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Accra, Ghana – The Minority in Parliament has said the Akufo-Addo government is borrowing its way into debt distress despite its mantra against borrowing when it was in opposition.
At a roundtable on Expectations Of The Minority Caucus Of The 2018 Budget Review, held at Parliament House on Monday, 16 July 2018, Minority spokesperson on finance, Cassiel Ato Forson, said: “Our public debt has ballooned to GHS 154 billion (excluding the Energy Bond of GHS 4.7 Billion) as of May, 2018 from GHS 122 billion in January, 2017.
“The Public Debt is expected to increase further by GHS3.8 billion – (1.7 billion 1.4 billion 0.7 billion) – should the financing plan specified above, i.e. selling state assets, prepayment of license fees, and monetisation of mineral royalties, fail to materialise.
“In addition to this, the Government has issued a Bond worth GHS2.2 billion to GCB in respect of its assumption of the collapse of UT and Capital Banks. This has added to the public debt and will be borne by the poor tax payer.
“Furthermore, the Government has earmarked GHS2.3 billion as possible cost to the tax payer should Unibank collapse. This means that the Financial Sector related costs for 2018 will also increase the Public Debt by GHS4.5 billion – (GHS2.2 billion GHS2.3 billion).
“We were the first to bring this to the attention of Ghanains. These issuances of public debt to defray ‘private’ debt was not done in a transparent manner as the policy was not presented to Parliament and the public for debate before an agreement was reached with the IMF. After all, as public debt, the debt service commitments will be met from taxes imposed on Ghanaians. As a precaution against similar occurrence in the future, we urge government to adopt the Non-Performing Asset Recovery Trust (NPART) approach”, the Minority said.
“We project that in the year 2018 alone, the government will be adding about GHS25 billion to the Public Debt stock. This will add to the total borrowing for 2017 of some GHS 26 billion. The Public Debt therefore, can be projected at about GHS173 billion by end-December 2018, which will take our debt-to-GDP ratio well beyond the 70% HIPC threshold.
“GNPC intends to borrow an amount of $564.81 million to fund its Operations including: $100 million for the construction of Agriculture Roads; $20 million for the construction of its corporate Head Office; $10million for the construction of it operating office in Takoradi; $13.4 million to refurbish its Petroleum House, $2 million to build a transit quarters for staff visiting Takoradi, among others.
“We are concerned about GNPC’s borrowing outside of its core mandate which constitutes yet another instance of flouting of the Petroleum laws, notably, provisions relating to the Annual Budget Funding Amount under the Petroleum Revenue Management Act. We want to remind GNPC that Section 15 of the Petroleum Exploration and Production Act, Act 919, 2016, stipulates that any borrowing exceeding the cedi equivalent of thirty million United States Dollars ($30 million) for the purpose of exploration, development and production, shall be approved by Parliament and shall be in consonance with the Petroleum Revenue Management Act, Act 815, 2011.
“In concluding on debt, we urge the government to stop beating its chest on tapering public debt around 70 percent of GDP. It should have done more, given the potential for growth and revenue that it inherited from the Mahama Administration”.
Read the Minority’s full statement below:
STATEMENT READ BY HON CASSIEL ATO FORSON AT A ROUNDTABLE DISCUSSION ON EXPECTATIONS OF THE MINORITY CAUCUS OF THE 2018 BUDGET REVIEW AT PARLIAMENT HOUSE ON MONDAY,16TH JULY,2018
Good morning Ladies and Gentlemen,
On behalf of the leadership and membership of the Minority Caucus in Parliament, permit me to welcome and thank you sincerely for making time to join us this morning to undertake this important exercise.
Sometime this week, the Minister for Finance, Hon Ken Ofori-Atta, will present a review of the 2018 budget to Parliament. In the period following the presentation of the 2018 budget in November last year, a number of very worrying developments have occurred in the management of the economy which requires thorough analysis and discussion. The antecedents are the very populist measures in the 2017 Budget.
Against this background we deem it necessary to make known our position and expectations regarding the policies and measures likely to be outlined in the budget review.
Pursuant to this, we have structured this presentation to capture what we look forward to seeing and our analysis of the general performance of the economy this year.
