Bawumia Got It All Wrong - Govt
5/5/2012 9:45:29 AM -
Dr Kwabena Duffuor - Finance Minister The government has described as mischievous and untenable the statement of the New Patriotic Party’s running mate, Dr Mahamadu Bawumia, to the effect that the Ghana Statistical Service (GSS) had doubtful credibility.
Dr Bawumia questioned the credibility and independence of the GSS in producing credible inflation figures.
In reaction to assertions of Dr Bawumia, the government, in a statement signed by Abdul Hakim Ahmed, Media Liaison Officer of the Ministry of Finance and Economic Planning, said although the running mate questioned the credibility and independence of the GSS, he gave credit to the New Patriotic Party (NPP) government for “transforming the economy from a low HIPC economy to a lower middle income economy in eight years.
The statement said: “One may ask about the data he used in assessing Ghana’s lower middle income status.”
“The same GSS data when the data suits him, he uses it but when it doesn’t he condemns it.”
At the fifth in the series of Ferdinand Ayim Memorial Lectures on the state of the economy in Accra on Wednesday, Dr Bawumia said these and others which sought to impugn the credibility and reliability of the GSS in what he termed as a critique of the economic achievements of the NDC government.
With reference to the single-digit inflation of which Dr Bawumia rubbished its achievement, by basing his doubts on an alleged inconsistency with economic fundamentals and development in key macroeconomic indicators, the statement said the economy of Ghana, like any developing country, had market imperfections and would not exhibit a theoretical relationship among inflation, exchange rate, and interest rate as alleged.
Additionally, the statement said historical data suggested that such departures also occurred in the period of 2000-2008.
The statement wondered why Dr Bawumia should compare the price of six selected items in three years to make a case that the increases in those prices were not consistent with inflation figures.
“Inflation measured by the Ghana Statistical Service is annual and does not span a three-year horizon,” it said.
The statement said the calculation of inflation as exhibited in the submission of Dr Bawumia violated any inflation formula.
“Inflation is calculated as a monthly change, point-to-point (year-on-year), and annual average... Nowhere in the world is inflation calculated the way Dr Bawumia calculated it.
“In addition, the basket of goods and services used in measuring inflation is much more representative than the few commodities he selected. There is, therefore no rational basis for debunking the single-digit inflation figures as he did,” the statement said.
A major weakness of Dr Bawumia’s analysis, according to the statement, was that he mixed the rebased Gross Domestic Product series with that of the old series, thereby drawing invalid conclusions.
For example, the statement said, the growth rate of the economy had increased from 3.7 per cent to 8.4 per cent from 2000 to 2008 that he stated was misleading as the 3.7 per cent was based on the old Gross Domestic Product (GDP) series (1993=100) and the 8.4 per cent was based on the rebased GDP series (2006=100).
The statement said Dr Bawumia’s assertion that the economy expanded six fold between 2000-2008 was not factually correct.
That was because the GDP of US16,496 (old series) in 2008 was only a multiple of 3.3 of the GDP of US$4,983 million (old series) in 2000.
It said the growth rates of 7.4 per cent, 15.1 per cent and eight per cent for agriculture, industry, and services sectors for 2008 based on the new series were correct.
However, in 2007, the agriculture sector grew by negative 1.7 per cent. In addition the industry sector which grew by 15.1% in 2008 was mainly due to the growth in the electricity subsector of 19.4%. That was up from a negative growth of 17.2% in 2007.
The statement said Dr Bawumia disputed the fiscal deficit of 14.5 per cent of GDP (old series) the NPP government left behind in 2008, but said that it should be noted that the fiscal deficit of 6.5 per cent of GDP he quoted for 2008 was based on the new series and included divestiture receipts.
“If divestiture receipts are excluded, the fiscal deficit for 2008 was 8.5 per cent of GDP (new series) which is equivalent to the 14.5 per cent (old series) quoted in the 2009 budget.
“Dr Bawumia also states that the debt to GDP ratio reduced from 189 per cent in 2000 to 29 per cent by 2008. The 189 per cent debt to GDP ratio is based on the old series while the 29 per cent ratio is based on the new series. The statistics, however, show that the debt to GDP ratio in 2000 is 181 per cent (old series) and 49 per cent in 2008 (old series). Again it is intellectually dishonest to compare the ratios based on the old and new series,” the statement said.
“The fact that oil prices had increased by 13 per cent between 2009 and 2011 did not necessarily mean that the country benefitted from that increase from 2009 as the speaker implied.
“We only started exporting oil in 2011. In addition, the entire oil revenue is not available for the state as state’s Carried and Participating interest in the Jubilee Fields is 13.5 per cent,” the statement pointed out.
According to the statement, using selective statistics to describe the performance of the agriculture sector, Dr Bawumia claimed that rather than expanding, the agriculture sector had seen steadily declining growth rates from 7.4 per cent in 2008 to 0.8 per cent by 2011.
Reacting, the government said it should be pointed out that the agriculture sector contracted by 1.7 per cent in 2007, a situation which never occurred during 2009-2011 period.
“In 2007, all the subsectors in agriculture contracted except livestock. Crops, cocoa, forestry & logging, and fishing contracted by 1.4 per cent, 8.2 per cent, 4.1 per cent, and 7.2 per cent respectively,” it said and wondered why Dr Bawumia excluded cocoa in his analysis of the crop subsector.
On fishing, the government said it should be noted that contraction in the subsector was usually accompanied by an expansion.
For example in 2007, it said, the sub-sector contracted by 7.2 per cent but its growth rebounded to 17.4 per cent in 2008 before contracting again at 5.7 per cent in 2009.
The analysis of the industrial sector performance also left out the contraction of the electricity sub-sector in 2007 as the sector contracted by 17.2 per cent which was much worse than the contraction of 0.8 per cent in 2011.
On unemployment, Dr Bawumia asserted that the growth of the economy was jobless and quoted the Trades Union Congress (TUC) Secretary-General to substantiate his point.
The government said without any reference to any employment survey, one wondered the source of Dr Bawumia’s evidence for jobless growth.
On fiscal developments and public debt, the statement explained that the borrowing policy of government was premised on debt sustainability.
“The main issue is not the amount of money borrowed but what the amount borrowed is used for and whether the borrowing can be serviced sustainably. Our debt indicators clearly show that as at the end 2011 our total debt to GDP ratio stood at 40.35% which is far below the debt threshold of 60 per cent for lower middle-income countries. A sizeable number of the projects executed using the loan facilities are self-financing.”
“In terms of the use of loan resources for example, the US$850 million out of the US$3 billion Chinese loan facility would be used for the provision of gas infrastructure for the production of gas,” the statement said.