Opinions of Fri, 4 Apr 201445
Bawumia and empty talk on economy
Dr. Mahamudu Bawumia’s address delivered at Central University College to mark the one year anniversary of the passing of H.E. Aliu Mahama was a complete waste of time. Nothing new was said and no reasonable preposition was put across with regards to management of the national economy.
He said that the challenges we are facing are declining economic growth, increase in central bank financing, a massive rise in public debt stock, decreasing net foreign reserves and the inability of government to pay arrears to contractors. He mentioned that Ghana may be heading back to HIPC if care is not taken, and that the cedi has been deprecating since 1960; and that economic challenges we are facing were as a result of weak economic fundamentals and policy choice of government.
The former Deputy Governor of the Bank of Ghana said that arrears in statutory payments and other challenges had been the result of major increase in government expenditure relative to revenue. He indicated that the bulk of the increase in govt. expenditure had been in recurrent expenditure and not in investment expenditure, that the declining growth in the economy meant the economy was not expanding and wondered why there is no admission by government that the economy was in crisis. He suggested to the government to shelve its plans to further borrow from the international market but rather expand the tax net.
These challenges have been there since Kwame Nkrumah’s time as Bawumia rightly said, but the burning question is how to fix it. Every government we have had has contributed to this mess one way or the other by making expenditures that have no immediate result increase in production such as increasing salary and wages because of pressure from organized labour. If Government does not yield to such pressures teachers for example will go on strike and school children will be out of the classrooms; in same vain paramedical staff could lay down their tools and patience will die in our hospitals.
The plain truth is that because of all the economic lapses Bawumia has mentioned which we already know we as a nation have been consuming more than we have been producing: importing more than we have been exporting. Mind you, if you eat imported chicken rather locally produced chicken then you are part of the problem. If we were operating a fixed foreign exchange rate regime, then the solution will call for a massive devaluation as was done by J.H. Mensah during the Dr. Busia’s administration. Presently we have a flexible foreign exchange rate so we allow the principle of supply and demand resolve the matter by currency depreciation as it is happening now.
The other alternative is what Dr. Osei Akoto a former Deputy Finance Minister recommended, which is massive re- entrenchment of labour in the public sector; in human terms throwing hundreds of thousands workers out job and ruining families. This will also put pressure on the already burdened labour market.
Dr. Akoto who seems a little more honest and focused argues that 70% of our recurrent expenditure is spent on workers who form only 10% of the working population. He also argues that the producer price of cocoa be increased and called for more roads to be constructed to cocoa farming areas. This is agreeable since we must feed the birds that lay the golden eggs.
But why did the Akotos and Bawumias cried out loud for free SHS whiles the birds that lay the golden eggs go hungry? Does the free SHS policy not amount to increase in recurrent expenditure as against increase in investment expenditure?
Devaluation is a harsh economic measure, but re-entrenchment is even harsher. If I am to chose +between devaluation and the laying off of workers, I will go for devaluation even though re-entrenchment may yield quicker results it is an irresponsible, insensitive policy with horrific social consequences. This tells us the mindset of the leaders of the New Patriotic Party (NPP).
They are telling Ghanaian workers: VOTE US IN AND WE CHASE YOU OUT!
The other alternative economic measure proposed by Dr. Bawumia is anti-people and completely nonsensical. The stupid talk about widen the tax net. This is the nonsense everybody talks about but nobody puts a finger on anything. What the hell does he mean by widening the tax net? Which people are they referring to? Those who remove toe nails or sell dog chains? People who are already feeling the brunt of our harsh economic measure do not even have any where sleep? Why not increase property taxes? What about inheritance taxes? How much tax did Jake Obetsebi Lamptey pay on the Government Bungalow he bought and sold?
It seems Dr. Bawumia made too much noise on Government borrowing as an indication of a failing economy. This is far from the truth. To be able borrow internationally means we have been able to put our house in order, and have won the confidence of foreign lenders. We are credit worthy. The Kufuor led government tried raising $1b and failed the application for the loan end up at a barbering saloon. I guess Dr. Bawumia was then Deputy Governor of the Bank of Ghana.
It seems the Central University College was a wrong venue for Dr. Bawumia to speak on prudent management of the public purse. Why did President Kufuor dole out billions of cedis from the GETFUND in support of a private university business owned by Dr. Mensah Otabil at a time public institutions are starving and without the consent of parliament?
What happened to the ill-managed e-Switch under Bawumia watch as Deputy Governor of the Bank of Ghana? What of the Euro-Bond scandal? Why was Ghana paying comparatively higher interests with ‘competent’ PhD- in-economics- holders like the Akoto Oseis and Bawumias?
What we have to do to is to raise revenue by increasing property rates progressively, and introduce progressive road tax on all the luxury cars and the big busses and articulator trucks which spoil our roads on daily basis. The taxis and tro-tro’s can be spared.
Dr. Bawumia has not offered any solution. He is only pursuing personal ambition in a party that will show him his roots one day. The political fate of the late Aliu Mahama should remind him.
The Author is a Management Consultant and Chairman of the Site 18 Dr. Aryerh Branch of the Tema East Constituency, National Democratic Congress (NDC).