Inflation in
Ghana
- Hon
Baffour Awuah vrs Mr Fiifi Kwetey
By Dr Kwei Ofei
On Tuesday, 23rd
November 2010, Good Evening
Ghana, a Metro TV programme
discussed the 2011 Budget Statement.
It was supposed to be an interesting
discussion, and in many respects, it
was. The panellists were Hon Baffour
Awuah, (MP for Sunyani West, and
former Brong-Ahafo Regional
Minister) and Mr Fiifi Kwetey
(Deputy Minister, Finance & Economic
Planning). The host, as usual, was
Mr Paul Adom Otchere. All three were
dressed in suit.
They discussed many
things. They discussed the growth
projections of the budget statement;
they discussed the real sector, that
is, Services, Agriculture and
Industry; they discussed the taxes;
they discussed the single spine
salary arrangements, etc, etc.
As was expected, the
Deputy Minister painted a good
picture of the NDC government’s
economic performance. He went on to
suggest that as a result of the
sound management of the economy,
inflation, among other indicators,
had improved. But the reference to
inflation was to define the high
point of the show.
In reaction, Baffour
Awuah pointed out that the drop in
inflation and what appeared to be an
improvement in the macroeconomic
situation were artificial.
Artificial because government has
refused to spend and has been
postponing its payments. And these
are payments that would have to be
made sooner or later.
Fiifi Kwetey quickly
retorted that government expenditure
was higher in 2009 than 2008, and
also, higher in 2010 than in 2009.
It was a tensed moment in the
discussion, because the credibility
of each of the gentlemen was at
stake.
To substantiate his
point, Baffour Awuah quoted from
paragraphs 71 of the 2009 Budget
Statement and paragraphs 48 and 80
of the 2011 Budget Statement. Fiifi
Kwetey also tried to quote something
from page 389 of the 2010 Budget
Statement.
Let’s examine the
information the two men presented. I
have before me the 2009, 2010 and
2011 Budget Statements. In paragraph
71 of the 2009 Budget Statement, the
following is stated:
“Madam
Speaker, total payments
for 2008, comprising
discretionary and statutory
payments, amounted to GH¢9,538.2
million, significantly higher than
the budget estimate of GH¢7,107.2
million.”
So, from the 2009
Budget Statement presented by the
NDC administration in March 2009,
total government expenditure in 2008
was
GH¢9.5 billion.
In paragraph 48 of
the 2011 Budget Statement presented
by Dr Kwabena Dufour, the following
is stated:
“Total
expenditure for the 2009 fiscal year
amounted to GH¢9,074.4 million,
equivalent to 41.7 percent of GDP.
This was against a budget target of
GH¢9,508.0 million, equivalent to
43.7 percent of GDP.”
Thus,
total government expenditure for
2009 was
GH¢9.1 billion.
This is less than the expenditure
for 2008 by GH¢400
million.
From
paragraph 80 of the same 2011 Budget
Statement, the following information
is reported:
“Total expenditure,
including payments made for the
clearance of arrears and commitments
for the first nine months of 2010,
amounted to GH¢8,494.0 million,
equivalent to 32.8 percent of GDP.
The outturn was 8.0 percent higher
than the budget target of GH¢7,863.6
million.”
So, for the first
three quarters of 2010, government
expenditure has only come to
GH¢8.5 billion.
We can summarise the
information we have as follows:
|
Year |
2008 |
2009 |
2010 (Q3)
|
|
Govt Exp
|
GH¢9.5 bn |
GH¢9.1 bn |
GH¢8.5 bn |
It
is clear that, indeed, government’s
yearly spending has been below what
the previous NPP government spent in
2008. The thing to note is that,
because of inflation, yearly
spending should increase in order to
do the same things as was done in
the previous year. Therefore, a case
such as this in which the figures
(as they are) are declining
signifies a substantial reduction in
government spending in real terms.
Obviously, this is largely why
inflation has been dropping.
Now, back to our two
gentlemen in the studio. Baffour
Awuah seems to have done his
homework well. Actually, it was
evident during the show that his
figures were more accurate. Our
Deputy Minister, Fiifi Kwetey
attempted to quote from page 389 of
the 2010 Budget Statement. I have
checked it. The information there is
the Economic Classification
of Central Government Expenditure.
It was of no direct relevance to the
topic they were discussing.
But the Deputy
Minister can be pardoned. He was
appointed to the Finance Ministry
just about a year and half ago. And
he had not had any previous exposure
or training in economics or budget
management before his appointment.
So far, I even think his courage in
discussing some of the economic
issues has been commendable.
We thank the two
gentlemen and Metro TV for the show.
