THE ECONOMY IN 2013----- HOW DID WE FARE

Ladies and gentlemen, brothers and sisters last week the NDC led government held a forum in attempt to explain how the so called BETTER GHANA was manifested in 2013. The speakers at that forum included HON Okudzeto Ablakwa, HON Omane Boamah, HON FIFI kwetey and HON Hannah Tetteh. If you listened carefully to all of them you would get the impression that in the context of the Better Ghana agenda, all is well in Ghana.

The President followed the next day with a Press Conference in which he sought to answer questions from journalists. In fairness to the President, he was a bit more moderate and acknowledged the challenges that we had gone through in 2013 and in fact he even refused to grade himself when he was asked to do so.

We are here not to respond directly to what was said at the forum nor at the press conference but to remind Ghanaians of what we all experienced in 2013, lest we forget. In a few weeks the President as mandated by the constitution will go to Parliament to give an account of the state of the nation. At that time we will let Ghanaians also know of our views on the true state of the nation.

For today we want to remind Ghanaians in brief terms how the economy of Ghana performed in 2013 and how such performance affected our daily lives. You may recall that the economy in 2012 ended with one of the highest twin deficits on record of about 12 % of GDP on the fiscal and current accounts deficits a record over-expenditure of over GHC 8 billion cedis

FISCAL POLICY
Against this background the Minister responsible for Finance presented a budget in March 2013 in which he promised in the course of the year to bring new tax proposals to attempt to improve the fiscal situation.

Ladies and Gentlemen true to his word 2013 is the year in which you will new tax proposals on condoms, cutlasses, fishing nets wellington boots, among others were introduced . During the latter part of the year 2013, in a rather unorthodox fashion the VAT rate was increased from 12.5 % to 15 % but to be made effective in 2014. Is This is a manifestation of the Better Ghana Agenda?.

In any case notwithstanding all these efforts to impose additional taxes on Ghanaians the fiscal deficit for 2013 is still very high, projected at 10.2 %of GDP but likely to exceed 11 % of GDP when the final figures are in. In 2013 simply put Government lived beyond it means by an additional GHC 9 billion cedis.

In an attempt to further improve the fiscal situation the NDC social democratic government in 2013, you will recall partially removed the subsidies on petroleum prices resulting in an increase in pump prices of all petroleum products and a consequent increase in transportation costs. Is this a manifestation of a better Ghana Agenda?

Increase in Fees and Levies

Ladies and Gentlemen in 2013 fees and levies were increased by over 200 %. You will recall that the Korle Bu teaching Hospital in haste to implement the initiative started charging higher fees even before it became lawful- a clear manifestation of the difficulties faced by service providers in 2013.

ARREARS ACCUMULATION

Delays in the payment of statutory funds hhave become a regular feature of the economic management strategy of the NDC government since 2009. Ladies and gentlemen the year 2013 was no exception. In fiscal year 2013 there was further accumulation of arrears in DACF( GHC 450 million),GETFUND (GHC 240 million), NHIF (GHC151 million), SSNIT contributions by government (GHC 695 million)
Together these amount to over GHC 1.5 billion. This does not include arrears owed to road contractors, salary arrears owed to public sector workers, arrears owed to suppliers of goods and services to government agencies including the security services and secondary institutions as well as caterers for the school feeding program. Is this a manifestation of the Better Ghana Agenda?.

REMOVAL OF UTILITY TARIFFS.

You will recall ladies and gentlemen that 2013 was one year in which Ghanaians experienced one of the worst episodes of the dumso-dumso phenomenon. A consumers and businesses were trying to adjust to the severe energy crisis, the government (through the PURC) responded by increasing electricity and water tariffs. The initial increases were so high that it was met with protests by many stakeholders including the TUC. Accordingly government as it were ‘reduced the increase to around 59 % but promised to bring it back in 2014.

True to its word Government has welcomed us to a’ happy new year’, by increasing electricity tariffs by an additional 9 % this month. Is this a manifestation of the Better Ghana Agenda?


PUBLIC DEBT
In 2013, government borrowed at least GH¢1.2 billion almost every month from domestic sources, so that by the end of 2013 our total debt stock stood at over $23 billion rising significantly from a stock of only $8 billion in 2008. The result is that in fiscal year 2013 alone, payment of interest on our debt amounted to over GH¢4.4 billion more than the amount spent on DACF, GETFUND and NHIS put together. Is this a manifestation of the better Ghana agenda?

INFLATION
Ladies and gentlemen in 2013 inflation has been in double digits reaching 13.2% in November, while public sector workers were given an increase of only 10%, not even to keep up inflation. And to make matters worse the government in the budget statement proposed a wage freeze for 2014. Is this really a manifestation of the better Ghana agenda?

