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Mr Beans
2018-09-25 14:31:01

Comparing Ghana to Zambia, Argentina And Others Does Not Help. The Reality Is In Our Economic Data.

Prof. John Gatsi

Economic management can never be an easy enterprise. Reporting economic outcomes may have some elements of politics but its deliberate politicization undermines the beauty of economic data and analysis. For example, if the standard is that the only cause of exchange rate depreciation is mismanagement, then observers have no choice but to assign same reason anytime they observe and experience depreciation.

In the past weeks, there were attempt to justify the depreciation of the cedi to the dollar with arguments of the dollar strengthening against major currencies and a more attractive investment environment in the USA.

In reality, currency depreciation is an adjustment to economic pressures, mainly external. However, in Ghana, we only see it in the light of whether our economic fundamentals are weak or strong and who probably caused it.

On the arguments of comparing Zambia, South Africa, Argentina and Turkey to Ghana, we should know these are all countries with weak fundamentals as revealed in recent economic management reports.

We cannot discuss Zambia because it has been in the news many times recently for obvious reasons. Turkey is equally going through challenges because of sanctions. Brexit is fundamentally disturbing the UK. Comparing our economic situation to these countries simply for a case that it is not cool anywhere is misleading. Comparing ourselves to fundamentally weak and troubling economies can only mean one thing, that our own fundamentals are not helping.

Perhaps, it is time to interrogate GDP growth figures as they do not align with government revenue figures. For example, in the economic and financial data released by the BoG, two days ago, tax to GDP ratio fell from 12.4% (October 2017) to 7.1% in June 2018. Total expenditure and arrears increased from 1.8% of GDP in January 2018 to 11.5% in June 2018. This only means government is now busily accumulating more arrears. This is an alarming reflection of the true fundamentals of our economy. In same document, capital expenditure, which was 2.2% of GDP in October 2017 has reduced significantly to 1.1% in June 2018.

The data also reported that both consumer and business confidence have reduced as non performing loans of banks remain in the same grade, while the downward trend in inflation not aligning with high real lending rate within the same high historical average lending rate around 28%. This implies that businesses and individuals are still borrowing at above 28% in the face of lower policy rate of 17%.

Interestingly, paragraph 9 of September 24, 2018 MPC report indicated that the public debt stock has reduced. “Total public debt decreased from 67.4 percent of GDP (GH¢137.5 billion) in July 2017 to 65.9 percent of GDP (GH¢159.4 billion) at the end of July 2018. Of the total debt stock, domestic debt was GH¢73.8 billion accounting for 46.3 percent and external debt was GH¢85.5 billion with a share of 54.7 percent.” This is also misleading. There is a difference between debt stock and Debt to GDP ratio. Declining Debt to GDP ratio when the growth does not generate revenue is not a good story to project. The crux of the matter is lower debt to GDP which is not productive in terms of revenue, jobs and opportunities for people in an inclusive manner cannot be an anchor for borrowing.

The truth as indicated in paragraph 9 of the MPC press statement should be that the public debt stock increased from GH¢137.5 billion at the end of July 2017 to GH¢159.4 billion at the end of August, 2018.

Government listening to the cries of the people is part of good economic management. Our pastors, musicians, entrepreneurs and Ghanaians, in general, are complaining but the government is divided on whether to accept the widespread suffering or not. The President now accepted it after key members of the government missed the opportunity to empathize with citizens. Some say there is no suffering and that in the suffering the government should be praised. Very soon all these maybe interpreted as arrogance. Insulting fellow citizens merely because they express their frustration and suffering is not healthy. Writing your achievements point by point when the suffering persists may amount to disruptive disregard for fellow citizens.

No economic figure nor expression is a substitute for the pains and hardships people go through. Improved economic management must improve livelihoods. If it does not, the advise is for the government to listen to the people.

[This is an authentic posting from Mr Beans (Registered User)]
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First Lady Elect
09-25 18:05