According to the NPP Members of Parliament (MP), this was the first time in a very long time that the country recorded a double digit current account deficit and budget deficit two years in a row, while the country’s current public debt stock which stands at GH¢58billion up from GH¢51.6billion in December 2013.
The Minority Spokesperson on Finance, Dr Anthony Akoto Osei, told journalists at a press conference organised by the Minority Caucus in Parliament in Accra: “This does not include the entire $3billion China Development Bank (CDB) facility or even the $1billion Euro bond.
This means that today every Ghanaian owes GH¢2,150. We are borrowing at a rate of GH¢2billion every month”.
He lamented that the public debt had risen from GH¢9.56 to GH¢58billion, an increase of over 510% in 5½ years, emphasising that; “the debt to GDP ratio is about 58% today. The Mills – Mahama administration inherited a total public debt of $8billion, the equivalent then of GH¢9.5billion at the beginning of 2009”.
That figure represented 33% of GDP. Within 5½ years this debt has escalated to GH¢58billion which is more than 4½ times, or indeed 510% increase in debt stock over 5½ years. Inflation for August meanwhile was 15.9%. It has been on the upward swing since January. Inflation is no longer in single digit and the nation has been spared the cacophony associated with it instead of concentrating on relevant matters, according to Dr Osei.
Growth and cedi woes
He noted that ; “the GDP growth rate which was inherited by Kufuor 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 later became 8.4% after the rebasing of the economy. This steady growth happened without the benefit of crude oil exports. This is how a really sound economic growth aggregate looks like”.
However, Dr Osei said if one was to consider the full set of economic aggregates that constitute what was properly called economic fundamentals then the facts cannot be distorted.
As he explained that the cedi depreciated by 17.6% in the first quarter alone this year compared with a depreciation of 1.1% in the first quarter last year. As at the end of August 2014 the cedi had depreciated by some 40% since December 31, 2013. The second worst performing currency in the world this year!!
In the eight-year administration under President Kufuor the cedi, from GH¢0.72 – GH¢1.1 to $1, depreciated by 53%. Less than 6 years into the NDC administration, the cedi has depreciated by 245.5% and still counting, he stressed.
On interest rates which now hover around 30%; Dr Osei stressed the country’s gross international reserves in months of imports had dwindled to 2.2 months of imports and the net reserves was for just seven days, its trade deficit was now well over $4 billion; the fiscal deficit was 10.8% in 2013 or about GH¢12billion. This was against the target of 9.0%. The fiscal deficit was 11.8% of GDP in 2012 against the target of 6.7%; our current account deficit in 2013 was 12.8% of GDP or $5.7billion (i.e. GH¢17billion):, it was $4.9billion in 2012.
In 2011 the nation’s trade deficit was $3.1billion; it escalated to $4.2billion in 2012 and in 2013 it hit $4.1billion. The worsening balance of trade position contributed to the massive current account deficit of $5.8billion in 2013, the minority MPs stated.
Crumbling Manufacturing Sector
Manufacturing in Ghana is not doing well. The share of manufacturing to the industrial sector continues to slump. It declined from 17% in 2011 to 5.0% in 2012, and to 2.5% in 2013.
Dr Osei added: “Manufacturing is wobbling because of the crises in the energy sector. Power supply had been epileptic and the cost has been very high. Industry does not have access to long term credit; excessive government borrowing has squeezed industry out of short term credit; industry is almost suffocating because of huge taxes; water supply to industry is erratic and expensive.
High production cost has rendered Ghanaian manufacturing industry uncompetitive. In the face of withering industry and an atrophic agriculture, employment cannot be generated and hence, unemployment figures are soaring. That is the state of our economy”.
In 2013 the 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 group are the Gambia, Guinea, Sierra Leone, Liberia and Nigeria. Ghana’s non-oil sector grew at 5.8% less than the average, and these others, apart from Nigeria do not have oil to provide any cushioning to them.
Of the 10 Primary and Secondary criteria of economic growth established for countries in the WAMZ, Ghana placed last in that league as Ghana was the only country that attained only three of the criteria in the course of 2013.
Even then, by December 2013 we had slipped on “exchange rate stability” and “real interest rate” and, hence, at the close of 2013, we met only one of the 10 criteria. That criterion is that Central Bank (BoG) financing of the country’s deficit for 2013 was less than 10% of the previous year’s tax revenue. That represented the worst performance by Ghana in 20 years.
This Dr Osei and his colleagues said was the real state of the economy, indicating that; ” instead of owning up this, President John Dramani Mahama only keeps restating to Ghanaians that the country has caught the bug of “the 2007 world financial crisis” and “the recent tapering policy announced by the US Federal reserve”.
When the GDP growth rate hit 14.4% in 2011 both the then Finance Minister and the then President came to Parliament and took credit for what they called “prudent economic management” which had resulted in “unprecedented GDP growth rate”.
At the time no reference was made to world financial crisis. He quizzed: ” Did the recent tapering policy of the US Federal Reserve affect only Ghana’s economy? The policy did not have any effect on the other countries in the WAMZ the GDP growth in which registered 6.7%? Sierra Leone which has just emerged from war registered a growth rate in excess of 12%. Clearly, there is something wrong with our economic management and it is time to take a real hard look!”
Clearly, because government failed to adequately and quickly respond to the unfolding economic crisis, the state of the economy has gotten worse by any stretch of imagination, the NPP MPs indicated.
African Eye News