(a) THE ECONOMY
Gross Domestic Product (GDP)
1. According to the April 2018 figures from the Ghana Statistical Services, Ghana’s oil GDP is estimated to have grown from -13.5% in 2016 to 39.6% in 2017 driven by the mining and oil sectors, fueled by the Tweneboa, Enyenro, Ntomme (TEN); and Sankofa oil and gas fields. (A legacy of the Mahama Administration that the NDC is proud of).
2. Non-oil GDP growth is estimated to have declined from 5.1% in 2016 to 4.6% in 2017.
3. For 2018, looking at the quarter-on-quarter sectoral and GDP growth, oil GDP growth declined from 2.1% in the fourth quarter of 2017 to 1.5% in the first quarter of 2018; growth in the agricultural sector is estimated to have declined from 2.9% in the fourth quarter of 2017 to 0.4% in the first quarter of 2018; growth in the industrial sector declined from 4.0% in the fourth quarter of 2017 to 2.3% in the first quarter of 2018, It is only in the services sector that growth improved from 0.9% in the fourth quarter of 2017 to 1.2% in the first quarter of 2018. Given these, the legitimate question to ask is: can the impressive oil sector growth of the economy in 2017 be sustained in the short to medium term?
4. Fiscal deficit is estimated to have dropped from 9.3% (Commitment basis) of GDP in 2016 to 6%(cash) of GDP in 2017. With Total revenue underperformed by 1.1% of GDP in 2017, the reduction in fiscal deficit turnaround was achieved mainly through expenditure cuts (1.3% of GDP) and a capping of transfers to Earmarked Funds at 25% of tax revenue resulting in the suspension and postponement of major projects. For how long can these projects be suspended or postponed for fiscal prudence at the peril of an improvement in the living standards of Ghanaians.
(b) REVENUE
5. Let me begin with a quotation from no less a personality than the current Vice-President and head of President Akufo Addo’s Economic Management Team, Dr Mahamadu Bawumia—on 6th June, 2016 at a rally in Tema: “We will move this country from taxation to production. I have worked as a Governor at the Bank of Ghana before. There is money in this country. You don’t need to tax the poor to give them better living condition.”
The nation has awakened to the fact that this is just one of the populist themes that run through the New Patriotic Party’s policy platform and commitments made as part of the 2016 election campaign.
It will be recalled that they promised the Good people of Ghana that a number of taxes—including many that were TEMPORARY—introduced by the NDC Government to stabilize the economy, would be scrapped, should they be elected into power. In the usual populist rhetoric, they characterized these taxes as “nuisance taxes” in that they had low revenue-yielding potentials and were stifling private sector growth, as indicated in the quote above of the then Running Mate (now Vice-President) of the NPP.
Tax cuts—another populist move
6. Upon assumption of office in 2017, after winning the 2016 elections, the NPP government reiterated in their maiden 2017 Budget Statement and Financial Policy, that these so-called “nuisance taxes” had to be scrapped because they imposed a significant burden on the private sector and on the average Ghanaian. They further stated that the aim of the government was to shift the focus of the economy from taxation to production.
7. In March 2017, the Finance Minister in his presentation of the Budget Statement on the floor of Parliament, announced that some tax handles had been abolished.
To reiterate, the 2017 tax measures blatantly overlooked:
● the NPP’s own extravagant “expenditure promises”; and
● Impact of the proposed tax cuts on tax revenues, given the impact of the global economic downturn on sub-Saharan African countries, some of which went into recession between 2014 and 2016—a situation that Ghana avoided.
8. Hence, it was merely fanciful and populist rhetoric to assume that the tax cuts in a recovering global and domestic economic environment would immediately spur or accelerate private sector operations and economic growth. In turn, it was amateurish to translate this situation into increased revenues to cater for the shortfall in removing part of the temporary taxes and “gargantuan” increase in expenditure from campaign promises.
9. Against this background, we wish to make the following observations:
● It is unthinkable and naïve for any economist to assume that cutting or worse still eliminating taxes, concurrent with expansion in expenditures, in a small open economy like Ghana, with a developing private sector, would immediately translate into economic growth, and increased tax revenue.
● Hence, since 2017, not even the increased petroleum revenues from additional crude oil and gas production as well as recovery in oil prices has been able to take care of the overall revenue shortfalls.
