Where Did The Ghanaian Economy Go?

THE 2012 ALL-TIME RECKLESS ELECTION SPENDING (DEFICIT) WAS THE LAST MAJOR STRAW THAT BROKE THE ECONOMY AND PUSHED IT INTO CRISES

The table below shows the trend of Ghana's Deficit from 2006 to 2012. From the table, years 2012 and 2013 budget deficits are the highest recorded in Ghana's history by any government. The NDC government's blatant disregard for the national interest but with a NARROW gain for short term political advantages, primarily to win an election at all cost through bribes and fraud via free laptops distribution, free Land Cruisers for chiefs, free cars for university girls and free gifts of GH¢50 to the electorate, has pushed the Ghanaian economy into abyss.

Ladies and Gentleman, the table above shows the facts behind our current economic crises or woes. Our economy and its structural problems have been known to depend largely on the traditional structure of more imports relative to exports. Hence, any economic management team or government that is prudent has to be mindful of any self-inflicted policies directed at productive investments likely to pay off. However, the contrary was the case in the reckless budget deficit by the NDC administration to win the 2012 elections.

The NDC government, in a desperate move to win the 2012 elections at all cost, went on a spending spree in a short period of time never seen in our history in terms of deficits. History has it that any country that runs huge deficits by spending $4 BILLION DOLLARS IN A SPATE OF FOUR MONTHS on consumables and non-investment projects will dislocate and throw its economy out of gear. However, the NDC government threw caution to the wind, to do the unthinkable by spending an extra $4 billion without parliamentary approval. This huge injection of free monies in the economy has long term effects that take time to fully transmit into serious problems like higher inflation, exchange rate depreciations, and loss of investor confidence. These are sometimes fuelled by a host of politically miscalculated pronouncements such as bad government communication, incoherent policy directions, propaganda of lies, as well as untrustworthy and dishonest assurances. This is particularly worse when a country's politicians lie about economic data statistics and go on a borrowing spree without investing in critical productive areas, except to spend on consumables and elections by dashing borrowed monies that has to be paid at very high interest rates.

Interestingly, though there is no value for money for the debt we owe, it currently stands slightly above 60% of GDP. Sadly, the monies we borrowed do not measure up to the investments in infrastructure, social interventions, GETFUND, salary arrears and a host of statutory payments and subventions to education and state agencies pending funds disbursement by the Government of Ghana.

It turns out that the monies went rather to individuals and cronies—a clear case of fraud against the state or the taxpayer. In fact, the amounts borrowed did not go into investments, but went into the pockets of supporters or foot soldiers of the NDC for the 2010 World Cup in South Africa, fake GYEEDA beneficiaries, and inflated GoG contracts via sole sourcing, among others. The NDC cronies then eventually channelled these corrupt monies into building a $20 million headquarters for the NDC party—a party that could not even pay its light bills at its headquarters when in opposition! Also regrettable, is the payment of monies to Woyome and all the “create, loot and share ” ponzi schemes by the government to defraud Ghanaians via a negotiated debt settlement by government officials disguised in the so-called fake “Judgment debts” that never were, when in fact the courts had ordered no such payments, especially in the case of Woyome.

Needless to say that when Greece faced a similar budget deficit of 12.8% due to corruption and mismanagement in October 2009, the investor confidence was lost in the economy and it became clear that Greece would not be able to pay back its debts and the interests thereof. The resulting corruption and mismanagement of the Greek economy led to austerity measures by way of cutting or removing subsidies, cutting government expenditure and finally a bailout from the IMF AND EU CENTRAL BANK. However, the negative fallouts were the resultant social tensions, political upheavals, demonstrations and voting out the incompetent political leadership to pave way for a new leadership, which eventually secured favour from the bailout that it received.

Hence, the Ghanaian crisis is worse than Greece's recent economic crises. Therefore, folks in Ghana must brace themselves for more difficult times. We were warned that the recent Greece crises, coming on the back of reckless hidden high deficits and corruption, would be surpassed by Ghana's own reckless deficits and corruption. The full impact or fallout of the record high budget deficit will hit every household squarely. This will lead to high cost of living, economic, social and political upheavals like it happened in Greece. History has it that those countries that faced similar problems reached that pinnacle in terms of social upheavals like it happened to all economies (strong or weak) that faced even less severe of such similar problems. A recent case in point is the Greece episode.

In conclusion, this is just the beginning of the price paid for economic mismanagement. The unfolding consequences will forever be the most unfortunate bitter lessons we will learn as a country. Economic management of a country is not an easy fix, for it to be recklessly thrown out of gear by irresponsible and unaccounted for deficits. We are in a deep hole. It will only take a huge bailout to restore us to a stable path, where we can have the free space to start building the economic pillars again. We have derailed progress for at least 7 years, and we will pay for the fallouts for a decade. Watch this space and see as the very harsh economic, social and political realities unfold right before all of us. The tree of sycophancy has now bore fruits and we will harvest according to our contributions.

Stay blessed folks.
MBA – Finance & Economics
By Daniel Amponsah, Ohio USA