…Says ‘Excessive Borrowing Has Put Economy On Life Support’
Mr. Isaac Adongo, a member of the Finance Committee of Parliament and Minority Member of Parliament (MP) for Bolgatanga Central, has said the midyear budget review presented by Mr. Ken Ofori-Atta, Minister of Finance, only confirms that harder days lie ahead of the country.
According to him, some elements, such as reduction in some projections in macroeconomic indicators, point to this fact.
Speaking to The Republic yesterday, Mr. Adongo expressed worry about the level of borrowing by government.
He said the NDC government handed economy growth rate at 6.3 % , but the government is driving the economy at 3.9 % growth rate, adding that he was not opposed to borrowing, but the monies should be commensurate with development projects and must be tangible.
“Our economy is on life support; any attempt to use propaganda will expose us,” Adongo warned during a debate on Finance Minister Ken Ofori-Atta’s mid-year budget review presented to the house yesterday.
“Where in the world do we use 10-year-old nominal values to make present calculations? Gross international reserves mean nothing if you don’t relate it with the depreciation of the cedi. Today, we are being told that a father who fails to raise revenue to feed his family should be praised,” the Bolga Central MP said.
Cassiel Ato Baah Forson, the minority spokesperson and ranking member on the Finance Committee, who is also MP for Ajumako/Enyan/Essian, on his part, said the mid-year budget review failed to address bread-and-butter issues, describing it as “Asemboni” budget” and not “Asempa” budget,
He said the current economic challenges do not offer enough incentive to the Ghanaian worker to put in peak performance, adding, the Akufo-Addo-led government’s “Good News” budget has now turned into a “Bad News” one.
Mr. Ofori-Atta, while presenting the budget, said the NPP government inherited a “weak” economy from the John Mahama administration.
He said: “Mr Speaker, we inherited a weak economy characterised by high fiscal deficit, 9.3 per cent of GDP on a cash basis against the then-target of five per cent on cash basis. A primary deficit of 1.4 per cent of GDP against a target surplus of 1.2 per cent, a high debt-to-GDP ratio of 73 per cent of GDP, high inflation of 15.4 per cent, low credit to the private sector, high interest rate, 91 per cent treasury bill rate at 16.4 per cent, weak domestic revenue mobilisation, low external reserves of 2.8 months of import cover, policy reversals including some unconstrained expenditure, seven billion of our standing commitments and un-discharged obligations and weak economic growth of 3.5 per cent – the lowest in 15 years.”
He added: “But Mr. Speaker, permit me to reassure this august house that the Akufo-Addo government is not daunted by this statistics that were passed on to us.”
But the Ajumako Enyan Essiam MP said: “From the information that we have heard today, from the document that we have just been given, I rise to say that unfortunately the budget is being revised from ‘Asempa’ (Goodnews) budget to ‘Asemboni’ (Bad news) budget.
“I say this because this is bad news for this country. You will notice that non-tax revenues as projected, the programme was that from Q1 to Q2 the outturn will be 2.7 billion, Mr. Speaker, the out turn is now 2.1 billion, this is a cut. Clearly, what this means is that there is a shortfall of almost GHS600million.”
Dr. Mark Assibey-Yeboah, Chairman of Finance Committee of parliament and MP for New Juaben South, justified government’s issue of bonds to restructure the country’s debts.
According to him, the length of time secured for borrowing, rather extends the maturity periods for the country’s debt.
“So far, this government has not been involved in borrowing; rather, what it has been involved heavily in is debt re-profiling, meaning that you are looking at your repayment period and you are asking other people to take some part of the debt and give you a longer repayment terms,” he stated.
Dr. Assibey-Yeboah argued that, “Instead of paying something in one year, you get the option to pay within ten years. This helps to get a moratorium to reduce the debt service which is a major toll on the country’s resources and fiscal appearance.”
Ghana’s debt stock as at May 2017 stood at GHc137.2 billion, according to latest figures from the Bank of Ghana. This also represents 67.5% of Ghana’s debt to GDP ratio.
Already, the government has announced plans to raise some GHc17.4 billion in bonds for the third quarter of this year. Of this, the government on Friday (July 28, 2017) raised GHHc1.49 billion from a 5-year bond it issued.
Nevertheless, presenting the mid-year budget review statement on the floor of Parliament, Ken Ofori-Atta quoted a number of macro-economic statistics which performed poorer than earlier reported.
Even though the 2017 budget presented on March 2, 2017, captured a 3.6% growth rate, the minister said updated figures presented by the Statistical Service in April 2017, showed the economy grew at 3.5% of GDP.
According to him, the fiscal deficit, which was reported to be 8.7% at the end of December 2016, was actually 9.3% of GDP.
“Mr. Speaker, on the fiscal front, updated information shows that the end-2016 fiscal deficit was worse than previously estimated, at 9.3 percent of GDP compared to the provisional figure of 8.7 percent of GDP on cash basis at the time of presenting the 2017 Budget. The deficit on commitment basis is now at 10.9 percent of GDP up from the 10.3 percent previously reported.”
The accumulated debt over the eight year period of the erstwhile NDC had grown by about 1,054% rising from GHc9.5billion in 2008 to GHc122billion in 2016.
Inflation, he said, was still high at 15.4%, despite the projected figure of 10.1%.
Despite these challenges, the Finance Minister said the Akufo-Addo-led government is undaunted and is working feverishly to ensure stability.
Under a new economic paradigm of shifting attention from taxation to production, the minister said the policies and programmes implemented are beginning to yield results over the last six months of the new administration.
“Mr. Speaker, we promised to stabilize the economy in a sustainable manner, while accelerating growth and creating prosperity and jobs for all. The macro-fiscal performance we have achieved in the first six months of President Akufo-Addo’s administration is showing remarkable progress.
The major macroeconomic indicators are now trending in the right direction indicating that the economy is on track.”
He said the fiscal deficit and interest rates are beginning to point downwards due to the sound economic management of the economy.
While he admitted a fall in revenue targets, he was quick to add that expenditure levels have also been reduced accordingly.
This, he said, is to ensure stability but was quick to add that measures have been taken at the country’s ports to ensure that corrupt activities are nipped in the bud in order to shore up the revenue receipt.
Source: Therepublicnewsonline.com/Felix Engsalige Nyaaba