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18.11.2005 Business & Finance

Budget suffers from “Dutch Disease” - Asaga

By Statesman
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MOSES Asaga, Minority Spokesperson on Finance and Economy, who returned from London this weekend, has added his voice to the National Democratic Congress' criticism of the 2006 budget statement read in Parliament by the Finance Minister last Thursday.

Mr Asaga describes the budget as not only an “Azaa” one, but also “a 'Budget of Confession' that Government's policy of ensuring Macro-Economic stability has failed to address the real and basic needs of the people.

“We told you so that basic needs of the people such as cheap and decent housing for the people, living wage, ability to afford three square meals is not based on only macro-economic stability,” he argues in a statement released yesterday. Mr Asaga maintains the New Patriotic Party's economic policies, which he calls the “Dutch Disease' typical of an IMF/World Bank economic model,” has not worked.

“And that is why after 5 years in government the needed results of putting money in the pockets of the people have not worked.”

He defends the Minority's description of the 2006 budget. “This budget is an Azaa budget because it is all sound and fury. The budget says it seeks to invest in people and invest in jobs. Such statements had been made repeatedly in the Sessional Address of the President that we want to invest in human capital and also on political platforms that the NPP would create 300,000 – 1,000,000 in 3 months, another in 6 months and another in 1 year. After 5 years the government is coming back to tell Ghanaians that they want to invest in people and jobs.”

He argues that the budget fails to address the issue of investing in people and investing in jobs “because the economic policies and structure have not changed.”

“The budget is based on high tax financing, high Petroleum Tax Financing, Donor driven in the key sectors, has low deficit financing, and very high capital account financing of the current account deficit. And indeed this capital account financing is dominated by official flows and not by FDI Portfolio Investments.”

Mr Asaga believes Government has also misled Ghanaians on the issue of revenue collection. “The claim that revenue increases are due to efficient collection is false and misleading. The high volumes of collection are largely attributable to the high taxes, introduction of new taxes, such as VAT increase to 15.5 National Reconstruction Levy 2.5 - 7 percent raise, huge increases in petroleum prices and petrol and taxes of the highest order now 43 percent Any government can collect more taxes at the current rates. The NPP inherited a VAT of 12.5 percent, zero NRL, below 40 percent fuel tax and price of ¢6,000 per gallon compared to ¢32,000.”

To make the 2006 budget work, the NDC MP for Nabdam has offered some advice to Government. “If you want to create jobs then government must do the following: Reduce the amount of tax charged on Petroleum from 43 percent to 35 percent; reduce the price of fuel from ¢32,500 to ¢23,000, scrape the Withholding Tax of 7.5 which is killing businesses; abolish the National Reconstruction Levy; reduce VAT from 15.5 to 12.5.”

He is also calling on Government to pursue vigorously President Kufuor's call for a zero tolerance for corruption and borrow externally with the B+ credit rating to invest and finance the productive sectors of the economy.

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