Maze and haze of early 2016
Obviously it is too early to clearly define the possible direction of the economy this year.
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However, since we are allowed, in the name of planning and the benefit of hindsight, to make predictions even 20 years ahead, it is certainly not wrong to attempt, at least, an explanation to the current state of play of the economy and the impact it could have overall on the lives of individuals.
First off, as expected, the average performance of the Ghanaian economy in 2015 and the promise by the economic managers that the austerity measures introduced months back were bearing fruits, the expectation for 2016 by many is nothing short of average.
“The country’s fiscal consolidation is bearing fruits, our gap between revenues and expenditures is narrowing. Our deficit has reduced from 11.5 per cent of GDP in 2012 to a provisional 7.0 per cent of GDP in 2015 while primary balance is expected to be positive in 2016, this is the first positive turn we have had since 2005”, Finance Minister Seth Tekper said about the economy some few days back.
Perhaps, the bullish sentiments expressed by Minister Tekper was informed by discussions with the International Monetary Fund (IMF), whose recent extended credit facility to Ghana has given it a foothold in the running of affairs of the country.
“There’s still a long way to go before things are restored to a more sustainable path; the global environment with declining commodity prices and tightening in international markets leading to higher borrowing costs have become less supportive and will make these efforts so much more difficult going forward,” Joel Toujas-Bernate, the leader of the IMF country team for Ghana’s Extended Credit Facility (ECF), stated recently.
The Chief Executive Officer of the Private Enterprises Federation (PEF), Nana Osei Bonsu, is rather of the view that contrary to the IMF claims that policies initiated were strengthening the economy, the opposite was rather the case.
In his view, the policies were eroding the capacity of private enterprises to grow.
“We have high inflation, high cost of money, [and] we are unable to strategise due to the uncertainties occasioned by currency volatilities, all of which lead to high cost of doing business,” he said.
Particularly, he bemoaned the high taxes and levies introduced recently, saying they were inimical to the growth of the private sector.
Again, the Secretary-General of the Industrial and Commercial Workers Union (ICU), Mr Solomon Kotei, in a recent interview with a local newspaper also stressed that “labour finds it difficult to accept the IMF’s position. Maybe the economy is moving in the right direction on paper but not on the ground.” Adding: “after unleashing new tariffs and taxes on Ghanaians if the IMF tells us that our economy is moving in the right direction, we find it problematic.”
Mr Kotei explained his personal experience following the introduction of the interventions as follows: “Our incomes have shrunk drastically; my income that could afford me x+ y some years ago is now giving me x - y so where is the improvement?”
In all of this, the reaction seems understandable. Whereas the desire of the government is to close out widening deficits over the years and to right-fit the income and expenditure pattern to reflect current realities both home and abroad, the desire of individuals however is to see an improvement in their standard of living or at least not lowered.
So how do you explain this? “In everybody’s life, you make sacrifices for things that are important. Times come when we have to squeeze ourselves a bit to do the precious things that we need in life. We can’t have money in our pockets when the roads are not good”, President John Mahama said, as he tried to offer hope.
Further, the President said: “What is the use of money when you are sick and can’t get a hospital to be cured? And so sometimes when we are squeezing ourselves, it is to do the things that are essential, to put in place the social and economic infrastructure after which you can begin to put money in your pocket. And so it is good politics to say things are hard, but the money that we are raising we are using for things that will benefit this country. We have spent these last four years investing in bringing the social infrastructure back to scratch”.
So, you see, when politics meets economics it could be anybody’s game. There are issues that make economic sense but politically sounds a bit silly.
For instance, why would a government decide in an election year to increase levies and taxes when it could have serious repercussions on its chances of winning an election if not for economic reasons?
The truth is, with the high borrowing in the last four years, which the President himself has explained was necessary for infrastructural development, the borrowing space is seriously limited.
The next best option, in the economic sense of it, was to look at internal sources to, not only maintain a good balance between revenue and expenditure but also to service the cost of borrowing.
Not surprising, therefore, is the maze and haze that seems to have characterised the assessment of the first seven weeks of 2016, and the predictions for the next 45 weeks ahead. Maybe the picture will become clearer half-way through the year.
botabil@gmail.com
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