I was in Cairo, waiting on the final leg of the Black Stars endeavor to advertise Ghana in the 2014 World Cup in Brazil, when I received the following message on my cell phone.
“President Mahama has expressed optimism that with prudent management by the government, the economy will be strong and resilient next year.”
It is a very nice thought from the Head of State. But, a typical English man or woman would tell you; wishes are not horses, otherwise, beggars would ride.
The President has made a number of profound promises, ostensibly to improve the lot of this nation, since taking the oath of office as the administrative head of this Republic. The only thing lacking, since partnering my friend and brother, the late Prof. John Evans Atta Mills to administer the Republic of Ghana in January 2009, has been the commitment of the administration to the kind of fiscal discipline that would reduce reckless expenditure, which alone, would lead to the kind of fiscal discipline needed to move the economy forward.
The GH¢8.7 billion blown on reckless spending in barely four months, obviously aimed at buying the vote of Ghanaians in 2012, has created such a gaping hole in state finances that it is going to take a miracle to bail this nation out of the economic mess. The President’s own submission that he is still in the first gear of the economy, after GH¢43 billion, the equivalent of US$20 billion, has been borrowed in five years of administering, does not give me confidence that this economy can ever improve under this watch.
Mr. John Dramani Mahama is a nice man, as a person. I can state on authority that I can count myself as one of his friends. In September 2012, he came to my humble village, Ekumfi Ekrawfo, at my invitation, as the Guest Speaker at the Akwambo Festival of the chiefs and the people of my humble home town. He is the only Head of State to visit Ekumfi Ekrawfo in the history of this small settlement.
That gesture, which was appreciated by the chiefs and people, should not obscure the fact that his administration has been reckless with the management of the state economy. That is one reason I regret the reaction of Alhaji Haruna Atta, Editor of the Accra Mail, and another friend of mine, who issued a disclaimer on the lecture on the need to adhere to fiscal discipline in this society, presented at the Accra International Conference Centre last Wednesday, November 13, to mark the first anniversary of the homecoming of Alhaji Aliu Mahama, former Vice-President of the Republic of Ghana.
As a member of the Planning Committee and its Media Sub-Committee, I am disappointed in the reaction of Alhaji Haruna-Attah. Dr. Mahamudu Bawumia was asked to talk on the need for discipline in society, the very stance the late Alhaji Aliu Mahama stood in society. His topic: “Discipline in Economic Management: The key to sustainable growth and prosperity,” did more than justice to the memory of the former Vice-President.
“Discipline,” Dr. Bawumia stated: “can be defined as the practice of training people to obey rules or code of behaviour, or using punishment to correct disobedience. For Alhaji Aliu Mahama, a society without discipline is doomed to failure…Discipline in economic management has three elements: Having a clear vision of what a government or leader wants to do; the discipline to follow through on implementing the vision, and the fiscal and monetary discipline to manage the implementation of the vision.”
It was not as if the renowned economist singled out one regime for analysis. He lectured on the economic policies of all regimes that have ever taken the centre stage of governance in Ghana, since independence.
According to Dr. Bawumia, the Nkrumah regime, which began the idea of self-governance in 1957, implemented socialist policies of a state-driven economy. It established enterprises like the Black Star Line, Ghana Medical School, Okomfo Anokye Hospital, the Ghana Atomic Energy Commission, several schools and colleges, Tema Harbour, the Cape Coast University, the Kwame Nkrumah University of Science and Technology, the Akosombo Dam, and many other construction projects.
The Nkrumah regime introduced free education, free medical attention, and many state interventionist policies to cushion the poor.
“The CPP (Convention People’s Party) inherited from the British a healthy amount of US$273 million, the equivalent of US$2.75 billion today. In addition, there was virtually no external or domestic debt, and Ghana’s population was 6.5 million.”
Dr. Bawumia told his audience that at independence, the country was operating under the West African Currency Board, which was constituted in 1912 to control the supply of currency to the four West African colonies – Gold Coast, Nigeria, Sierra Leone and The Gambia. The exchange of the West African pound to the sterling was fixed, and the government could not just print money without backing it with an increase in foreign reserves. “The framework kept inflation barely noticeable.” At the time of independence, according to Dr. Bawumia, inflation was only one percent. A year later, in 1958, it was zero.
