The 2012 Budget: Breaking The Curse Of A Decade

By: Victoria Lakshmi Hamah

All over the world discussion of current hardships is taken from a period from mid-2001 to the close of 2010. In the US it has meant resurrecting the scary ghost of the Bush era. In Greece the reckless, fraudulent sale of the country to German banks through the issuance of high interest bonds that has brought attention to priorities and decisions of governments over the decade in question.

The Trades Union Congress leadership in Ghana argues that the cost of living in Ghana is high despite high economic growth figures. That is correct. This is mainly an effect of political and economic policy of Governments. That is even more correct. Life under Mills is better than that of Kufuor. That should also seem obvious.

The main point here is that, you cannot analyze the challenges and the objective conditions of any economy in a period of two to three years. The opposition commentators and government critics have tried to arrest and imprison rational public debate by this limitation.

The TUC must issue constructive criticism on the way forward for economic management guided by an unbiased/ critical inspection of the priorities of governments over a realistic time frame.

2001-2011 decade is a harsh one; and it is mainly a Kufuor/NPP decade in Ghana and a George Bush decade in the United States.

The only faith the NPP regime kept with the organized labour was the embryonic initiation of the Single Spine Salary Structure which has been given life and breath by the Mills Government. 97% of workers have been migrated into the Single Spine Salary Programme despite constraints on Government finances, broadening of social intervention programmes and expansion of the social sector -- which broadly reflects an increase in social wages -- and not to mention the enormous administrative challenges associated with its implementation At a period that governments throughout the globe are imposing austere economic measures and cuts in social services throughout the globe, the National Democratic Congress (NDC) Government is extending much support to the social sector of the economy. This is commendable. Consider the following: The National Youth Employment Programme (NYEP) is aiming at recruiting 692,000 more jobs under its 15 modules; the school feeding programme is to cover an additional 500,000 pupils; the allocation of a record GHC 138 million for capitation grant, free school uniforms, free exercise books and subsidies for basic and high school education.

A record 23.7% of total government expenditure has been allocated for basic education, primary health care, feeder roads and poverty centered agriculture, rural electrification and rural water as part of the measures for poverty alleviation.

After the 2000 recession, economies around the world began to experience some recovery. Normally it is not possible for any economy to forever remain in a recession. There was a boom in the first half of the decade. In fact no regime had had more foreign assistance than the Kufuor regime. The ‘rationale’ of a ‘boom’ implies that a recession will follow. In economic management it is necessary to allocate resources to viable sectors of the economy to be able to minimize and erase the effects of a recession or even take advantage of it. Greece at the same period as Ghana saw frivolous government spending and the issuance of high interest on government bonds to attract German and French banks to finance inflated governments contracts. Greece was a country that also counted and depended on foreign inflows in the form of remittances and tourism. Thus shocks in the global economy particularly foreclosures in the US greatly threw overboard economic expectations .The reckless 2004 summer Olympics spending was just one story of the misplaced priorities of the Greek government at that time.

In Ghana under Kufuor the story was not different.

The adoption of the Highly Indebted Poor Country (HIPC) programme implied that resources meant for meeting sovereign debt obligations are diverted for ‘development’ purposes under the cosmetic Ghana Poverty Reductions Strategy guidelines. The story was simply distributing HIPC funds without parliamentary consent to various sector Ministries at a time that the Ghana Education Trust Fund and the District Assembly Common Fund stood in arrears.

The legacy of the first term of the Kufuor rule was some kind of short sighted investments and publicity stunts such as the construction of HIPC KVIP toilets throughout the country. It was a lost opportunity for economic development. The Kufuor regime never improved the productive capacity of the economy to be able to withstand the shocks of an impending global economic slowdown. The tourism sector that saw great attention by the NPP Government was extremely dependent on the consumption power of the Northern countries. There was no innovative policy for productive capacity for local tourism.

There was also over dependent on the traditional sectors such mining, cocoa and logging.

At the end of the NPP regime, the only innovative features of economic life where five star hotels, exotic shops and eateries concentrated in prime areas of the capital. There is no need saying much of these investments are owned by leading political actors of the ex-regime and their close associates.

The only, perhaps proper, social investment initiative might be the Presidents’ Special Initiative (PSI). But under a corrupt and incompetent regime it became a total failure. The PSIs can be described as still born and wasteful when compared with ambitious and innovative investments in the agricultural sector under Mills regime like the National Buffer Stock Company (NBSC) – or the rehabilitation of irrigation dams in the three Northern regions; fertilizer subsidy and other incentives to agriculture which is the leading engagement of the national work force.

The Kufuor Government enjoyed and abused its good will in the early years to sky-rocket petroleum taxes; this heightened the conditions of mass poverty and rising cost of living in the midst of an exaggerated and doubtful claim of sound macro-economic indicators.

The Mills Government in the two years of its term needed to boost government revenue and ensure macro-economic stability and a predictable and stable economic climate. It had meant a moderate increment in Petroleum taxes and cautious imposition of austerity measures. This has enabled its success in securing massive loans to meet the housing, transportation and agricultural infrastructural deficit of the country without any adverse effect on standard of living of the national population.

Governments need to raise taxes and at times impose some measures of austerity. In a sense; a redirection of resources to more productive sectors, guided by a clearly defined strategy for economic development. It is from this point of view that we need to examine the priorities of the Mills government with particular regard to the 2012 Budget and Economic Policy Statement. Macro-Economic indicators show a more prudent economic management. Inflation which stood at 18.4% at the end of 2008 stood at 8.4% at end of the third quarter of 2011. Fiscal deficits which stood at 6.6% of GDP at the close of 2008 stood at 2.0% at end of September.

Government economic management strategy targets a fiscal deficit of only 4.5% for 2012 despite massive investments in transportation and agricultural infrastructure partly in fulfillment of the central theme of the budget: INFRASTRACTURAL DEVELOPMENT FOR ACCELERATED GROWTH AND JOB CREATION.

The government, however, faces challenges with its programme with the International Monetary Fund (IMF) which ends in June next year. The conditions of the programme includes among other things, a commitment for government not to borrow more than $800 million, at the same time government needs to borrow $ 3bn ($1.2bn for 2012) from the China Development Bank (CDB) as part of its plans to meet the severe infrastructural deficits of the country.

Government has not had the support of the opposition New Patriotic Party (NPP) which has taken sides with the IMF against the national interest.

Government seriously requires this loan for an ambitious infrastructural development plan that has broad linkages to vital sectors such as energy and agriculture; to improve efficiency and productive capacity.

The Western Corridor Gas Infrastructure; Western Corridor roads and railway line modernization; Accra plain irrigation project; the construction of massive coastal harbours and landing sites; and the Tema – Akosombo –Buipe multi modal transportation project, represent the kind of farsighted policy initiative for sustainable, all round and integrated economic growth and development. This is what was absent in the 2001—2011 decade which was principally a Kufuor/NPP decade; this missing link provided the incentive that sparked the need for change of regime in January 2009.

That is what the Budget and Economic Policy Statement attempts to fulfill. That is what makes the Better Ghana Agenda our best bet for prosperity in the coming decade.

The author is an organizer of the Progressive Organization for Women’s Advancement (POWA), a network of public spirited youth committed to the advancement of women’s right as a link to other broader social justice causes. Email: Victoria.hamah@yahoo.com