10. In essence, the institutional and structural rigidities of the Ghanaian economy will suggest to any economist that the nexus between tax cuts, economic growth and tax revenue are more likely to be inelastic; meaning that a tax cut will spur economic growth and consequently increase tax revenue; however, the increase in tax revenue will not be enough to offset the loss in tax revenue resulting from the tax cut. That is to say, economic growth and tax revenue response to tax cuts will be insignificantly small, and the effect can be permanent over the medium term, as was demonstrated by the study: “Would Tax Cuts Induce Higher Economic Growth, and Tax Revenue in Ghana: An Assessment of NPP’s Manifesto Promises in Ghana, by Cassiel Ato Forson, Published by the Daily Graphic on 6th December 2016; Citifmonline.com on 2nd December 2016; Myjoyonline.com on 19 December 2016.
These were populist policies which did not translate into any meaningful real GDP growth.
11. The antecedents of the growth that we see today are in policies of the Mahama Administration, such as the Partial Risk Guarantee (PRG), which facilitated the increased oil production from the TEN and Sankofa Fields as well as the Emergency Power Plan, both of which the NPP opposed and vowed to remove on assumption of power.
12. Given the potential growth that was forecast by institutions such as the World Bank in 2016, we can argue that the NPP is rather supervising a real sector economy that has performed below its potential. This is the direct outcome of channeling the oil revenues into consumption instead of investments and managing the public debt.
13. We must warn that the NPP Government is superintending over a perfect recipe for high deficits and record borrowing that it seems to be hiding under a “financial engineering” plan. We buttress these points with the following assessment by the Minister himself and that of the International Monetary Fund (IMF) under the Extended Credit Facility (ECF) Programme.
c) IMF ECF REPORT: OBSERVATIONS FROM COMBINED 5TH AND 6TH REVIEW
14. In the IMF Staff Report on the 5th and 6th Review of the performance of the Ghanaian economy under the ECF Programme, the Fund stated that the outturn for fiscal year (FY) 2017 was characterised by a large revenue shortfall. Specifically, overall tax revenue was lower than programmed by 0.7 per cent of GDP, on account of trade taxes, being lower than programmed by 0.5 per cent of GDP, and VAT being lower than programmed by 0.3 per cent of GDP, reflecting high refunds.
15. Non-tax revenue was also lower than programmed by 0.6 percent of GDP, reflecting implementation problems with the new policy on retaining internally generated funds (IGFs) of central government agencies. The Fund further stated that the disproportionate increase in petroleum taxes had been almost entirely offset by a marked erosion of direct taxes and VAT while the performance of import duties remained flat (see pages 5 and 11 of IMF ECF Staff Report).
16. For Fiscal Year 2018, data available at the Ministry of Finance shows that revenues recorded high deviation from January – April resulting in the fiscal deficit being higher than targeted. The fiscal deficit on cash basis is estimated at GHS6.4 billion (2.4% of GDP) against a target of GHS5.7 billion (2.4% of GDP), a deviation of 11% or GH¢ 632 million – (Finance Minister’s Presentation to Labour Unions, Wednesday, 11th July, 2018).
17. Clearly, the deficit is the result of expenditure overruns and accounts for the highest pace of borrowing that we are seeing. It is also obvious that the Vice President’s boastful “magic”, to be able to generate revenues to meet huge expenditure promises, without borrowing and even reducing taxes, has failed miserably.
18.
Government tax recommendations
19. Ladies and Gentlemen, the populist approach to governance by the NPP has caught up with them. In the face of the realities of the poor results of their misguided policies, leading to the underperformance of revenue, the Government has informed the IMF Board of Directors that they are considering the following tax measures purposely designed to bridge the revenue gaps (http://www.imf.org/en/Publications/CR/Issues/2018/05/02/Ghana-Fifth-and Sixth-Reviews-Under-the-Extended-Credit-Facility-Request-for-Waivers-for-45841)
ALERT: More unproductive, anti-business and killer taxes ahead!!!
