The purported good macro-economic performance of the erstwhile NPP administration was an economic illusion which ultimately resulted in their political defeat at the hands of the NDC in the 2008 general elections. Indeed, as the clock ticks on the NDC in Government, the economy is becoming more robust and resilient as a result of the ambitious but prudent macroeconomic policies being pursued by Government.
The economy was so badly managed that only one of the economic targets for the year 2008 was met. In as much as one would argue that these were just projections, it is instructive to note that the failure of the Government to meet about 85% of the targets it had set for itself gives a worrying signal to all economic analysts and the international community. The situation is as bad as a self-professed scholar who sets his own questions in an examination and gets 15% of them right.
It is also significant to note that in the 2008 budget, the NPP Government projected an overall budget deficit including divestiture of 4.0 per cent of GDP and a deficit, excluding divestiture of 5.7 per cent of GDP. In sharp deviation to these projections, the NDC Government inherited an economy characterized by severe imbalances that resulted in a huge public debt and a ballooned overall budget deficit of 14.5 percent of GDP. The huge deficit did not include expenditure arrears and commitments which are currently estimated at about GH¢1.7 billion, equivalent to 9.7 percent of GDP for 2008. In layman's terms, we spent a great deal more than what we earned. The deficit was largely driven by lack of prudence in public spending and misplaced priorities of the NPP administration which believes in property owning democracy.
The effect of this excess expenditure was the rapid depreciation of the Cedi against the currencies of our major trading partners during the first quarter of 2009. According to the Monetary Policy Committee report for the third quarter of the year, the cedi is gaining stability; an indication that the effects of both monetary and fiscal policies are beginning to take hold. The latest surveys show more positive assessment of the general macroeconomic outlook; and a rebound in both business and consumer confidence, with some downward revision of inflation expectations.
The Monetary Committee Report as released by the Bank of Ghana indicates that the Gross international reserves position at the end of August 2009 was US$1,772.14 million. This compares with US$2,036.22 million in December 2008 and US$2,497.28 million in August 2008; and represents 1.7 months cover of imports of goods and services. As at September 18th, 2009, the Gross international reserve was at US$2,270.21, including new SDR allocations, and represents 2.2 months cover of imports of goods and services. This exceeds the 2.0 month target of the Government in her 2009 budget.
The depreciation of the Cedi has been halted. The cedi depreciated by 5.1% in January of this year Government was in transition. But by the end of June the depreciation is only 0.2% from the Banks and from 6.8% to 0.1% at the Forex Bureau. The significance of the above is that, big and small businesses can now obtain their foreign exchange requirements more easily from both the banks and forex bureau bringing the rate almost to a par. This development is also a vindication of the wise and bold decision of the NDC Government to deal with the World Bank and the IMF resulting in credits of $2.2billion which have made foreign exchange available for budgetary support and to shore up balance of payments.
The projected average inflation for 2008 was targeted at 7 per cent but was sharply missed with an average inflation for the year (2008) at 16.5 per cent. With the attainment of the targeted end-of –year inflation of 14.5 per cent still on course due to the current trend and the fact that the September inflation of 18.3 per cent, had been projected by the Ghana Statistical service of a significant drop in October, it is expected that the end-of year inflation of 18.1 per cent inherited from the NPP Government will be significantly improved at the end on the year. Despite these woefully abysmal economic records, the NPP painted a rosy picture and described the economy as robust and resilient. To add insult to injury, the NPP in their state of gross impunity is raving and ranting with an Akufo-Addo led chorus that, “if it is broke, fix it”.
The Atta-Mills-led administration is poised to prove sceptics wrong and have therefore effectively collaborated with the Bank of Ghana to put in place prudent fiscal economic and monetary policies and programmes to make the economy resilient and robust. Indeed, the NDC’s social democratic credentials had culminated in the fulfilment of most its pro-poor promises in their 2008 manifesto for a BETTER GHANA.