Everything seemed to have gone haywire the moment Ghana broke away from the West African Currency Board and operated under the Bank of Ghana, which had been established in 1957 by the Bank of Ghana Ordinance, passed by the British Parliament. The ordinance was designed to enforce fiscal discipline, akin to the West African Currency Board’s arrangement. But the need for rapid industrialisation and rapid expansion of social services meant that by 1960, the CPP was frustrated with the autonomy of the Bank of Ghana.
With the expansion of industries, many of which were making losses, fiscal discipline was thrown to the dogs. The fiscal position, according to the 2012 presidential running mate of Nana Addo Dankwa Akufo-Addo, deteriorated and government spending increased from 9.5 percent of GDP in 1957, to 25.8 percent in 1965. Balance of payment deficit ballooned from a surplus of 14.5 percent of GDP in 1954, to a deficit of 6.4 percent of GDP in 1965.
One of the major reasons advanced by the National Liberation Council for justifying the overthrow of the Nkrumah regime on February 1966 was that the country was broke under the CPP.
Both the NLC and the Busia regime operated the market economy founded on the principles of free and representative government, multiparty democracy, relatively free press, and principles of democratic accountability.
The economic situation was aggravated by poor cocoa prices, and when the government devalued the local currency, the cedi, by a whopping 44 percent, the military stepped in.
According to the lecturer, the period between 1972 and 1983 was characterised by a dramatic economic decline, underpinned by indiscipline in the management of the economy. “Revenue collapse increased the reliance on the banking system to finance expenditure.”
In the opinion of Dr. Bawumia, the loss of monetary discipline accelerated inflation, which increased from 6.5 percent in 1969 to 116.7 percent in 1977, and 122 percent in 1983, all in the midst of controlled prices.
When the Provisional National Defence Council took charge after overthrowing the People’s National Party of ex-President Hilla Limann, it worsened the economic plight of the nation by setting up the Citizens’ Vetting Committee to investigate people perceived to be rich with deposits of ¢50,000 and more.
“Inflation reached 122.8 percent as more money was printed to finance government budget deficit. Fiscal indiscipline reached a crescendo under the National Democratic Congress of Flt. Lt. Jerry Rawlings, which resorted to huge borrowing to fund public expenditure, especially, during the 1992, 1996 and 2000 elections,” Dr. Bawumia stressed.
When the Kufuor regime took power after the victory of the opposition New Patriotic Party in the December 2000 polls, the nation benefitted from tax reliefs, which were prudently used to stabilise the economy. “The stabilisation of the macro-economic indicators between 2001 and 2007 was achieved by strictly limiting central government’s borrowing requirements,” Dr. Bawumia stated, cheered on by the partisan audience at the lecture.
Even then, expenditure ballooned again in the election year of 2008, and by the time the NPP government exited in December 2008, the nation was indebted to the tune of GH¢9.5 billion, according to Dr. Bawumia.
The NDC Mark II administration of deceased President John Evans Atta Mills and his former Vice-President John Dramani Mahama, according to the lecturer, has taken this country on a roller-coaster journey of public debt, with very little to show for the expenditure.
“Ghana’s total public debt has increased from GH¢9.5 billion in 2008 to GH¢43.9 billion as at August 2013, an increase of 357 percent in five years. Mr. Chairman, the NDC has borrowed the equivalent of US$20 billion in just five years… Where are the projects to show for the $20 billion?” he asked.
Calling on Parliament to enact a law to curb government expenditure and prudent management of the economy, Dr. Bawumia quoted author H. Jackson Brown Jnr, who wrote: “Talent without discipline is like an octopus on roller stakes. There is plenty of movement, but you never know if it is going to be forward, backward, or sideways.”
This economy has taken a sharp U-turn from the attempts in 2001-2008 to restructure the fiscal policies of this nation. As pointed out by the lecturer himself, the gear to the state engine is in reverse mode. The driver is on notice to re-adjust, or the whole economic direction of this nation would end up in a ditch, with fatal consequences for this nation.
We are not sitting pretty at all!
Source: Ebo Quansah/The Chronicle
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