● Increasing Value Added Tax (VAT) from 17.5% to 20%: There have been strong indications from persons close to this government that the Finance Minister will slap a hefty 2.5 percentage increase on VAT. If this proves to be true, it would be most baffling as, apart from the extreme hardship it will impose on Ghanaians, it makes the Free SHS justification untenable without tax increases. At this point, we wish to remind GHANAIANS that the 2.5% VAT proceeds that accrues to the Ghana Infrastructure and Investment Fund (GIIF) has already been committed to finance that programme, as part of the 2017 and 2018 budget. This is another clear example of also channeling non-oil revenues into consumption, away from investment.
● The introduction of a corporate minimum tax: Government is putting in place measures to introduce a minimum corporate income tax of 2.5% on turnover for all companies irrespective of whether they make profit or loss—in essence, like the “flat-rate VAT”, this imposes a “presumptive tax” regime, designed for SMEs, on medium and large businesses in the formal sector, irrespective of whether they keep proper records and pay their “quarterly tax assessments or not”. These are very retrogressive steps that drain liquidity from businesses and not befitting a Middle Income Country (MIC).
● Imposition of an excise tax on luxury cars: Under this policy, the Akufo Addo government is set to impose an excise tax of 10% on luxury vehicles, i.e. vehicles with engine capacity of 3.5cc and above—ignoring the fact that the current progressive regime already imposes a higher excise and import duty on these vehicles. The petroleum excise tax also embeds a progressive use tax regime for these vehicles—including offsetting the much-trumpeted reduction in petroleum taxes. This means that Ghanaians within the middle class will be required to pay more money to own vehicles they purchase.
● Re-introduction of supposedly abolished taxes: A reversal of the removal of VAT on fee-based financial services, real estate transactions (note, “abolished” with fanfare in the 2017 Budget)—it is a mark of the impulsive nature of policy- making within the NPP government that it would be considering bringing back this tax that it abolished barely a year ago.
● Increasing Communications Service Tax up from the current 6 percent and the imposition of a Levy on mobile money transactions—this is “double jeopardy” and points to the fiscal pressure facing the nation; the NPP back tracked in introducing what we preferred to call the “umbrella” and enhanced “talk” tax in the 2018 Budget and now wants to fill a widened revenue gap with these two (2) additional taxes.
● Increasing SSNIT contributions to NHIL: Government will soon burden workers and employers with a 1.5 percent and 1 percent tax respectively—this is a measure by a government that promised to tackle the NHIL problem from a more “competent” cost approach. This increment would have been entirely unnecessary had government not taken the unwise decision to cap funds accruing to the NHIL. It appears that government is seeking to punish the poor tax payer after its own flawed policies have led to a cash crunch for the scheme. A case in point can be seen at Appendix 4B of the 2018 budget statement which shows that out of a total accrual of GHS 2,233,918,183 to NHIL, the Akufo-Addo government only allocated an amount GHS 1,814,537,436 to the fund. The remaining GHS 419,374,747 was used to finance the budget.
It is worth noting that as long as the capping remains in place, any additional revenue accruing from the increased deductions from SSNIT contributions will not plug the funding gap that has been used as justification for the deductions in the first place. The amount so accrued will also be capped. This means that Ghanaian workers would have deductions made from their SSNIT contributions that will not entirely be used to finance the NHIS or their health-care needs.
● Extend the National Fiscal Stabilization Levy (NFSL) and broaden the coverage: note that the NFSL, a tax with a restricted coverage and specific goal of resolving fiscal crisis (as was its antecedent National Stabilization Levy) was supposed to have lapsed in Fiscal Year 2017 but was extended by the NPP for 2 additional years. Now, in typical “double-jeopardy” fashion, it is to be expanded or broadened to include more companies.
Ladies and Gentlemen, it is appropriate to quote our Vice-President again. He said at Tema on 6th June, 2016 at a rally that “we are a party of production and not taxation and this is a philosophical difference between the NPP and the NDC”.
Your guess is as good as mine as to the accuracy of this claim in light of all the taxes the Akufo-Addo government is heaping on Ghanaians.
Additional impositions and appropriations
20. Divestment and Royalties: The government plans to raise GH¢1.7 billion from divestment and GHS1.4 billion from the monetization of future royalties, in particular, that of gold. Note that, as enshrined in the Constitution (see later), a share of these royalties currently go to our Assemblies and traditional authorities (another “double jeopardy”, given that the central government is already “capping” the DACF that is due to go to our localities).
