Ghana's Economy Crushing Under the Weight of External Debt

....Faced With Low Tax Revenue New Finance Minister Plans Reduction in Government Expenditure

Ghana's economy is crushing under the weight of external debt, according to the country's new Minister of Finance, Hon. Yaw Osafo-Marfo. The Minister of Finance is in the United States as part of a high level official delegation to the World Bank.

Hon J. H. Mensah, Majority Leader of Ghana's parliament and the Governor of Ghana's central Bank, Bank of Ghana, were the other members of the delegation.

Speaking at an "Open Forum" Saturday, April 21, at the Ghana embassy in Washington, DC, Osafo-Marfo who is also the Member of Parliament, MP, for Akyim Oda constituency, indicated that all taxes collected by government has not been enough to balance domestic expenditure.

Mr. J. H. Mensah who is also the Minster in charge of government affairs, told the audience of about 250 Ghanaians and a few African-Americans, that the forum was an opportunity for the delegation to hear what Ghanaians abroad think about what is going on in Ghana. "We must recognize the significance of the decision we took last December," said J. H. Mensah, with obvious reference to the 2000 elections that brought the New Patriotic Party, NPP, to power.

Indeed, the December 2000 election process in Ghana and the results were both historical and significant. For the first time since independence in 1957, the country experienced a peaceful change of government through the ballot box and also saw the exit of a military and quasi-military regime that had reigned for 20 years.

"We waited for too long for the consolidation of democracy in Ghana," J. H. Mensah admonished Ghanaians. He told Ghanaians living abroad that "Today people are questioning everything" in Ghana, a situation that "brings back memories."

For J. H. Mensah, the memories he talks about go back to the post-World War II struggle for political independence in the Gold Coast. People in the Gold Coast, ruled by colonial British government, "followed J. B. Danquah and the [United Gold Coast Convention] UGCC in 1947 with a passion," according to J. H. Mensah. He said the passion for political change in 1947 is the same today in Ghana, "It is taken personal."

J. H. Mensah did not mention, though, that it was the Committee for Youth Organization, CYO, a breakaway faction of the UGCC movement that spearheaded the actualization of political struggle for change to victory in Ghana. The CYO, to those who may not know, was transformed to the Convention Peoples Party, CPP, led by Kwame Nkrumah, which powered the reality of political independence for Ghana.

Mr. J. H. Mensah, Minister of Finance in Ghana's Second Republic (1969 to 1972) pointed out that there are great difficulties with the economy in Ghana today. "We did not become independent to continue the same economic path," Mr. Mensah lamented.

Osafo-Marfo cited economic indicators of Ghana that were heartbreaking. For example, the rate of inflation in Ghana was 40% at the end of 2000 with 45% interest rate in the financial sector.

According to the Minister of Finance, imbalance in government revenue and domestic expenditure has been a result of the low level of tax collection. Corruption has been the biggest problem for tax collection and payment in Ghana, resulting in the low revenue accruing to government.

Ghanaians have a great affinity for "cutting corners when it comes to taxation," Osafo-Marfo pointed out. He singled out CEPs, the Customs Department, as the biggest culprit for corruption in the area of tax collection. Osafo-Marfo mentioned also the Internal Revenue Service, IRS, as another agency where corruption is rife. Some Ghanaians were surprised when he did not mention some more government agencies, such as the Accountant General's department where corruption is suspected to be rampant.

Osafo-Marfo indicated that 45% of Ghana's national revenue is spent on servicing interest on domestic debt alone. In this regard, "We have to discipline ourselves by reducing our expenditure," said Osafo-Marfo.

In a period of over two hours, the delegation that had indicated it wanted to hear from Ghanaians had what it bargained for in the form of questions, comments and some 'lectures'.

When this reporter asked for what the NPP government has to offer for economic change and resuscitation in Ghana, Osafo-Marfo was on top of his game, endearing himself to the admiration of the audience. For starters, the Minister of Finance indicated that the NPP government operates on the principle of "zero tolerance for corruption." As an indication of the seriousness it views corrupt practices, a fired Minister of Sports responsible for a missing $46,000 meant for the national soccer team, is scheduled to be prosecuted in court.

Osafo-Marfo remarked that in some previous Ghanaian administrations, the sports minister's actions that led to the missing $46,000 would have been swept under the rug, so to speak.

There was spontaneous applause when the Minister of Finance announced that he has ordered the auditing of para-statal institutions. He explained that the auditing exercise is not meant as a witch-hunt of the previous government's appointees but rather a means of bringing corrupt officials to book. At the highest level of abstraction, corruption can be defined as the abuse of official position for private gains.