CEDI DEPRECIATION
Ladies and gentlemen in 2013 the Ghana cedi depreciated by almost 24% against the dollar. It is important to note that Hon. Fifi Kwetey in his address at the NDC forum said that the Ghana cedi had depreciated by only 5% against the dollar. We only hope that this was a slip of tongue from the former propaganda secretary of the NDC.

ADVERSE TERMS OF TRADE
In 2013 also Ghana experienced an adverse terms of trade when the international prices of two of our major export commodities, gold and cocoa, declined significantly. This weakened our capacity to accumulate foreign exchange reserves, thereby putting more pressure on the Ghana cedi.

CREDIT RATING
Finally, Ladies and gentlemen in the fiscal year 2013 all the three major credit rating agencies, Fitch, Moody’s and Standard and Poor downgraded Ghana’s sovereign credit rating. This means that when we go to the international capital market to borrow we will have to pay a higher risk premium.

Ladies and gentlemen, I have given you a summary of economic indicators for 2013 just so we do not forget the realities.

The question we need to ask is so for the average Ghanaian, what was the combined effect of all these economic indicators on our daily lives in 2013?

The answer in simple terms is that in 2013, the average Ghanaian found life very difficult because:

• Parents in 2013 had a hard time paying school fees
• Individuals and businesses struggled to pay higher utility bills
• Ghanaian consumer’s confidence declined
• Ghanaian businesses struggled to deal with the dumso-dumso phenomenon
• The cost of doing business increased
• Business confidence declined
• Contractors were not paid
• Service providers including school feeding caterers were not paid
• Public workers were paid but had no work to do
• Teacher trainee allowances were stopped
• Workers experienced salary arrears and were threatened with a freeze on wages
• Importers were faced with higher tariffs
• Because of arrears in DACF, developmental projects in the MMDA’s came to a stop
• The National Health Insurance faced severe challenges because of arrears

Ladies and Gentlemen, this is how Ghanaians were challenged in the year 2013. Whether or not this is a manifestation of a better Ghana Agenda is for Ghanaians to judge.

2014
As we begin the year 2014, the obvious question to ask is what does the year 2014 have in store for us?

To start with, we started this year with an increase in utility tariffs and when Ghanaians were crying, a Minister of State is reported to have said “if you can’t pay, turn it off”, a better Ghana agenda indeed.

Just last week the increase in VAT became effective and prices of goods and services have already gone up.

Ladies and gentlemen, this year, every month from January to September the government through the PURC has signaled that tariffs on utilities will be increased.

The National Petroleum Authority (NPA) has also signaled that the automatic adjustment formula for petroleum products will be fully operational this year 2014. This is in addition to the increase in the road levy which has just been introduced. The implications for higher pump prices and its consequent impacts are obvious.

Ladies and Gentlemen, the increase in fees and levies, some by over 200% have already become operational as hospitals such a Korle-Bu have already advertised an increase in their fees.

Fellow Ghanaians, the personal income thresholds which were raised in previous years to protect low income earners as well as compensate for inflation have been frozen in 2014.

The mining sector which shed jobs in 2013 is faced with an imminent windfall profit tax in the face of declining gold prices.

Withhold tax on rent for commercial properties have been increase to 15%.

Fellow Ghanaians, these are a few of the policy measures which have been approved by Parliament for the fiscal year 2014. Unless government intends to propose other policy intervention in the course of the year, then on the basis of the last poor performance on revenues and excessive over-expenditures since 2009, we predict that the year 2014 is likely to bring as many challenges to the average Ghanaian as the year 2013 did.

Ladies and Gentlemen, to conclude, I want to touch on a matter which has also engaged the attention of the President and Ghanaians. This relates to the CDB (Chinese loan) of $3 billion.

Mr. President, I am sure you are aware that over 75% of this year’s capital expenditure program is funded from foreign sources. Of this amount as much as 78% is dependent on expected disbursements from the Chinese loan. To be more precise, government expects that about $1.6 billion will be disbursed from the Chinese loan this year. But as you noted, in three years since the loan was approved only about $600 million has been disbursed. To ensure that these monies are disbursed will require Presidential intervention at two levels. 1 The Commitment fee, which is pegged at 1 % of the undisbursed balance. Thus far an amount of US$ 54 has been paid as commitment fees . Surely this cannot be good for Ghana. 2. Conditions precedent for disbursement are too complicated and cumbersome, These conditions need considerable relaxation. This matter is urgent of extreme public interest. We will humbly advise the President to treat as urgent.

Ladies and Gentlemen we thank you for your attention
 

NPP Communications Directorate
NPP Headquarters, Asylum Down. Accra.

AG. Director Communications: Curtis Perry K. Okudzeto
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