You Cannot Manage The Economy With Propaganda – Bawumia

2ND MAY 2012

Dr. Mahamudu Bawumia, the New Patriotic Party Vice Presidential candidate, has stated emphatically that no economy can be managed with propaganda.

“The lesson from history for governments is that you cannot manage the economy with propaganda. In fact, you can engage in all the propaganda you want but if the macroeconomic fundamentals are weak, the exchange rate will expose you.” Dr. Bawumia stated.

The renowned economist made this statement at the 5th Ferdinand Ayim Memorial Lectures held in Accra on Wednesday.

Dr. Bawumia came to this premise after taking the packed auditorium filled with members of civil society, supporters of the New Patriotic Party, media practitioners and various other observers through a concise analysis of the Ghanaian economy today.

Lecturing on the theme, “The State of the Economy”, Dr. Bawumia took his time to deflate the much touted single digit inflation talk of the ruling National Democratic Congress by pointing out that while inflation was said to be in single digits, it had no correlation to the cost of commodities in the markets, general cost of living, the interest rates and also the exchange rates of the Ghana cedi.

Dr. Bawumia mentioned the prices of basic commodities such as Gari, Maize, Pure Water, Cement as well as prices of fuel products and tariffs of water and electricity, school fees, road tolls etc. which had all seen triple digit increases and quizzed why the much talked about single digit inflation was not reflecting on the ground.

“Mr. Chairman, How many Ghanaians have seen a single digit increase in the prices of what they normally buy in the markets and shops over the past year? I can testify that if you try to give your spouse a single digit increase in chop money, she would not be amused.”

He again took on the relationship between inflation and interest rates. Dr. Bawumia observed that between 2001 and 2008, inflation was cut by more than half from 40.5% to 18.1%. At the same time, the interest rate saw a commensurate decrease by almost half from 44% to 27%. He however, noted that while inflation has dropped from 18.1% in 2009 to some 8.8% today, the interest rate had only witnessed a negligible decrease from 27% in 2008 to 26% currently.

Dr. Bawumia also used the incoherent relationship between the inflationary figures and the exchange rates to question the veracity of the single digit inflation rates. He wondered why the exchange rate of the cedi was fast depreciating while the inflation was in single digits and stable, noting, “Ladies and Gentlemen, something does not add up. The rapid exchange rate depreciation observed suggests that inflation could be higher than what is being captured by the official data.”

In tackling the depreciation of the cedi more concisely, the NPP Running Mate stated that the free fall of the cedi which was being witnessed “is a vote of no confidence by market players in the management of the economy”. He added that as a result of this apparent lack of confidence in the management of the economy, many players were now anticipating the cedi to dollar rate to reach 2:1 soon.

He lamented that instead of tackling the fundamental causes of the rapid depreciation of the cedi, the government was rather trying to blame speculators for the fall in the cedi.

The former Deputy Governor of the Bank of Ghana pointed out that credibility and transparency was extremely important in successfully managing an economy. “You cannot manage an economy by propaganda. You cannot claim to have created 1.6 million jobs and your Minister for Employment would say he cannot vouch for that. You cannot ask government officials that when they see a small goat, they are supposed to tell us that it is a big fat cow! and expect the markets to consider you credible. You cannot claim that all the gold reserves in the Bank of Ghana have disappeared and expect the markets to consider you as credible. Today, we have a Green Book touting “unprecedented” achievements! Hyperbole has its place but certainly does not belong in the realm of economic management. The best response Ghanaians can give to the Green book is to show the NDC a red card in the December 2012 elections”, Dr. Bawumia asserted.