Within the past ten months of stewardship, the Government had defied all odds to increase the Capitation Grant by 50% from GH¢3.00 to GH¢4.50, and the supply of free school uniforms for every Ghanaian child in public schools to be produced locally for this year alone at a cost of GH¢1,700,000 or ¢17,000,000 (in the production stage). To put the icing on the cake, the government has released GH¢13,000,000 or ¢130,000,000,000 (one hundred and thirty billion Cedis) for the school feeding programme. The Government has made available GH¢10,700,000 or ¢107,000,000,000 for the Youth in Agriculture programme. GH¢10,000,000 has been released for the purchase and distribution of fertilizer at 50% subsidized rates to farmers across the country. Forty-one irrigation dams are under rehabilitation to enable dry season farming in the northern regions. 0ver 2,000 Tractors and other agricultural equipment worth GH¢3,600,000 are being imported to enhance agricultural production. The Savannah Accelerated Development programme in the Northern regions, Brong Ahafo and Volta Regions to enhance agricultural production is another useful Government initiative. These and many more interventions are taking place in health and all facets of our economy. The producer price of cocoa had increased by 35.29 percent above the previous price of GH¢ 1,632 per tonne coupled with Government’s establishment of a Social Security Fund for Cocoa Farmers at an amount of GH¢ 15 million. Within these ten months, various pro-labour interventions have been initiated and implemented. The new 3 tier pension scheme has been launched to help improve the lot of pensioners in Ghana. The National daily minimum wage is increased to GHC 2.65 for public sector workers and civil servants, which is an increase of 17% over the 2008 figure. This increment is unprecedented for the past 8 years and it is expected that the Single Spine Salary Structure which is scheduled to take off in January 2010 will be the best package Government will be given to the Ghanaian employee and employer alike in many years.
Even though Economic and fiscal policy analysts described the targets of Government to be ambitious and unattainable, the ten-month old Atta-Mills-led administration had exceeded most of its targets. As a matter of fact, the domestic financial imbalances inherited from the previous administration coupled with the impact of the global economic crisis resulted in most of the teething problems of our economy. The volatility in commodity prices, lack of capital, depreciation of the cedi to the major currencies, inflation, reductions in foreign aid and remittance flows from citizens working abroad posed a threat to economic growth. According to the provisional September 2009 figures, real GDP grew by 4.7 per cent this year, against the 2009 budget target of 5.9 per cent. For most analyst, the GDP growth is commendable since the Government had arrears of GH¢ 1.7 billion and public debt (external and domestic) of $ 8bn of which Government had made total payments for the first half of 2009, comprising discretionary and statutory payments, amounting to GH¢4,095.2 million, against a budget target of GH¢4,892.4 million. These together with the massive government pro–poor interventions and subsidies in the areas of agriculture, education health, transportation, etc. can never be downplayed by even the diehard critics of government. Ghana’s growth of 4.7 per cent against the projected 1.1 per cent growth of Sub-Saharan Africa is a notable feat which is the envy of many countries in Sub-Saharan Africa. The 6.2 per cent growth in Agriculture against a target of 5.9 per cent in comparison to the 4.9 growth in 2008 is an implicit indication that the Government’s short term programmes, policies, subsidies and interventions in the Agricultural sector is beginning to yield fruits and it is expected that Ghanaians can expect that with the stability in the economy and better Agricultural production, leading to food security and lower prices of food stuffs, better living conditions can be achieved sooner.
It is expected that with the macroeconomic indicators and the performance of Government in handling the economy so far, the microeconomic benefits will be full and inure to the benefit all in the days to come. The NDC’s brand of Social Democracy must be affirmed by a commitment to encourage foreign investment, and to marry the efficiency of the private initiative with the compassion of state intervention to protect the disadvantaged so as to ensure optimum production and distributive justice. The commitment of Government to domestically rejuvenate the social sector to give fresh impetus to health, education, housing and employment through interventions, subsidies, policies and programmes will ensure total economic opportunity and prosperity for all in a BETTER GHANA.
Thank You,
Justice Kutsienyo Shevrock23@yahoo.com
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