21. Sale of Communication Spectrum and Prepayment of Telcos Licence Renewal: The government also expects to raise 0.3 % of GDP through the sale of communication spectrum and prepayment of telecos license which will translate as follows:
Table 1: Amount to be communication spectrum and prepayment of telecom license
Item to be sold
Expected amount
Communication Spectrum ($ 50 million)
GHS240 million
Prepayment of Telcos licence renewal
GHS460 million
Sub-total
GHS700 million
Unprecedented tax and levy measures
16. Ladies and Gentlemen, a summary of the total impositions that Ghanaians should expect in the 2018 Mid-year Review, is as follows:
Table 2: Summary of total impositions
Item
Amount to be raised
Divestment
GHS1.7 billion
Royalties
GHS1.4 billion
Communication spectrum/telcos licence
GHS0.7 billion
Total
GHS3.8 billion
22. We want to take this opportunity to caution the government against failure to carefully assess the impact of these transactions on future revenue and its flexibility.
23. In addition to the implications for Assemblies and the Traditional Authorities, the government needs to bear in mind that the planned monetisation of mineral revenue will not be Debt-Neutral, as they would have us believe, since prepayment is a long-term liability and should be classified as part of Public Debt, should they be successful in getting parliament to approve it. Also, the government should be mindful of Article 267(2) and 267(6) of the Constitution and be reminded that it cannot monetize Gold Royalties for the purpose of financing the National Budget, since Article 267(6) of the Constitution is very clear on how the revenues should be shared among the traditional Authorities and the District Assemblies at the Sub-National level.
We, the minority members of Parliament, will resist any attempt to disregard the Constitution of Ghana.
d) PUBLIC DEBT
We will not borrow—the vain promise.
Ladies and Gentlemen, another area where the New Patriotic Party engaged in a lot of misleading commentary and outright populism, while in opposition, is the Public Debt. Amidst deliberate misrepresentation of the facts about our debt position, its computation and rationale for borrowing, they also claimed to possess the magic to mobilize domestic resources to finance their campaign promises. They dismissed borrowing as “a lazy approach” to economic management and promised a different paradigm.
Contrary to these claims, our public debt has ballooned to GHS 154 billion (excluding the Energy Bond of GHS 4.7 Billion) as of May, 2018 from GHS 122 billion in January, 2017.
24. The Public Debt is expected to increase further by GHS3.8 billion – (1.7 billion 1.4 billion 0.7 billion)– should the financing plan specified above, i.e. selling state assets, prepayment of license fees, and monetisation of mineral royalties, fail to materialise.
25. In addition to this, the Government has issued a Bond worth GHS2.2 billion to GCB in respect of its assumption of the collapse of UT and Capital Banks. This has added to the public debt and will be borne by the poor tax payer.
26. Furthermore, the Government has earmarked GH¢2.3 billion as possible cost to the tax payer should Unibank collapse. This means that the Financial Sector related costs for 2018 will also increase the Public Debt by GHS4.5 billion – (GHS2.2 billion GHS2.3 billion).
27. We were the first to bring this to the attention of GHANAIANS. These issuances of public debt to defray “private” debt was not done in a transparent manner as the policy was not presented to Parliament and the public for debate before an agreement was reached with the IMF. After all, as public debt, the debt service commitments will be met from taxes imposed on Ghanaians. As a precaution against similar occurrence in the future, we urge government to adopt the Non-Performing Asset Recovery Trust (NPART) approach.
28. On page 170 of the 2018 budget, the following plan for mobilizing resources (a strange way of describing borrowing) is indicated:
● Borrowing from the Domestic Market: GHS 8,240,520,000
● Draw Down on Project Loans: GHS 2,970,420,000;
● Draw Down on Program Loans: GHS 479,100,000; and
● Issuance a Sovereign/Euro Bonds: GHS4,791,000,000.00.