In response to an African-American businessman who recommended the establishment of a special bank through which African-Americans could invest in Africa, Osafo-Marfo said such a bank, the African Development Bank, AfDB, has been in existence since 1975. He noted, though, that Europeans, rather than African-Americans, have been the principal investors in AfDB.

Prof. Augustus Abbey of Morgan State University's School of Business agreed with this reporter that the AfDB, obviously, has not done a good public relations job in selling itself to the African-American community. Osafo-Marfo explained that AfDB, based in Abidjan, Ivory Coast, is a low-cost institution where African governments can borrow investment funds.

In view of the seriousness of the imbalance in revenue and domestic expenditure, Osafo-Marfo gave the indication that the NPP government will not hesitate to raise the Value Added Tax, VAT, rather than reducing it, as requested by a questioner.

On the question of financing education in Ghana, Osafo-Marfo said he has discovered that there is no mechanism available for student loan repayment and those loans have not been collected. In addition, he indicated that for a long time, businesses and institutions that owe government have failed to repay. "I have written for re-payment and will prosecute delinquents," said Osafo-Marfo, with respect to uncollected government bills.

"As a banker, I know that if borrowers do not make repayments you have to write to them giving the date and time for action to be taken and Yaw Osafo-Marfo will do that," the Minister of Finance emphasized. Good riddance!

Mr. J. H. Mensah pointed out that Ghanaians expect a very big economic dividend from the change of government but noted that it is not the government's role to create capital but to lead and guide the economic process. He indicated that Ghana is seeking relief from its international debt obligations and does not consider applying for participation in the Highly Indebted and Poor Countries, HIPC, program a bad idea. An economist by training, J. H. Mensah told Ghanaians to accept that "we are poor."

Mr. Mensah asked Ghanaians to acknowledge that "the per capita income of $390 is less than the poor man's income."

According to Mr. Mensah, "There is in Ghana, and has been, mistrust of success. "The politics of envy has been one of the problems in Ghana." However, J. H. Mensah stretched one's imagination when he blamed "socialism" for mistrust of the private sector in Ghana.

J. H. Mensah's view on "socialism" in Ghana is in apparent reference to the economic ideology espoused by Kwame Nkrumah who led Ghana to independence and served as Chief Executive from 1957 to 1966.

Overthrow of Nkrumah's regime actually paved the way for the coming into political power by the government of Prime Minister Kofi Busia and the Progress Party in 1969. Mr. J. H. Mensah was a cabinet minister in the Busia Administration.

In fact, the Progress Party of 1969 was one and the same as the United Party, UP, which had opposed Kwame Nkrumah's CPP since the day before Ghana's independence. In this sense, it should not be surprising that Mr. Mensah seizes the opportunity to blame the contradictions of Ghana's economy in 2001 on "socialism".

What is worrisome, today, is for a high ranking official of the NPP government to refer to "socialism" in the discussion of Ghana's downtrodden economy. This is especially so since the three-month old NPP government has declared its intention to put the past behind and to move Ghana forward.

In any case, Mr. J. H. Mensah needs not to be reminded that declaration of "socialism" by Kwame Nkrumah ought not to be taken as materialization or actualization of that ideology; far from it.

If J. H. Mensah is desirous of playing the blame game in explaining Ghana's decrepit economic situation, he does not need to go back to pre-1966 conditions. Mr. Mensah may want to look at a commentary in Aug. 13, 2000 issue of The Ghanaian Chronicle: "When Flt. Lt. Rawlings was at the Trade Fair advocating against the buying of Apino soap, Darko Farms chicken products, and products from Dr. Addison's factory, there were many who questioned the merits of such invidious pronouncements." This episode captures Mr. Mensah's view of "the politics of envy" much better.

To those complaining about Ghana's participation in the HIPC program, Mr. Mensah reminded them that "Ghana has lived with IMF conditionalities since 1983. He noted that "Ghanaians have demonized the [International Monetary Fund] IMF but through the HIPC interest payment will come down."

To capture the reality of Ghana's position in the world economy, Mr. Mensah was quite blunt when he noted that "Ghanaians are living in the Zongo of the global village." In Ghana, "Zongo" describes deprived slum enclaves in urban and rural townships.

What Ghana needs, according to J. H. Mensah, are new standards of performance in public service delivery. He asked Ghanaians living in the United States how many of them play with "lotto" numbers on the job. He said in Ghana workers do their "lotto" permutations at the workplace and that is going to stop.

Mr. J. H. Mensah urged Ghanaians living abroad to get together into groups to establish businesses in Ghana. He noted that there is a tendency on the part of Ghanaians to go "solo" when it comes to establishing businesses and advised that in the eyes of bankers, groups attract more credibility than individuals.

"We want to bring positive change to Ghana," Mr. Mensah emphasized. He declared also that "We need successful businessmen to power the economy."

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