General News of Monday, 17 February 2014
Source: Today Newspaper
The Minority caucus in Parliament has asserted that the government of the National Democratic Congress (NDC) under the leadership of President John Dramani Mahama has no antidote to the current falling economy.
New Patriotic Party (NPP) Members of Parliament (MPs) in a release stated that their concern stems from the fact that the Mahama administration was offering ‘outmoded responses’ to the weakening currency, a situation which points to the fact that the government is ‘bereft of workable ideas’ in solving the economic woes of the country.
“There is nothing to suggest that this [the Mahama] administration can fix the economy since, thus far, whatever ideas this government is capable of generating and, indeed, has put forth have proved incapable of fixing the economy…,” the minority stated in their release.
Measures put in place by the administration to tackle the economic problems, the release said, further expose the government’s incompetence in tackling the economy.
“Unfortunately, there is nothing in the measures announced by government that would support increased output…,” it said.
According to the release, Ghana’s hopes of ever recovering from the shock of an increase in tariffs were dealt a great blow when the Mahama administration increased the Value Added Tax (VAT) by 2.5% and also removed subsidies on all petroleum and utility products.
The government, it said, contributed much to the weakening of the cedi which depreciated at a whopping 7.8% against the US dollar in January, 2014.
The minority said the president has refused to listen to all wise counsels on the economy and also failed to put in measures in time to save the situation.
“Even after all the credit rating agencies downgraded our credit rating as well as its outlook, the government failed to put its fiscal house in order. Instead, President Mahama’s government and their apologists chose to engage in fruitless arguments with these rating agencies…,” it recounted.
Ghana’s huge budget deficit and debt ballooning of about 11% of GDP in 2013 and $23 billion, the release said, respectively occurred because of the uncontrolled borrowing and irresponsible spending on the part of government and its appointees.
“It is a matter of fiscal indiscipline and economic mismanagement…,” it added.
Dwarfs, high rise buildings and the denomination of the cedi per the release can never be the cause of the falling cedi with the statement continuing that the dollarization of the economy has always been part of the economy since the 1970s.
However, it said the impact of dollarization on the country’s economy is highly felt in periods when the economy is highly mismanaged with the country also travelling the path of fiscal indiscipline.
It also attributed the depreciation of the cedi to other factors including the injection of excess amount of cedis into the economy relative to production.
“We are paying the price for Woyome, Waterville, Isofoton and other so-called judgment debts, SADA. SUBAH, GYEEDA. Dealing with corruption is, therefore, key to restoring sanity in public finance…,” it continued.
The minority was also of the view that the solutions professed by the central bank towards saving the ailing economy are not only late in saving the situation but are also outdated and business unfriendly.
“What prevented the Bank of Ghana [BoG] from holding the emergency Monetary Policy Committee meeting earlier when the crisis was unfolding? Why didn’t the bank pump more reserves into the ailing economy in time? What has happened to the unprecedented level of foreign exchange reserves and government claims to have built up?”
These questions, the minority believes, show that unregulated failure on the part of BoG and the NDC government, thus calling on the BoG to take full responsibility for the problem and stop passing the buck.
The central bank through its directive not to allow the issuance of cheques and cheque books on Foreign Currency Accounts (FCA) and Foreign Exchange Accounts (FEA) are forcing foreign currency holders to bank their forex in the homes.
“This directive might not only be illegal, it also has the potential of discouraging savings in a country where the culture of savings with the banks is still very low and less than 50 per cent of all business transactions pass through the banks…,” it said.
The minority agreed with the assertion of Ghana’s Ambassador-designate to the Netherlands, Dr. Tony Aidoo, that measures from the BoG such as the exchange rate controls are ‘panicky’ and one that would further push the ordinary Ghanaian from saving with the banks and also boost transactions on the black market.
As a solution, the minority supported the call by BoG that the minister of finance and economic planning should work hard to cut down on the huge budget deficit as well as get the macro fundamentals back on track through the lowering of inflation and avoidance of over-expenditure.
“Fiscal and monetary policy have to be prudently implemented to achieve these goals…reserves accumulation is unnecessary in the present circumstance, unless there is something the central bank is not telling us,” the statement noted.
Real investment in the economy, increase of the export base and manufacturing of consumed products, the release said are of utmost importance if the country is to get back on track.
“If Ghana should indeed be the gateway to West Africa, we should not lose our competitive edge in investment. We should sanitise the investment environment to attract more purposeful investment and hence attract more hard currency into the system,” the release stressed.
The minority caucus, however, warned the NDC government to learn that propaganda has its limits and bad economic management has adverse consequences for the economy.
Meanwhile, President Mahama will this week visit Parliament to deliver his annual state of the nation address.
The president’s visit is in accordance with the provisions of the 1992 constitution which mandates all sitting presidents at the beginning of the year present to the people’s representatives’ account of the happenings in the country.
Thus, on Thursday, 20th February, 2014 President Mahama will storm Parliament with the state of the nation address.
Sources from the presidency and the legislature indicate that issues of the economy would feature in his address and many expect the president to reiterate steps taken by his administration and his economic advisers to arrest the problem.