Editorial: Govt must not be shy to spend big
THE scientific and comprehensive national survey conducted by the Ghana Centre for Democratic Development in March gave the following indications about people's opinions on the economy: 63 percent felt the national economy was in bad shape (66 percent in 1999, 59 percent in 2002); and 65 percent said their living condition was bad (68 percent in 1999, 63 percent in 2002). The clear reading from this is that Government has to deliver on the economy. Period.
Next week, the 2006 national budget is expected to be read, tentatively, Thursday, November 10. The challenge therefore is for President Kufuor and his Finance Minister to respond boldly and positively to the common national cry: “There's no money in the pocket.” This in effect would call for a translation of the five years of macro-economic stability into productivity. The answer to this, again, could be found in the same Afrobarometer survey by the CDD last March. It showed that Ghanaians place unemployment at the top of the nation's most pressing economic problems. As a measure of the depth of the unemployment problem, a significant proportion of respondents (40 percent) reported not having jobs that pay cash income. Over half of Ghanaians, according to the survey - 56 percent - reckoned that the availability of job opportunities has worsened as compared to what it was a few years ago. In 2002, the figure was 46 percent, indicating growing despair over the job situation. The news that next year's budget, which is hopefully to be read next week, will focus on the creation of employment should therefore come as a national relief. Indeed, it is scandalous to hear a President or his Finance Minister saying they do not know what the unemployment figures of the country are. Without these figures it is almost impossible to plan an economy competently –although it must not be forgotten that this failing also reflects the overwhelming size of the informal sector in Ghana.
What The Statesman would like to see is a specific national policy to transfer people from the informal sector to the formal sector. We believe Government can begin by introducing a graduated corporate tax system. This could see corporate tax ranging from 10 percent for the smallest scale business to the 28 percent upper ceiling expected in next year's budget. This should also mean the introduction of the national identity card system. In addition, it could include the simplification of book-keeping for small scale businesses, including the setting up of a government agency, dedicated to assisting the informal sector in the crucial transitional area of book-keeping.
If the NPP is serious about holding on to power then it needs to change its language from basic macro-economic stability to putting money into the pockets of those willing to work.
The ruling party must begin to embrace with gusto the economic philosophy which we have termed Neo-Keynesian. This, we define as increasing capital expenditure massively but not with the intention to open up the budget deficit without any short to medium term revenue expectation to close it up. It means spending big, but by finding creative and expansive ways to enhance revenue within the short to medium term. It means borrowing more and using the bulk of what you borrow to invest in the productive sectors.
According to figures available in the 2005 budget, the estimated total receipts (and total payments) for 2006 was ¢39 trillion ($4 billion). This is only ¢4 trillion more than this year's estimate. Discounting an annual average inflation rate of about 15 percent, we believe this expenditure increase is far too modest to put the oomph into the NPP's promised accelerated growth. We also do not buy the argument currently making the rounds in the Cabinet that the delay in 100 percent multilateral debt relief is putting a check on Government's plans to spend big next year.
The expectation is that the debt relief package would set in by June 2006. What is irrevocably true is that debt relief is due Ghana. Thus, even if it is delayed until 2007, it is still bound to come. Secondly, there is an expectation that foreign aid to Ghana may double latest by 2007.
Government should therefore not be shy of building up a budget deficit and offsetting that with the expected income from our donors in the near future. The fact is this: If the macro-economic gains chalked in recent years are not speedily supported by a radical boost in productivity we would end up returning to ground zero, as seen in the past. Macro-economic stability cannot be maintained in a vacuum. Leave it hanging on its own for long and we will watch it come tumbling down.
The bottom line is that Government must spend and spend big. And what can be more responsible and comforting than spending big and knowing there is more money on the way.