NPP responds to 2015 Budget
RESPONSE OF THE MINORITY NPP TO THE 2015 BUDGET STATEMENT AND ECONOMIC POLICY OF THE GOVERNMENT AND CURRENT EVENTS – JANUARY 8, 2015
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Fellow Ghanaians, on Wednesday, November 19, 2014 His Excellency John Dramani Mahama, in line with article 179 of the 1992 constitution, caused to be laid in Parliament the Budget Statement and Economic Policy of the Government of Ghana for the 2015 financial year. The Minister for Finance Mr. Seth E. Terkper performed the act on behalf of the President.
Countrymen and women, the theme for the 2015 Budget Statement and Economic Policy is “Transformational Agenda: Securing the Bright medium Term Prospects of the Economy”. The word “secure” means “to be free from danger, trouble, worry or uncertainty”. That is according to the Chambers 21st Century Dictionary. This theme that the President chose for the budget derives from the President’s attempt to buttress his own assertion in his 2014 State of the Nation Address that “our economic fundamentals remain sound and the mid-term prospects are bright”. The President emphasized his bold declaration with statistics on economic growth. If one were to assume rather erroneously, as the President did, that economic growth rate alone make up economic fundamentals, then it becomes relevant to analyse the facts to enable one to properly judge the President’s descriptions of the state of our economy which this budget statement borrows a leaf from.
ECONOMIC FUNDAMENTALS
1. GDP GROWTH INDEX
The GDP growth rate which was inherited by President Kufuor, i.e. in 2000, 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 was later reviewed to 8.4% after the rebasing of the economy. This is steady growth which occurred without the benefit of crude oil exports. This is how a really sound economic growth aggregate looks like.
Now compare with the rather convulsive growth rates achieved under the Mills-Mahama administration. In 2009 GDP growth rate swung down to 4.0%; in 2010 it grew at 8.0% and upped to 14.4% in 2011 when, for the first, time oil output was added to the GDP. It is important to underscore that for 2011 the non-oil sector registered a 7.8% growth. The provisional GDP growth for 2011 was 13.6% (see pg 4 of the 2011 budget). That was later reviewed to 14.4%. The 2015 budget document indicates that GDP growth for 2011 was 15%. The basis for these multiple reviews must be questioned (ref to Pg 158 of the 2015 budget).
We were told the GDP (with oil) grew at 7.6% in 2013. The figure was later reviewed downwards to 5.8% with the non-oil sector registering 4.1%. In the 2015 budget the GDP growth rate of 2013 has been revised again to 7.2%. The 2014 growth rate is 6.9% (ref. page 11 of the 2015 budget). This figure is according to the Ghana Statistical Service. Ironically, the Ministry of Finance itself has projected the 2014 GDP growth to be 4.6%. The differences between these estimates of GSS and MoFEC shows the uncoordinated nature of the management of the country’s economy under President John Mahama. Notwithstanding, it is important to stress that all these rebased figures since 2011 have oil components. What is crystal clear is that the non-oil sector of the economy has never managed to grow at 8.4% since 2009 under the Mills-Mahama administration inspite of the pontifical high mass that they have every year organized to celebrate what they deem as “bright economic prospects”.
2. OTHER ECONOMIC INDICATORS
Ladies and gentlemen, let us consider the other economic indicators: Exchange Rate: The cedi depreciated by 17.6% in the first quarter alone in 2014. As at the end of August 2014 the cedi had depreciated by over 75% since December 2013. As we speak now the cedi has made some recovery from ¢3.85 to $1 to ¢3.30 and that represents a depreciation of over 50% from the December 2013 level even though we are told that officially it is about 31%. The Bank of Ghana may have to explain to us what the basis of their calculation is. For in December 2013 the exchange rate was GH¢2.20 to US$1 and the 2014 budget projected that the cedi will get to GH¢2.35 to US$1 in December 2014. Today, it is GH¢3.30 to US$1.
In the 8-year administration under President Kufuor, the cedi moved from GH¢0.72 to US$1.0 to GH¢1.1 to US$1. Thus the cedi depreciated by 53%. Six years into the NDC administration the cedi has depreciated by 200.0% and we are still counting.
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Interest rates now hover around 30%. Kufuor brought it down to 25% from the 42% that it was in December 2000. Our gross international reserves, we are told, have since August 2014 recovered from 2.2 months of import cover to 3.