Any assessment of the state of the economy and the performance of the government must be against the background of the amount of resources at the disposal of the government – Dr. Mahamudu Bawumia
In my view, the biggest threat to human survival and existence is to forget so soon circumstances that have impacted on your life either positively or negatively. A rational individual or group of individuals would learn lessons from decisions they took previously and the negative outcomes which might have impacted on their lives and programmes in a very terrible manner. Going forward, the rational decisions will be a variation of what was previously done to avoid a repetition of the awful results of the past.
Nations make decisions that would meet the needs of today and expect that the positive outcomes would be the stepping stone towards future activities as well. However, no reasonable decisions would be made without looking back to previous decisions and their outcomes. It is also true that in our individual lives, previous decisions that hurt us or produced negative results impede our forward movements and need to be dealt with before we can move forward.
In the Daily Graphic of August 16, 2018 (page 17), the headline of the lead story read: Economic difficulties under NPP man-made—Asiedu Nketia. He is quoted as saying among others that “the government was moving from one crisis to another, and that all those crises were man-made”. He had blamed the Free SHS programme for whatever economic challenges that confront the Akufo-Addo administration.
After reading the said story, I asked myself whether my very good friend, the General-Secretary of the National Democratic Congress (NDC), had so soon forgotten about the bare-bone economy the Mahama leadership of this country in just six months (July-December) 2012 bequeathed to this country after taking over from the late Prof. Atta-Mills’ administration?
From four per cent fiscal deficit in 2011 under Prof. Atta-Mills, Mahama ended 2012 with 12.2 per cent, 11.7 per cent and 11.9 per cent for 2013 and 2014 respectively, and crowned it with an unprecedented total debt to GDP at 71.6 per cent in 2016. For the first time in Ghana’s history, double digit fiscal deficits were recorded all under Mahama’s government. This was an era when the nation was making revenues from oil production, no matter how small it might be.
I am still wondering what ex-President Mahama would have described the economy of this nation to us and the world if he had won the elections in 2016. If in 2012, the economy was reduced to bare bones as a result of the total debt to GDP of 47.8 per cent, what description would have aptly covered the 71.6 per cent total debt to GDP?
In any case, which economic situation anywhere in the world comes automatically? The state of any nation’s economy is man-made. Policies and their efficient implementation or otherwise determine the state of an economy. I can now understand why this country was continuously thrown into darkness for a four-year period. The energy sector was put on an auto-pilot mode; no thinking and no appraisals on the outcomes of the way that particular sector was moving.
Any open-minded observer of the economy of this country under the Fourth Republican dispensation would need to cast his or her mind back to 1992. The first NDC government under the Fourth Republic led by former President Jerry John Rawlings inherited from itself, the P/NDC, a huge deficit after the 1992 general elections. The then Finance Minister, Dr. Kwesi Bocthwey, had blamed salary increase agitations and strikes and threats of strikes by the civil and public service sectors employees who thought it was time for them to recoup what they had been denied over the years under the outgoing P/NDC. To address the fiscal imbalances the out-gone government left behind, the government embarked upon tax increases and the introduction of new ones to balance up.
Among such taxes was the introduction of the Value Added Tax (VAT) for the first time at a rate of 17 per cent in 1995. The subsequent response to it and the massive nationwide demonstrations which greeted it and the accompanying needless murders are part of our history. The long and short of it is that, by the time the NDC ended its eight-year term, the country had become a Highly Indebted Poor Country (HIPC).
Interest payments alone on our external indebtedness were far more than our capital expenditure in our budgets. This was the economy inherited by the NPP under the Kufuor administration. It is an undeniable fact that the performance of a government by and large depends on what is bequeathed to it by a previous administration. From 2001 to 2009 (eight-year period), Kufuor managed to move Ghana from a HIPC status to a middle income country. That indeed was attained through a man-made policy positively geared towards the growth and development of Ghana.
In his eight-year period, President Kufuor attracted taxes and loans amounting to GH¢20 billion to manage this country. With the support of HIPC reliefs, he left behind a fiscal deficit to GDP ratio of around 5 per cent. Within the same period, the economy grew from $5.1 billion to $28.5 billion, a 459 per cent increase in eight years. Remember that Kufuor never had oil revenue during his tenure even though it was his ‘man-made’ policies that brought oil in commercial quantities to this nation.
Conversely, the economy under the NDC between 2009 and 2016 grew by 40 per cent from $28.5 billion to $40 billion. Kufuor’s administration left behind a total of GH¢9.7 billion debt to the NDC. Within the eight-year period of the NDC of Prof. Mills and Mahama, they left a debt of GH¢122 billion. All of these were man-made and not automatic. The total interest payments by the Mahama administration alone in the year 2016 was much higher than the total national debt the Kufuor administration left behind for the NDC.
It has become very clear that each time there has been a change of government between the NDC and the NPP, the NPP has inherited worst economic situations than what the NPP bequeathed to the NDC. The NPP is still paying for completed jobs awarded by the NDC long before the Akufo-Addo administration took office; the contractors were not paid for. Saddled with these and other such outstanding debts, certainly prudent financial management requires that genuine existing arrears are cleared before new financial obligations are committed.
While resorting to this common sense approach to financial discipline, the NDC is accusing the Akufo-Addo administration of having done nothing in its 18 months of leadership. They also forget that for eight years, the Suhum portion of the Accra-Kumasi Highways was never completed.
The worst of the economic mismanagement left behind for the NPP government is the gross mess in the financial sector. As a running mate in 2016, Dr. Bawumia once again cautioned the nation before the general elections that eight indigenous banks stood the risk of collapsing. As usual, his admonishing was treated with disdain and contempt and considered as political gimmicks. Today, five indigenous banks have gone under and the nation has had to look for funds to reorganize them so that depositors’ funds would not be in jeopardy. In modern times, if the financial sector is threatened in a manner that has been inherited by the NPP administration, it adds to the already dire economic situation.
Sadly, even banks that have not been affected by the NDC’s unprofessional management of that sector are under threat of losing their clientele. Workers have lost their jobs and incomes for that matter. All of these are man-made but the NDC General-Secretary did not and still does not see them as man-made. A good economy is man-made just as a bad economy.
Daavi, my usual three tots of the bitters.
From Kwesi Biney