Gov’t Has Turned Economy Around – Oppong-Nkrumah
Deputy Information Minister, Kojo Oppong-Nkrumah, says the Akufo-Addo administration has succeeded in turning the economy around over the last 11 months.
Contributing to a debate on the 2018 budget statement, he cited increased revenue generation, a slowdown in the rate of debt accumulation and rise in GDP figures as the evidence that the economy is doing better today than under the previous government.
“In our law courts, we will say Res Ipsa Loquitur. Ghana’s economy has turned around. Our energies ought not to be spent denying this. Let us spend our energies embracing this turnaround, consolidating it and now building inclusive, job filled growth poles on it,” the MP for Ofoase Ayirebi told the house.
Below is the full statement
Mr Speaker, on November 15, 2017 the Finance Minister presented the Budget Statement and Economic Policy of government for the year ending December 31, 2018. This he did in accordance with Article 179 of the 1992 Constitution. Following the reading of the Budget Statement which was themed “Putting Ghana Back to Work”, several debates have come up on the floor of parliament between the sitting administration and the main opposition party.
Mr Speaker, Thank you for the opportunity given me to contribute to the debate on the 2018 Economic and Financial Policies of the Government of Ghana. As Ghana’s democracy deepens, it is my hope that our development policy debates will focus less on disputing our national data or twisting same around to represent absurd positions. Instead, I pray for the day when our debates will focus on how to build on what we have achieved in the last budget and not how to wish the successes away with propaganda.
That is why Mr Speaker, I will be using my time to point out 5 empirical facts that show what we have accomplished as a nation in this 1st year of the Akufo-Addo administration. And I will tell this house, particularly my friends on the other side, not to yield to temptation to wish away what we have collectively achieved as a nation.
1) First is the issue of GDP and Non-oil GDP growth
Mr Speaker, Ghana in the year 2011 recorded a GDP growth of 14% of which the President of the day, H.E. the late John Evans Attah Mills of the NDC described as “unprecedented”. In built of that 14% growth was oil which was discovered under the tenure of HE John Agyekum Kufuor. Nonetheless, our friends from the opposition side were happy to count it as part of their GDP growth achievements. Today, we are being told by the same NDC that oil included in GDP should be discounted for no reason.
Mr Speaker the NPP government targeted a non-oil GDP growth of 4.6% by the end of the 2017 fiscal year based on the economy that we inherited. Non-oil GDP growth has gone up by 4.0% from January to September this year and is estimated to hit 4.8% by year-end. That is the mark of a government that is investing heavily in non-oil sectors as well in getting the growth that we desire. We are targeting a non-oil GDP growth of 5.4% in 2018 and about 6.8% GDP growth with oil.
Our friends from the opposition have again made the argument that if indeed we have stabilised the economy, then the Fiscal Stabilisation Levy should be removed. Mr Speaker Economic stability is not an event but an exercise that must be maintained over a period and so even if the NPP government has managed to stabilize the economy, it is important to build buffers that would ensure that in the medium to long-term, this stability is maintained. That is why the Fiscal Stabilisation Levy has been maintained.
2. The challenge of a debt overhang inherited at the beginning of 2017
Mr Speaker the NPP when in opposition always warned against reckless borrowing. Huge annual deficits in the period preceding our assumption of office led to an annual debt accumulation at a rate of 36% year on year. This left us with a debt overhang calculated at 73% of GDP as at December 2016. The Akufo-Addo administration has used a number of tactics in its first year to reduce the debt overhang and created fiscal space for investment in the growth-enhancing initiatives.
Servicing of debts & arrears
We have paid about GH₵9.7 billion in interest payment through September this year in order to ensure that part of the debt that we inherited will begin to break down. The NDC which has been making the argument that we have not done much had paid only GH₵7.9 billion at this same period last year. We have paid about GH₵760 million in net arrears clearance compared to GH₵641 million paid by the NDC same period last year.
Slowing down the rate of debt accumulation
Mr Speaker, this Akufo-Addo government has been cautious of the rate at which it accumulates debts and for that matter reckless borrowing has been avoided.
Quick rise in GDP
The tactics used by the Akufo-Addo administration within these 10 months has begun to manifest through an uptick in GDP. We took off from about 3.5% GDP growth, we projected 6.3% and seeking to end the year 2017 at 7.9%.
Reprofiling our debt
The interest burden of Ghana’s debt has also been reduced from 45% of tax revenue to 43.9% in September 2017 and is projected to further reduce to 41.8% at the end of 2017. A combination of all these strategies has brought our debt-to-GDP ratio to 68% and we are hopeful to meet our end-year target of 70.9%. (So debt to GDP will not automatically go up just because you have heard of government activity on the capital markets. It is the net of our debt position as against our GDP)
Is this not good for Ghana? This is good for Ghana and no amount of Propaganda can wish it away. Our Focus should be on how to sustain and build on it.
3. Primary Balance has moved from negative to positive
Mr Speaker, the primary balance is what measures the difference between the revenues you raise domestically and expenditure items except for interest payment. When the country’s primary balance is in deficit, it means that you are borrowing to satisfy wages and salaries, interest payments etc. Primary balance in 3 out of the past 4 years (2013-5.4%, 2014-3.9% and 2016-1.4%) has been in deficit. The evidence before us speaks for itself. H. E. Akufo-Addo and the NPP government assumed the reins of power and the primary balance is back to a surplus of 0.3%.
