Nduom’s Perspectives on the 2010 budget
….Difficulties on the Road to a Better Ghana.
“Given the experience in 2009 I had expected that government would come through with a program to inject a heavy dose of local participation in the economy”.
This was the reaction of the Convention Peoples Party 2008 Presidential candidate, Dr. Paa Kwesi Nduom in a statement copied to theghanaianjournal.com on Thursday.
According to him he was not surprised when the key objectives set by the President Mills' NDC Administration's Finance & Economic Planning Minister for 2009 were missed.
Readers can read the full statement by Dr. Paa Kwesi Nduom
Introduction – 2009 Budget
With firm signals of uncertainty and lack of confidence, the Minister of Finance & Economic Planning introduced the 2010 budget to Parliament in a way that told Ghanaians that the road to a better Ghana has many curves, potholes and roadblocks. We need to refer to the 2009 budget presented by the Mills Administration to Parliament on March 2009. That budget aimed to reduce the estimated end of year 2008 budget deficit of 14.5% of GDP to 9.4% of GDP at the end of 2009. To achieve this, a program of economic stabilization and fiscal control was initiated. The program was to “…reduce the current budget deficit to sustainable levels, improve the exchange rate regime, and work towards the attainment of single digit inflation.”
According to economic and financial experts in Ghana, it is clear that 2009 has brought in its stride stagnation in economic activity with inflation still relatively high. Any entrepreneur or a future one in Ghana must accept and recognize that the global financial crisis has had a big impact on us. Remittances from Ghanaians abroad have not kept pace with previous growth levels. The Stock Market has continued to experience selling instead of buying which means lower prices for shares on offer. The big buy orders from abroad have virtually dried up. We are feeling the effects of global economic difficulties combined with self-inflicted problems. Inflation has gone down from a high of is still high. The Bank of Ghana's prime rate has gone up to 18.5% driving up the cost of money. Many banks have deliberately slowed down lending. We are selling one dollar today for 1.45 GHC and buying it for 1.55 to 1.65 GHC. Money has been made scarce and so it is becoming very expensive. The ordinary person is borrowing at 48% per annum with the urban and rural poor borrowing at 5 – 8% per month or 60 to 96% per annum.
In 2009, the Mills Administration led us back firmly into the grips of the World Bank and the IMF and their growth-suffocating conditions. It has been reported that over 2 billion US dollars have been committed by these institutions to support the Ghanaian economy in exchange for the implementation of stabilization measures including freezing public sector employment and a further liberalization of pricing in the crucial energy sector. Also worrisome is that fact that the Economic Governance & Poverty Reduction Credit from the World Bank is supposed to “… serve as a partial bridge to the onset of oil production”. This can only mean that we have started to spend oil revenues even when as a country, we have not agreed on the use of petrol dollars. The “conditions” for disbursements from this facility are virtually the same or similar to the ones attached to facilities granted to previous administrations. A review of other facilities signed with the World Bank will show previous Administrations' (1993-2008) similar commitments for budget discipline, energy issues, public sector reform and poverty reduction. Predictably, disbursements expected from the international finance agencies have delayed due to the government's inability to satisfy conditions in a timely manner. So our reliance on the charity of foreign governments to finance our budget has deepened in 2009.
Not surprisingly, the key objectives set by the President Mills' NDC Administration's Finance & Economic Planning Minister for 2009 will be missed. No single digit inflation, no reduction of budget deficit to sustainable levels, no improvement in the foreign exchange regime. Furthermore, government's revenue targets will be missed while cost of living has risen. On top of it all, fuel prices have risen drastically. This is not the path to self determination.
Expectations of Government Fiscal Economic Policy for 2010
Given the experience in 2009 I had expected that government would come through with a program to inject a heavy dose of local participation in the economy. I believe that this is the time to find a way to enable Ghanaians to gain control over the domestic economy and adopt nationalistic policies in the management of the nation's development agenda.
Elsewhere in the world, governments have gone out of the normal ways to inject resources to prop up and some cases resurrect near-death enterprises. In the USA, they have had for several years their Small Business Administration that at the federal level, there is provides business advisory service, low interest loans and access to government contracts among others. Minorities get similar support plus a provision that allows government to set aside a percentage of certain contracts for minority enterprises to help their development and growth. In Canada and other places, they have similar programmes and specialty ones to encourage entrepreneurship on the part of women. We are all aware of the billions of U.S. dollars that have been spent by governments in North America, Europe and Asia to support enterprises and protect their domestic jobs. So government support to business enterprises is not an ideological matter, it is matter of the survival of domestic entrepreneurial spirit and the prosperity of the people.
So what do we need to do to launch an aggressive crusade to buy locally produced goods and services? It needs leadership. Parliament and the Mills Administration can lead in a way that will make this crusade national and enable it to gain a solid foundation. One relatively inexpensive way to enable local producers to find their feet in the market, walk and then run is for the government to ensure that the taxes collected from the people go to fund local enterprises. Locally produced items such as fruit juices, soap, electrical supplies, chocolate, rice, etc must be supported through a hard and secure policy that restricts all government-funded organizations and projects to buying local with no exceptions.
Also, services provided by local professionals – consultants, architects, road/building/electrical contractors and investment advisors must be given a preference.
In addition to providing support financially, such a policy must also come with measures to promote quality through technical assistance. The Koreans did this successfully which enabled them to overcome poverty and gain a giant measure of prosperity within two decades.
I expected the Mills Administration to use the 2010 budget to provide a Ghanaian Stimulus to bring the economy back home.
The 2010 Budget
The Minister of Finance & Economic Planning presented a “business as usual” policy orientation that included the usual NDC-NPP blame game. The repeated emphasis on comparing arrears and problems left by the NDC1 administration in 2000 and the NPP administration in 2008 rather than focusing on results achieved or inherited problems solved was a clear indication that the 2010 budget would not produce any serious, challenging targets.
The 2010 budget continues the policy of achieving macroeconomic stability and fiscal consolidation at the expense of real growth that would encourage job creation and rise in the standard of living of Ghanaians. The budget presented today does not carry with it the policy intentions that will make it easier for our companies to gain easier access to credit, obtain lower cost funds and create more jobs in the country.
I have examined priority spending areas and their implications and am at a loss to pinpoint something said by the Minister to tell the people how we will arrive at a better Ghana through the following areas:
- Oil and Gas
- Modernisation of Agriculture
- Private Sector Development
- Key Infrastructure Development
- Information and Technology Development.
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In my view, nothing new or different or challenging was presented in Parliament today that described the ability to deliver on targets set in the budget. It is quite apparent that priority and significant hope is being put by the Mills Administration on oil and gas revenue to move the country to 8-10% GDP growth in the future in order become a middle income country in 2020. Nothing new was presented by the Minister of Finance to show how we will get there. Much was said about stabilization, expenditure controls and arrears payment – what made the economy stagnate in 2009 – but very little about growth. Given that the prospects are that the Mills Administration will miss its 2009 GDP growth target of 5.9% with an actual of about 4.7%, it is difficult to determine how we will reach a growth target of 6.5% in 2010. Without growth, the dream of a middle income country in a better Ghana will not be achieved during the four year tenure of the Mills-led NDC Administration.
source: Papa Kwesi Nduom, PhD; CMC