Economy Performed Poorly In 2010

Dr Kwabena Duffuor

Ghana's economy was said to have performed abysmally last year with almost all economic targets missed, according to a comprehensive appraisal of the 2011 Budget by the Minority in Parliament.

Presenting facts and figures at a news conference, the Minority pointed out that the performance of the economy for 2010 as described in the Budget statement for 2011 was worse than what the New Patriotic Party (NPP) anticipated.

Minority Spokesperson on Finance, Dr. Anthony Akoto Osei indicated that in 2010, government targeted a real GDP growth of 6.5 percent but actual attained growth was 5.9 percent.

With respect to sectoral growth rates, the agricultural sector was targeted to grow at six percent, industry at 6.6 percent and the services sector at 6.8 percent.

However, the provisional growth rates achieved are reported to be 4.8 percent, 7.0 percent and 6.1 percent for the agricultural, industry and services sector, respectively with government missing two out of three targets.

Dr. Akoto Osei, who is also a former Minister of State at the Ministry of Finance and Economic Planning, said average inflation was targeted at 10.5 percent while the end period inflation was targeted at 9.2 percent.

But the provisional numbers are estimated at 12.5 percent and 9.38 percent for the average and end period inflation respectively.

Dr. Akoto Osei said inflation targets were missed despite the horn blowing of falling inflation by government.

The Minority Spokesperson on Finance, who is also the MP for Old Tafo, said if one compares the country's economic performance in 2009 and 2010 with those countries in the West Africa Monetary Zone, Ghana, which wants to position itself as the gateway to the sub-region, falls short on major indicators.

'For example the average growth rate for the region is expected to be over seven percent in 2010 and Ghana was happy to reach 5.9 percent,' he stated.

The average inflation for Africa is projected to be at 6.5 percent in 2010 but Ghana, the gateway, is content to target 10.5 percent and really registered 12.5 percent as the actual average inflation, he added.

Dr. Akoto Osei said government's fiscal programme in 2010 was worse than reported, pointing out that on a cash basis, the deficit was over 13 percent of GDP and on a commitment basis the deficit was well over 23 percent of GDP as a result of new accumulation of arrears.

Government, he added, has accumulated domestic payment arrears (that is payments not made for work done) to the tune of some GH¢3.2 billion or over 12 percent of GDP, including arrears on Single Spine Salary Structure (SSSS) of between GH¢600 million and GH¢1.1bilion, new commitments by MDA's of some GH¢1billion, arrears on GETFund, District Assemblies Common Fund (DACF), National Health Insurance Scheme (NHIS), SSNIT pensions, among others.

He said if this new accumulation to the stock of arrears as of 2009 was GH¢ 1.4 billion then the total stock of arrears as of the end 2010 will be over GH¢4.6 billion.

This is much higher than the stock of arrears of GH¢1.1 billion that was inherited in 2008.

Dr. Akoto Osei said the new arrears of GH¢ 3.2 billion for 2010, indicated that on a commitment basis, the deficit exceeds 23 percent of GDP and could be as high as 26 percent of GDP, a record high.

He said with the government not paying its bills it is not surprising that it can boast of accumulating Gross International Reserves of some $3.9 billion with over 60 percent of the gross reserves as debt owed to workers and contractors.

Dr. Akoto Osei said looking at the proposed wage bill for 2011, a further salary arrears accumulation of about GH¢1.6 billion is anticipated.

Thus by the end of 2011, as a result of the partial implementation of the SSSS, a total amount of between GH¢1.986 billion and GH¢2.396 billion would have accumulated as salary arrears.

According to him, teachers and nurses will be particularly owed huge salary arrears since they are likely to be the last group to be put on the new SSSS.

As a result of the huge arrears, public debt in 2010 is increasing at a rapid pace and rose from $8 billion in December 2008 to over $11 billion as of September 2010, representing over 68 percent of GDP.

Dr. Akoto Osei indicated that the stock of public debt in 2000 stood at $7.5 billion and end of December 2010, the NDC administration would have added more to Ghana's Public Debt in two years than the NPP administration did in eight years.

This, according to him, does not include the STX loan of over $4.5 billion, the so-called $13 billion framework loan package from China, as well as the over 700 million Euro loan package currently before Parliament.

The second challenge on the expenditure side relates to lack of discipline.  The practice of awarding contracts over and above what is approved by Parliament must be stopped.

As an example in 2010, government functionaries had approved contracts that are at least GH¢1 billion over and above what was approved in the Budget by Parliament, he said.

According to Dr. Akoto Osei, the proposed fiscal measures by the government are not robust enough to clean up the economic mess of 2010.

He said the non disclosure of the status of the net arrears accumulated in the course of the fiscal year 2010 leads to an assessment of economic performance, which is totally different from reality.

'First, government relies on some unexplained increase in non tax revenue of over GH¢770 million from profits and dividends in the last quarter of 2010 (when the first three quarters yielded only GH¢609 million,' the former Finance Minister noted.

Second, the budget did not account for over GH¢300 million in payments on arrears including judgment debt that were made in 2010.

Third, the projected deficit also depends on grants of over GH¢300 million materializing in the last quarter of 2010, which means that should the projections not materialize and account is taken of the stock of arrears then the projected deficit will be over 13 percent of GDP as compared to a target of 7.5 percent of GDP, he continued.

By Awudu Mahama