If someone says government borrowed to pay salaries, let them be reminded that a nation with positive primary balance does not finance its salary and interest payments from new borrowings. This is a significant achievement and no amount of Propaganda can wish it away.
4. Government has failed to meet its revenue targets & thus has failed
Mr Speaker in the year gone by the government of the day set itself a revenue growth target of 26% and missed it by 11%. The NPP government, on the other hand, set a bold revenue growth target of 33.5% and we are not short by even 10% today. It is the revenue that we have raised that has encouraged us to fund the many social initiatives that we have spoken about. The Organisation for Economic Cooperation and Development (OECD) suggests that developing economies must hit a tax to GDP ratio of between 14% and 15% to accelerate development. In as much as it is important to grow revenue aggressively, it does not necessarily mean piling nuisance taxes on people. That is why even in the year when we have removed taxes, we are still able to achieve revenue higher than what the previous government did.
From January to September 2017, we have raised revenue of GH₵37 billion compared to GH₵35 billion raised by the Mahama-led government during the same period last year.
If someone says government missed revenue targets and has become a failure, this is empirical evidence that as ambitious as our revenue targets are, we have achieved a significant portion of it and have used its proceeds judiciously. And no amount of Propaganda can wish this achievement away.
5. This government is not spending, is not spending on Capital Expenditure and cannot achieve growth.
– GDP growth does not come from capital expenditure alone, but from the summation of Consumption (household spending), Investment (firms spending), Government Expenditure (government spending) and Net export. As government spends on critical sectors, making prudent Investments (be they private and public flow into this new stable economy) coupled with increase in exports over imports, you bet our GDP will grow. That is why even for they who claimed to spend more in 2016, we have achieved higher growth than they did. That is prudent economic policy.
– Mr Speaker this government chooses to spend heavily on human capital initiatives because new research shows that investment in people is not social spending. It actually contributes to GDP. President Jim Yong Kim of the World Bank has stated that “governments that do not invest early in a skilled, healthy, productive workforce are undermining their current and future economic growth. We need to help countries understand that investments in human capital are just as critical as investments in ‘hard infrastructure’ if they actually want to spur economic growth and compete effectively in the short, medium and long-term.”
So Mr Speaker as we spend 400 million on Free SHS in 2017, and 1.2 Billion in 2018, we have invested in the earliest part of people’s lives and this will make a big difference in our country’s ability to compete. This investment will establish the social foundations that can act as a bulwark against instability, violence and conflict as indicated by President Kim.
– But Mr Speaker, the numbers do not support the narrative that this government is not even spending.
– And oh by the way Mr Speaker if our friends had not left us arrears of about 3.2 billion, interest payment requirements of 13.2 billion and another over 7 billion in outstanding debts all totaling 23.4 billion, just maybe we would have been able to spend this 23.4 billion more in addition to our capital expenditure budget of 7.1 billion in 2017.
– As prudent as we can be Mr Speaker, we are spending to drive growth in the critical sectors of the economy.
If someone says government is not spending, this is empirical evidence that our spending is efficient and leads to growth. And no amount of Propaganda can wish this achievement away.
Mr Speaker, the evidence shows that the Ghanaian Economy is back on a path of stability. This is something we all ought to be proud of.
In our law courts, we will say Res Ipsa Loquitur. Ghana’s economy has been turned around. Our energies ought not to be spent denying this. Let us spend our energies embracing this turnaround, consolidating it and now building inclusive, job filled growth poles on it.
We must now focus on consolidating this recovery so it is not washed away at the slightest jolt of external shocks.
– The Finance minister intends to continue on the path of Fiscal Discipline and seeks to bring his deficit from almost 10% to 6.3% and further to 4.8% this year. We must encourage him to keep to his word. Indeed we must support him. For this is the only way to keep our debt from ballooning on one hand and keep growing our GDP through high efficiency and targeted expenditure in the productive sectors.
– The Finance Minister in the 2018 Budget chooses to remain audacious in revenue mobilisation without necessarily adding on new taxes but being more efficient in the existent tax handles. We should support and encourage him to succeed at this. Our domestic revenue mobilisation must stretch for the optimal so that we have enough resources to move our nation forward. That is when Ghana beyond aid will see the light of day.
– He seeks to be accurate in expenditure forecasts and firm in expenditure management. He has demonstrated he can do that in 2017. Let us not be in a hurry to throw it away. It is healthy for our economy.
– It is good to be in a hurry to fulfill promises as we are doing, but not be in a hurry to rack up more debts on the national debt stock and put debt at unsustainable levels
The Finance Minister and the Economic Management Team have done their bit. They have spelt out a clear economic policy direction. The challenge now rests on CEOs of Agencies, Directors of MDAs, ministers and other appointees who are charged with executing the growth agenda for 2018 and beyond. I ask that we are reminded that our duty is now to execute on time and within budget so that we all may witness the coming beauty of Ghana soon. Our task is to execute within time and at minimal cost. It is to get things done in accordance with this policy direction.
If we do this without ifs and buts, selflessly and with utmost good faith, the prayer we say in this chamber every morning will be answered; we will see the coming beauty of Ghana in our lifetime.
I thank you, Mr Speaker