowed some $5billion between 2001 and 2008. This NDC government has therefore borrowed some five times the amount borrowed by Nkrumah and Kufuor put together. Reckless borrowing by the Mahama government has led us to a debt stock that is 73% of GDP, which is beyond the threshold of debt sustainability. Did the President not have any evidence of this when he presented the state of the nation address? Not surprisingly, we are now being charged interest rates that would keep generations of Ghanaians impoverished.
Last year, interest payments amounted to more than GH¢9.6 billion. That figure was more than the total debt stock of GH¢9.5 billion in 2008 at the end of President Kufuor’s term. I recall in 2008, candidate Mahama lampooning the Kufuor government for excessive borrowing.
To put the interest payments on the debt in context, we should note that the entire allocations in the 2016 budget to critical ministries, such as the Ministries of Roads and Highways, Trade and Industry, Food and Agriculture, Water Resources, Works and Housing, Youth and Sports, and Transport, amounted to a total of GH¢2.1 billion. Interest payment in 2016 of GH¢10.5 billion would be five times what was allocated to these six key ministries combined. In 2015, the GH¢9.6 billion allocated to interest payment on the debt stock was about 3.4 times the entire allocations to the six key ministries listed above. The interest payments on the debt stock in 2015 amounted to six times Ghana’s oil revenue for the year. The oil discovery has basically been compromised over the last six years by the government’s recklessness and incompetence.
Agriculture and industry, which should be the key drivers of the economy, are doing very badly. Last year, agriculture as a sector grew by only 0.04%. This was because crops generally recorded negative growth of -1.7% and cocoa declined in growth from 4.3% in 2014 to 3.0% in 2015. So much then for the claim by the President to have made cocoa farming attractive! Cocoa farmers will tell you that all the gains they made in the Kufuor years have been systematically eroded in the Mahama era.
Industry suffered one of the most heartbreaking setbacks in Ghana’s history in 2015. Manufacturing, which has the potential to create lots of jobs, recorded a negative growth of -2%, while mining, which provides gold our 2nd highest foreign exchange earner, recorded a further negative growth of -3.8%. Mr. President, when you cite the example of a 7 million dollar gold refinery opening in Ghana as evidence that you are doing something about the economy, please be reminded that the true state of mining is that our mining industry is in crisis, and mining companies are closing down. The industry recorded a -3.8% growth.
In services, this government could not achieve its own projected target of 4.9% growth in 2015. Hotels and tourism, which provide jobs and incomes for tens of thousands of people, only managed -4.8% and -6.3% growth respectively. How, then, can the President claim our economy has become resilient?
The macroeconomic indicators, which show the health of our economy, are troubling to say the least. Inflation is on a persistent upward trajectory and so are bank lending rates. The cedi has become a joke on the currency markets, which has destroyed the confidence of our traders. The attempt of the President to suggest that the economy is in the process of structural transformation was effectively undermined by his own admission that the export base of our economy remains what it has been for over a century, a narrow one based on the production and export of raw materials.
The story from big business, from small business, from the markets, from families, from students, from the desperate unemployed youth, from teachers, from nurses, from doctors, from cocoa farmers, from tro-tro and taxi drivers, from artisans, from pensioners, from nursing mothers, from all corners of our country all paint a dire picture. I believe the only conclusion to draw is that ours is a nation in crisis. Ghana is a nation in crisis.
We are in a state of crisis when investment and output in agriculture have decreased every year under this government, and we are now in negative figures. We are in a state of crisis when cocoa production has been going down because the government of Ghana changed the mass cocoa spraying regime they met, to an NDC cocoa farm spraying project. We are in a state of crisis when Ghana is reduced to importing cocoa from Cote d’Ivoire, as the Minister of Finance has informed us that we imported 15,000 tons last year. The stagnation in agriculture found expression in the importation of $1.5 billion of food stuff into the country in 2014 against a food import bill of $600 million in 2008. The import of fish, poultry, tomatoes, cooking oil, have all doubled between 2008 and 2015.
The production of basic food staples has been stagnating. The huge yearly vacillations in outputs and the rising imports of rice from 395,400 metric tons in 2008 to 543,465 metric tons in 2011 and over 600,000 tonnes in 2013, for which alone the nation spent $374 million, testify to the escalating food insecurity in the country. We are in a state of crisis when the fishing industry and our coastal economies have collapsed as government officials play politics with pre-mix fuel.
After asking the IMF for a bailout to restore the government’s lost policy credibility, the President, in a further demonstration of how out of touch he is with the reality on the ground, apparently believes that the economy is turning around. All that has happened, thus far, is that the fiscal deficit has reduced marginally with some relative temporary stability of the currency. However, the type of fiscal consolidation that we are seeing is one that has allowed the government incredibly to continue on a massive borrowing spree. This has resulted in inflation not coming down, and interest rates staying high and increasing. The private sector has been crowded out and investment is declining along with growth. The government’s response to this development has been to impose large tax increases on individuals and businesses to fill the gap. This is only going to aggravate further an unsustainable situation. The economy is on a reverse track.
It is clear that the Ghanaian economy is in crisis.
- See more at: http://citifmonline.com/2016/02/29/full-text-nana-addos-real-state-of-the-nation-address/#sthash.eHWcJDc1.dpuf
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