These can be summed up as follows:
Table 3: Proposed borrowing plan
Resource mobilisation
Amount to be raised
Domestic Borrowing
GHS8,240,520,000
Draw Down on Project Loans
GHS2,970,420,000
Draw Down on Program Loans
GHS4,791,100,000
Issuance of Sovereign/Euro Bonds
GHS4,791,000,000
Total
GHS16,481,040,000
These will add to the debt stock as follows:
Table 4: Summary of additional debt stock
Additional debt
Amount
Financial Sector
GHS4,500,000,000
Divesture
GHS1,400,000,000
Mineral Royalties
GHS1,700,000,000
Telcos
GHS 700,000,000
Resource Mobilisation (page 170 2018 Budget Document)
GHS16,481,040,000
TOTAL
GHS24,781,040,000
29. Based on the foregoing, we project that in the year 2018 alone the government will be adding about GHS25 billion to the Public Debt stock. This will add to the total borrowing for 2017 of some GHS 26 billion. The Public Debt therefore, can be projected at about GHS173 billion by end-December 2018, which will take our debt to GDP ratio well beyond the 70% HIPC threshold.
30. GNPC intends to borrow an amount of $564.81 million to fund its Operations including: $100 million for the construction of Agriculture Roads; $20 million for the construction of its corporate Head Office; $10million for the construction of it operating office in Takoradi; $13.4 million to refurbish its Petroleum House, $2 million to build a transit quarters for staff visiting Takoradi, among others.
31. We are concerned about GNPC’s borrowing outside of its core mandate which constitutes yet another instance of flouting of the Petroleum laws, notably, provisions relating to the Annual Budget Funding Amount under the Petroleum Revenue Management Act. We want to remind GNPC that Section 15 of the Petroleum Exploration and Production Act, Act 919, 2016, stipulates that any borrowing exceeding the cedi equivalent of thirty million United States Dollars ($30 million) for the purpose of exploration, development and production, shall be approved by Parliament and shall be in consonance with the Petroleum Revenue Management Act, Act 815, 2011.
In concluding on Debt, we urge the government to stop beating its chest on tapering public debt around 70 percent of GDP. It should have done more, given the potential for growth and revenue that it inherited from the Mahama Administration.
e) EXPENDITURE
h) Do we have a revenue or expenditure problem?
28. The focus so far has been on revenue mobilization and public debt, at a time a number of factors have actually given revenue a relative boost, including:
● Recovery in crude oil prices at low US$40s per barrel in 2015 and 2016 to US$70 per barrel currently;
● additional crude oil and gas flows from the TEN and SANKOFA fields—at the relatively higher prices noted above which led to an increase of about 82% in oil and gas revenue for 2017 alone;
● record flows from non-conventional sources such as the temporary Energy Sector Levy Act that the NPP appears to be making virtually permanent with the issuance of 10 year bonds;
● Revenue flows from the retention of other temporary taxes;
● increases in GRA nominal tax revenue as well as MDA/MMDA non-tax revenue;
● Central Government “capping” policy that has (mis)appropriated revenue of about GHS3.7 billion from the Assemblies, Traditional Authorities, MDAs and Statutory Funds;—instead of aligning it, as the NDC had envisaged; and
● Record domestic and external borrowing in just 18 months to support the budget—something the government promised never to do.
32. We do not overlook the need for GRA to raise more tax revenues through improved performance and in line with the nation’s middle-income country (MIC) status. However, since increases in tax revenues always lag behind recoveries in economies, care is needed not to put pressure on households and businesses to meet unrealistic promises made to the electorate, that increase expenditures.
Beware—fiscal pressures are mounting
33. The evidence seems to suggest that fiscal credibility is being compromised, regarding government expenditures. The background is clear: large fiscal slippages are being created by the government’s inability to raise the needed ADDITIONAL revenues to meet the unrealistic promises that are increasing expenditures.
34. The projected deficit target of 4.5 per cent would be missed due to huge deviations in revenue and expenditure and the financial sector related cost.
35. Aside the fact that Government is accumulating arrears and sweeping them under the carpet, there is also a prior decision by government to cut down expenditure up to an amount of GHS850 million on already-starved key sectors of the economy purposely to make enough savings to meet the demands from specific expenditure.
36. As noted, government’s decision to cap transfers to statutory funds is gradually collapsing all these statutory funds. The capping law was introduced purposely to free some revenue for government to undertake opulent expenditure but this has rather proven woefully inadequate due to the huge fiscal burden emanating from the introduction of new expenditure.
