As our president, who happens to be communication expert exhibits his effective communication skills in the floor of parliament, Ghanaians least expected the elimination of update on growth rate, debt level, economic indicators and the state of our statutory funds from the nation’s address. My major aim of this review is to set the records straight as far as these economic issues are concern.
Economic growth rate
In last year’s state of the nation address, the President promised a growth rate of about 8%. However, the provisional growth rate for 2014(4.2%) and projected growth rate for 2015 (3.5%) were not highlighted not talk of compare them to the president’s expected growth rate of about 8% . Our medium term growth rate which is projected at about 4.4% had no place in the address. From a growth rate of about 8.4% in 2008 which peaked at 14% in 2011 as a result the base impact of oil, growth rate declined steadily to (9.3%) 2012, 7.3%(2013) and currently, 4.2% for 2014. The citizens needed to be addressed on this unfortunate trend and needed explanations given to that effect.
In the 2014 nation’s address, the President lamented “ Mr. Speaker, as a lower middle‐income country in transition to middle income status, we have an enormous need for credit to develop our social and economic infrastructure. Our debt to GDP ratio is currently estimated at 52%.While this is not abnormally high, Our domestic debt and the current high interest rates are a major challenge to the economy. The Hon Minister for Finance is currently implementing measures to refinance apportion of the domestic debt, thereby reducing the pressures these obligations are placing on the budget.”
As at September 2014, our debt stock has crossed the debt unsustainable level for developing countries which is set at 60%. The finance minister told us our debt stock has increased to about 60.9% about 4months ago when he read 2015 budget. A little over 4months down the lane, our debt stock has increased by GhS 10billion which is higher than the debt stock this government inherited from Nkrumah down to kuffuor’s era which was about GhS 9.1billion. The government increased the total public debt by GH₵24.2 billion in 2014 alone, increasing the total national debt to GH¢76.1 billion (67% of GDP).
This sharp increase in debt stock has caused government interest payment obligations increased to about 9.8billion which is higher than the government budget allocation for capital expenditure (7billion) and that of education (7.6billion). This trend needed to highlighted and controlled.
Currently, government is willing to pay as high as 25% interest to borrow internally, this has rendered the fight against the cost of credit in this country ineffective. Small traders, businessmen, firms and household has to pay at least as high as 30% interest before they can secure loan. This has compounded the problems facing our private sector.
How can a state of a nation address be read without economic indicators such as the state of inflation rate, interest rate and exchange rate not highlighted?. Because these indicators seem not favourable, it was not included in the address. From single digit inflation in 2012, the inflation rate increased to 17% by the end of 2014 and now over 16% as a result of fall in world crude oil price. The cedi depreciated very seriously in 2014 whilst interest rate level is nothing to write home about. From an unprecedented 2 successive years of double digit budget deficit, the country now records 9.8% budget deficit. This rate is still abnormally high and poses treat to our economic fortunes.
Do not be deceived the IMF bailout cannot help stabilize the cedi but may reduce the rate at which its depreciates which I expected of any government. Our fight to stabilize our cedi is unattainable until we change our economy to export driven economy.
The 2014 economic year has come to an end and we are getting to the first quarter of 2015 yet most statutory funds are still in arrears by at least 2 quarters. GETFUND, Common Fund, NHIS, Capitation grant, School feeding et al are all in arrears. This is a palpable breach of the 1992 constitution of republic of Ghana. If old statutory funds are not being met, why then do you create new ones? Because of how this new funds are managed I doubt the future of new statutory funds created by this government such as Infrastructure fund, Road fund and contingency fund. Already the management of these funds are not transparent as we are not abreast with the amount accrued in the accounts of these funds so far.
This was a golden opportunity for the president to highlight the poor state of our economic indicators and use that to to explain the decision to seek IMF bailout to salvage our economy and hardship that comes with IMF bailout. But nothing of such was done to clear the minds of the good people.
Abdulai Saeed (Asiba Sans), Ch.FE.
(Communication team member, Wenchi NPP)
Source: Asiba Sans
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