'Ghana's Economy In Crisis' - Minority

The Minority in Parliament says Ghana’s economy is in crisis as total debt stock keeps sky rocketing under the leadership of President Nana Akufo-Addo since he took office in 2017.

The opposition National Democratic Congress (NDC) MPs say the country's debt is now up from 122 billion cedis in January 2017 to over 154 billion cedis as of May this 2018, excluding the Energy Bond of GHC 4.7 Billion.

Non-oil Gross Domestic Product (GDP) growth has declined from 5.1% in 2016 to 4.6% in 2017. But according to the Minority, oil GDP growth declined from 2.1% in the fourth quarter of 2017 to 1.5% in the first quarter of 2018.

Their estimation states that growth in the agricultural sector is estimated to have declined from 2.9% in the fourth quarter of 2017 to 0.4% in the first quarter of 2018, while growth in the industrial sector declined from 4.0% in the fourth quarter of 2017 to 2.3% in the first quarter of 2018.

Former Deputy Minister and Ranking Member on Finance, Caisel Ato Forson disclosed this at a breakfast meeting with the Parliamentary press corps, representatives of Civil Society groups, the Trades Union Congress, the academia and some governance think tanks on Monday, July 16 2017.

Mr Forson said reality has dawned on the NPP government who in opposition had pledged to move Ghana "from taxation to production" as it plans to slap Ghanaians with a VAT and National Health Insurance Levy (NHIL) increment.

He contended that the potential growth that was forecast by institutions such as the World Bank in 2016 indicates that the ruling New Patriotic Party (NPP) is "rather supervising a real sector economy that has performed below its potential" because the government, out of economic mismanagement, has channeled the country's oil revenues "into consumption instead of investments and managing the public debt."

He also added that "the NPP Government is superintending over a perfect recipe for high deficits" and "record borrowing that it seems to be hiding under a financial engineering plan."

"In the IMF Staff Report on the 5th and 6th Review of the performance of the Ghanaian economy under the ECF Programme, the Fund stated that the outturn for fiscal year (FY) 2017 was characterized by a large revenue shortfall. Specifically, overall tax revenue was lower than programmed by 0.7 percent of GDP, on account of trade taxes, being lower than programmed by 0.5 percent of GDP, and VAT being lower than programmed by 0.3 percent of GDP, reflecting high refunds.

Non-tax revenue was also lower than programmed by 0.6 percent of GDP, reflecting implementation problems with the new policy on retaining internally generated funds (IGFs) of central government agencies. The Fund further stated that the disproportionate increase in petroleum taxes had been almost entirely offset by a marked erosion of direct taxes and VAT while the performance of import duties remained flat (see pages 5 and 11 of IMF ECF Staff Report)," a statement from the Minority said.

Economy In Crisis
The Minority said data available at the Ministry of Finance shows that revenues recorded high deviation from January to April for Fiscal Year 2018, resulting in the fiscal deficit being higher than targeted.

"The fiscal deficit on cash basis is estimated at GH¢6.4 billion (2.4% of GDP) against a target of GH¢5.7 billion (2.4% of GDP), a deviation of 11% or GH¢ 632 million – (Finance Minister’s Presentation to Labour Unions, Wednesday, 11th July, 2018)," Mr Forson added.

To him, it is clear the deficit is the result of expenditure overruns and accounts for the highest pace of borrowing the government is engaging in.

"It is also obvious that the Vice President’s boastful “magic”, to be able to generate revenues to meet huge expenditure promises, without borrowing and even reducing taxes, has failed miserably," he asserted.

Hardships
The Minority has since predicted untold hardships on Ghanaians due to what they described as a "populist" approach the Vice President, Dr Mahamudu Bawumia and his economic management team has resorted to in quest to managing the country's economy.

Reacting to reports of an imminent rise in VAT , Cassiel Ato Forson stated that the idea will cripple businesses in the country which will be a "hell" for citizens, contrary to the "Heaven" the NPP promised Ghanaians prior to the 2016 general elections.

"...it [the tax increment] would be most baffling as, apart from the extreme hardship it will impose on Ghanaians, it makes the Free SHS justification untenable without tax increases," Mr Forson hinted.

"...we wish to remind Ghanaians that the 2.5% VAT proceeds that accrues to the Ghana Infrastructure and Investment Fund (GIIF) has already been committed to finance that programme [Free SHS], as part of the 2017 and 2018 budget. This is another clear example of also channeling non-oil revenues into consumption, away from investment."