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Opinions of Wednesday, 22 January 2014

Columnist: Nicholas Issaka Gbana

In defence of Seth Terkper

Last week, two unprecedented but related things happened. The First one was the public confession by President Mahama that, he was under pressure from some people in the National Democratic Congress (NDC) to sack his Finance Minister, Seth Terkper.

The Second one was a public notice from the Ministry of Finance that Ministries, Departments and Agencies were awarding contracts indiscriminately without due regard to their budgetary allocation. The notice actually warned that, the Ministry “will recognize contracts as valid if only they are duly authorized by PURCHASE ORDER generated from the GIFMIS SYSTEM”. GIFMIS is a new financial management system being implemented by government.

The import of the Ministry’s notice was that, if you were awarded a Government funded contract by any government establishment which was not backed by a purchase order from GIFMIS, forget about being paid.

The agitations for Seth Terkper’s dismissal started last year. The first public indication was when some newspapers that are aligned to the NDC began publishing negative and speculative stories about the Minister.

Who are those calling for Seth Terkper’s head?

The key reason behind the agitation for the removal of the Finance minister by some NDC members has been noted to be the badly needed discipline, which he is exercising over the management of public funds.

The persons involved, however fall into the three categories below.

The first category is the bad nuts who direly endorse the inept spending of taxpayers’ money to continue unabated. They so miss the free flow of money that occurred especially in 2012. These are not ordinary foot soldiers of the party; they are leading members of the NDC, some of who hold positions in government.

For such people, it is not about the development of Ghana, the delivery of the NDC’s manifesto promises or the success of this Mahama government but their self-interest and how much millions they can make to ensure that their children, grandchildren and great grandchildren will forever be comfortable.

It is also about power. As someone rightly claimed not too long ago, if you have money, you can control people. In light of this, these persons may have calculated that, the NDC could lose 2016 elections hence, they must grab as much as they can now.

The second category is the ignorant. They include party big wigs and ordinary foot soldiers. They do not understand the truth that the government is very broke. It is not generating enough revenues to pay the single spine salaries, accumulated arrears and finances for the construction of roads, schools and other infrastructural projects that the nation so desires.

Part of the problem also stems from the unprecedented ‘by heart’ spending that took place in 2012 when government ended the year with a budget deficit of GH¢8.6 million which was 11.8% of Gross Domestic Product (GDP).

This group do not understand that the NDC government has borrowed heavily since 2009. NDC inherited domestic and external debts of GH¢4.8 billion and US$4.0 billion from the NPP. At the end of 2012, the debt had increased to GH¢18.5 billion and US$8.8 billion respectively.

Continued borrowing at this rate will definitely lead to the economic, social and political crisis we have seen in the last two years in European countries like Greece and Spain.

The ignorant do not also know that, as much as the President has the power to appoint his Ministers, when it comes to the choice of his Finance Minister, that person must be acceptable to the donor community including the International Monetary Fund, World Bank, African Development Bank and major bilateral donors like the USA, United Kingdom, France, Japan, Denmark, etc.

If these donors are not comfortable with the person in charge of the nation’s finances, especially coming from the backdrop of the gross fiscal indiscipline of 2012, they will show the President and his Minister the red card by withholding or slowing down on the disbursements of their pledges of budgetary support and development assistance.

These donors did it to the NDC in 2000, and they will do it again if President Mahama removes Seth Terkper merely on the grounds that he is “too strict” for the liking of some NDC gurus.

The third category is those suffering from forgetfulness. They do not remember that poor economic management contributed to the NDC’s defeat in 2000. Those were the days when government borrowed to the point where the yield on the 91 day Treasury bill crossed the 40% mark in 2000. Commercial banks (not microfinance shylocks) were lending at interest rates of 45% to 50% per annum.

Then, banks will only lend short term, one month to a year. They will not give a medium term loan to a small to medium enterprise (SME). We have come a long way since then. We cannot return to those bad old days.

President Kufuor experienced similar pressures

Kojo Mpiani, President Kufuor’s Chief of Staff, was granted an instructive interview on Joy FM’s ‘Super Morning Show’ on the subject of the party pressuring a President to sack some appointees. A key point he made was that, when you investigate these demands, you will often discover that the only crime of the person in question is that, he or she is insisting that the right thing is done.

President Kufuor faced similar pressures over Yaw Osafo-Maafo, his first term Finance Minister. There were many in the NPP who felt that he was not allowing them to ‘chop’. It was under Osafo-Maafo’s watch that the three landmark laws on public financial management were passed in 2003. These were the Public Procurement Act, Financial Administration Act and Internal Audit Act.

Those laws were necessary to instill some sanity in public financial management. The Financial Administration Act especially, gave the Finance Minister the needed power to call everyone including the Big Boss, the President, to order when it came to spending our taxes.

Leave Seth Tekper alone

President Mahama should fully support Seth Terkper, and provide him with the political cover from the machine gun fire coming from those NDC elements opposed to the Finance Minister’s fiscal discipline.

If the President yields to the pressure and changes his Finance Minister, it will convey the signal that he is not ready to correct the fiscal indiscipline of the NDC first term, and 2012 in particular.

And that will be disastrous for the economy. My bet is that, the donors will slow down on the disbursement of their pledges and development assistance. The inflow of funds from abroad into our domestic debt market and stock exchange will dwindle. Ghana will be further downgraded by international credit ratings.

Already, the mining sector, a major contributor to foreign exchange receipts, is in crisis because of low gold prices. The outlook for the cocoa sector too is uncertain.

A return to the fiscal indiscipline of the NDC’s first term will lead to a sharp depreciation of the cedi, stalling of infrastructure projects, increasing government borrowing, higher interest rates, increased cost of doing business, and increased cost of living.

Lastly, President Mahama should ensure that, his public directives to the Finance Minister to release money for one thing or the other are backed by GIFMIS purchase orders.

Writer’s Note: All figures in this article were extracted from Bank of Ghana’s Statistical Bulletins

Nicholas Issaka Gbana

The Writer is a Management Consultant and a Member of the National Democratic Congress