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Opinions of Tuesday, 20 April 2010

Columnist: Seshie-Vanderpuije, Alex

World Bank vindicates NDC, We told you NPP was Reckless

The NDC government now stands vindicated for telling Ghanaians that the nation’s economy at end- 2008 was broke. This was confirmed by the World Bank Country Director, Mr. Ishak Diwan, in an interview with a Ghanaian radio station. Mr Diwan said, “ex- President Kuffour’s led government were irresponsible and reckless in their management of Ghana’s economy”. His comments have ruffled some few feathers within the NPP camp. I know the NPP are intolerant to criticisms. But for these comments to come out at a time when the NPP are seriously looking for the next kangaroo dancer, do not do them any justice. No wonder the knives are out for Mr Diwan’s scalp, for daring to say the truth.

To underpin Mr Diwan’s comments, I have previously argued that the purported good macro-economic performance, which the NPP had boasted about during their 8 years in government, was an economic illusion. I say economic illusion because I find it difficult to understand how a country could attain 7.3% real GDP growth rate and yet have over 50% of its citizens live in poverty. How on earth could a country attain 7.3% real GDP growth and have over 5000 of its children attend schools under trees? How could a country attain 7.3% real GDP when for over two years, the government failed to pay the salaries of public sector workers. Who were the beneficiaries of this phantom economic growth? What benefits did the citizens gain from this growth rate when at a time most urban centres were littered with sub-standard housing structures, unsanitary environments and squatter and slum communities?

Ladies and gentlemen, the truth is that the NPP were bad economic managers. They irresponsibly spent the nation’s scarce resources on luxurious foreign imports that benefited only the few. It’s rather unfortunate that it has taken the World Bank this long to come out with the truth. All the same, it is good they have come out to vindicate the NDC government for being honest with the people, although it should have happened sooner. I guess it’s better late than never.

The Economic Legacy of 2008

When the government of President of President John Atta Mills came to power in January 2009, initial financial audit shows that Ghana’s economy was broke. Characteristically of the NPP politicians who could not tolerate criticisms, went haywire, jumping from radio station to radio station and holding press conferences to deny that the economy was broke.

They accused the NDC administration of playing politics with the economy. And that if the NDC continued to say the economy was broke, investors would be driven away. Some people bought into this load of rubbish and the word “Challenge” became the economic sing song for non performance.

The gospel truth is that the NDC government in January 2009 inherited a distressed economy characterised by huge financial deficits. Available records show that when the NPP left office, the fiscal deficit alone stood at GH¢ 2.6 billion at the end of 2008 compared to GH¢ 260 million when NDC left office in 2000. The fiscal deficit “black hole in the nation’s coffers” under NPP government widened from 9% of GDP in 2007 to 24.2 % of GDP in 2008.

What some economists and financial analyst failed to appreciate is that the earlier estimate of 14.5% was revised upwards to 24.2% as the NDC government continues to uncover expenditure arrears and commitments totalling $1.16 million.

The government is still uncovering debts, which the Ministries, Departments and other government Agencies (MDAs) have not disclosed to government 15 months after coming to power. This gives the reader a hint of the difficulties the NDC government faces in tracking all the financial malfeasances that characterised the 8 years of NPP administration. (NPP- USA take note; these are the off budgetary expenditures which you claimed “were too miniscule within the context of national budget to warrant itemising” but as you can see off budget expenditures when added up affect the nation’s GDP).

Ladies and gentlemen, as you now know, the GDP deficit, was largely driven by the NPP government’s lack of prudence in public spending, misplaced priorities and off budget expenditures, which characterised their 8 years rule. Their irresponsible and reckless extravagancy, the regular demand for luxurious foreign imports weakened the balance of payments and the Cedi exchange rate. The result was that by December 2008 the balance of payments had recorded a huge deficit of USD941 million. Non-oil imports rose by 33% in dollar terms in 2008, causing a significant increase in the current account deficit to over 20% of GDP.

It, therefore, comes as no surprise when the Work Bank Country Director, Mr Diwan, said the Kuffour led administration irresponsibly “spent on a lot of things which were not worth spending on, a situation that led Ghana to an unprecedented GDP deficit of 20%.”

This confirms what the NDC has been saying all along that the NPP was reckless in managing the Ghanaian economy. The NDC even spared them the humiliation of not qualifying their behaviour as being - irresponsible.

Do we have to wait for “Oyibo” (Whiteman) to tell us this? In their characteristic fashion of intorrelance and denials they are now calling for the head of the IMF Country Director - to resign. The truth always hurts and the truth will always prevail.