37. Despite being capped, the District Assembly Common Fund is going to be burdened with an additional cost since the Nation Builders Corp has been aligned to the DACF. The program which has been estimated to cost 0.2 percent of GDP will be funded through allocation from the DACF. The DACF will suffocate to death.
38. The Ghana EXIM Bank has noted that it is to use its revenues to support the One District One Factory initiative while we have noted the case of GNPC already. Since this would be appropriating SOE revenues for Budget purposes, we urge government to make a full disclosure of the pressures being put on other state institutions to (mis)appropriate funds for political goals.
39. The government within the medium term is also cutting back on payment to construction companies. We have already drawn attention to the “financial engineering” that appears to enable government to do “offsets” rather than settle these liabilities. These companies are collapsing due to non-payment of amounts owed to them, resulting in an upsurge of non-performing loans. We project that the Minister will again cut Capital Expenditure during the mid-year review.
CONCLUSION
A clear fact that emerges from the discussion so far is that the current crisis confronting the managers of the economy, compelling them to impose a raft of heavy taxes on the already burdened populace, is self-imposed. The Akufo-Addo government should be wary of burdening Ghanaians in its desperation to “save face”.
The fiscal problem is the direct result of shallow opportunism and populism. It is obvious that the promises made by the NPP in 2016 and their initial actions as contained in the 2017 budget were intended only to get them elected and convey an impression of fidelity to those promises.
The reality, however, is that, it has led to major problems for the economy which have translated into severe hardships for the generality of our people. Inflation has begun rising again and is now in double digits following a fleeting stay at single digits in the last two months or so.
The Ghana cedi continues its catastrophic nosedive and is showing no sign of improvement despite lofty talk from government and the Bank of Ghana. It is currently trading at GHS 4.8 to the dollar and appears almost set to reach GHS 5 to the dollar if the trend is not curbed immediately. This has in turn led to steep rises in the prices of goods and services leading to more hardships for the people. Fuel prices have increases astronomically as have transport fares.
Key campaign promises like “one District, one factory”, “one village, one dam” among others remain unfulfilled with contradictory pronouncement from various government officials on the status of these projects, the order of the day.
Contrary to a promise not to borrow, the Akufo-Addo government is borrowing at break-neck speed and in alarming proportions. Almost two years in office, they have borrowed nearly half of what the NDC borrowed in 8 years. More worryingly, they have virtually no serious capital investment to show for this level of borrowing except a reckless dissipation of the borrowed funds on consumption thus saddling present and future generations with debt they will struggle to pay. This has come at a time when a major crisis is afflicting the health sector where patients in critical need of health care are being turned away or are treated in dehumanizing conditions owing to severe congestion. This is made all the more problematic by the fact that apart from its inability to make any investment in the expansion of health infrastructure, the Akufo-Addo government has inexplicably decided to allow huge investments made by the Mahama administration in health infrastructure to rot away by refusing to either operationalise them or complete them.
Instead of a clear programme to address these concerns, the government has rather chosen to compound the suffering of Ghanaians by introducing more taxes after making a song and a dance out of the removal of supposed nuisance taxes. These taxes will no doubt hit Ghanaian households and businesses very hard and further erode their already dwindling disposable incomes. All of this is happening at a time of great waste and profligacy by the government. Only last week, the Auditor General’s report into the activities of MDAs revealed that nearly a billion Ghana cedis had been squandered and or wasted with the Finance Ministry, leading the pack with over GHS 632 million.
The conduct of the Akufo-Addo government clearly underscores the need to be wary of boastful politicians who tout capacities that they do not possess, promise heaven and deliver hell and above all are prepared to use the most disingenuous falsehoods and ruses to capture political power.
In them we are seeing a Government that clearly lied to the people and claimed it was going to be able to raise revenues to meet every expenditure, without borrowing and affecting traditional expenditures.
This dire situation should compel the Akufo-Addo government to apologize to Ghanaians for their deception and follow the advice of national leaders to organise a national forum to find solutions to problems caused by their mismanagement of the economy leading to misalignment of the Budget that is saddling us with even more details.
Thank you.
Source: ClassFMonline.com