Plundering of Nation’s Foreign Reserves

Ladies and gentlemen, after collapsing all our manufacturing and export industries and with insufficient funds coming in, the NPP irresponsibly went about plundering our foreign reserves. Between July 2007 and December 2007 the official foreign reserves were heavily drawn down by $950million to support the sinking Cedi. As the situation continued to worsen between January 2008 and December 2008 another $250million of the nations foreign reserves were again withdrawn to support the Cedi.

In total, the NPP government sold over $1.2 billion of currency reserves in the foreign exchange markets just to support the new Ghana Cedi, yet the currency continued to depreciating sharply. The new Ghana Cedi depreciated over 31% against all major currencies during this period. The country’s gross foreign reserves under NPP dropped to USD1, 896 million equivalent to 1.3 months of import cover for goods and services.

We can now see how irresponsible and reckless the NPP was in government. If this is the Party that Ghanaians would want to return to power in 2012, then they must be ready to tighten their belts and brace themselves for the worst bumpy ride in their lives.

Instead of stopping to reflect on why Ghanaians booted them out of office, they rather unashamedly went on the offensive with Akuffo Addo’s ill-famed press conference chant: “if it is broke, fix it”. What a pathetic statement coming from people who claim to understand all the basic economic concepts?

The NDC government is tackling the unsustainable “world record budget deficit”, the arrears, the unpaid bills and the crippling judgement debts left behind by the NPP, which the World Bank now describes as unsurpassed in post modern times. Truly, if Greece’s budget deficit of nearly10% threatens to undermine the whole of the European Union economies, then Ghanaians should count themselves blessed to be still able to walk upright and standard on their two legs after NPP mind bogging, world record budget deficit of 20% GDP.

The Real GDP Growth

Ladies and gentlemen, despite the woefully abysmal economic record, the NPP painted a rosy picture and described the economy as robust and resilient. Although the NPP claimed and continue to boast that the economy registered an estimated growth of 7.3% in real Gross Domestic Product (GDP) 2008, we know for a fact that this ‘artificial’ growth rate was largely caused by the massive injection of funds, including the $750million sovereign Eurobond in 2007, sale of majority stake in Ghana telecom for which the Government of Ghana was short charged, and the $1.2billion draw-down of the country’s foreign currency reserves to prop up the new Ghana Cedi.

How can an NPP government made up of people who claimed to have so much knowledge about economic concepts treat current account inflows, not targeted at any production activity, as contributing to real growth in the gross domestic product (GDP)?

We know for sure that part of the $750million Eurobond was used in paying salaries and wages. We also know that proceeds from the sale of Ghana Telecom were used to balance the budget. And we also know that the $1.2 billion drawn down from our foreign reserves were used to prop up the new Ghana Cedi. These were not funds targeted at any real economic activity but were deceitfully recorded as investment capitals inflows. This is NPP accounting for you.

I cannot therefore work out how the NPP government came to the conclusion that the massive inflow of “phoney” funds in 2008 contributed to the real GDP growth rate of 7.3%.

The World Bank now confirms that “the economy for most of the period was buoyant, grew at 5-6% a year” Who do we to believe, a reputable international financial institution or a disreputable New Patriotic Party?

Ladies and gentlemen, the NDC government has been vindicated in its pronouncements on the state of Ghana’s economy as at December 2008. I rest my case.

The New Approach under NDC The role of the NDC government will not be limited to addressing crises. It will support the economy with its prudent macro and fiscal policies and overtime, the recovery is assured, the extra spending and the deficit will reduce. The government, like the rest of us, will ultimately live within its means.

The NDC government will not allow the reckless and greedy behaviour of the few to put tax payers’ money on the line to bring down the economy as we experience under the NPP.This means effective and robust regulation; accountability and transparency in all spheres of the economy and a bar on frivolous spending.

The NDC government’s choice is a growth strategy to build the jobs of the future to ensure that everybody who has the right to work match with responsibility to work if they can.

To this effect, the NDC government is positioning itself with the expected commercial exploitation of crude oil and gas for a major industrial take off. The government is laying the foundation for an integrated aluminium industry based on bauxite; a petrochemical industry based on salt and natural gas; a fertiliser industry to give impetus to agro development; a salt based industrial chemical industry for caustic soda; and allied consumer products and exports based on oil and gas.

Ladies and gentlemen, the National Democratic Congress holds true to its social democratic values of fairness, opportunity and social justice to all Ghanaians.

Alex Seshie-Vanderpuije Public Relations Officer NDC UK & Ireland Chapter