Minority engages majority on rising fiscal deficits as Parliament debates 2013 budget
Parliament on Tuesday started the debate on the 2013 budget statement and economic policy delivered by the Finance and Economic planning Minister.
Both sides of the house put up spirited opinions on the financial plan.
Whilst the majority hailed the economic policy as one that would sustain the economy to achieve the country’s desired development goals, the Minority described the budget as “a job killing budget” that was stealthily leading Ghana into the Highly Indebted Poor Country (HIPC) status.
The motion for the debate on the budget statement was moved by the Minister of Finance, Seth Terkper and was seconded by Dr Anthony Akoto-Osei, MP for Old Tafo and ranking member of the Finance Committee.
Contributing to the debate, MP for New Juaben North, Dr Mark Osei-Asibey, said the country’s economy was headed for recession considering the rising public debts and decreasing gross domestic products (GDP).
He said government was derailing the economy and creating a financial quagmire for future generations by the numerous borrowing and financial commitments it was making. He urged that the situation should be urgently arrested to put the economy back on track.
Ghana’s current public debt stands at GHS33.5 billion from a post 2009 figure of GHS9.6 billion.
“Even without the inclusion of the Chinese Development Bank three billion loan, this is a whopping 248% increase in public debt in four years. Mr Speaker, as we speak right here now, each Ghanaian owes GH1, 340.00”, Dr Osei-Asibey noted.
He said Ghana was classified as HIPC in 2008 when its fiscal deficit hit 9 percent, moving up to 12 percent in 2012 “and we are coming to 9% again in 2013. So, without a doubt, Mr Speaker, Ghana again, is a HIPC country.”
The New Juaben North MP said it was heart-wrenching that the prudent economic measures instituted by the government between 2001 and 2008 had been whittled away by the present government’s negative handling of the economy.
That has resulted in “excessive borrowing, increasing national debt stock, reckless spending and payment of dubious judgment debts”.
The MP said that Ghana missed its target in 2012 since that years’ financial outlook projected a growth of 9.4 percent and recorded a marginal 7.1 percent growth, comparing the period to the New Patriotic Party’s (NPP) last three years where the economy grew progressively from 7.6 percent to 8.4 percent without the oil proceeds.
He said the agriculture sector that was projected to grow at 4.8 percent managed a meager 2.6 percentage growth because the government had not committed the needed investment in the sector, arguing that government should pay more attention to the country’s other traditional sources of income and not fall into the “Dutch Disease Syndrome”.
Dr Osei-Asibey questioned why Ghana was registering negative growth when its neighbors like Nigeria, Liberia and Sierra Leone were recording positive economic performances. He indicated that Liberia registered a budget surplus while Nigeria reduced its deficit to 2.17 percent.
“Mr Speaker, we missed all the convergence criteria. The only one I know that my colleagues on the other side will talk about is the single digit inflation. Let me address that single digit inflation hoax – that single digit inflation is a hoax.
“Mr Speaker, there are established relationships in economics. If you have low inflation, there has to be attendant low interest rates, low cost of living, stable currency. It is only in Mills and Mahama’s Ghana that you have a single digit inflation that the cost of borrowing is 22.9%, Mr Speaker, the single digit inflation that is being talked about is a hoax,” he insisted.
The Finance Minister, however, quickly countered the argument and maintained that the MPs submission was not accurate.
“Mr Speaker, the correlation which the Hon. The member is speaking about is not accurate. It is such that if you go back between May 2009 and early 2012, there is a correlation which is quite clear between the interest rates, the fall in inflation. It is when we started using interest rates as a measure to correct the economy that that correlation was misplaced,” he noted.
Responding to the Finance Minister’s intervention, Dr Osei-Asibey drew the house’s attention to the 8.6 percent rate of inflation in 2010 and the 12.3 percent Treasury Bill rate, which drew no correlation.
“The Treasury Bill Rate was 12.3 percent, inflation has only inched up from 0.2 to 8.8 percent and the government itself is borrowing at 22.9 percent. Do we call this a correlation? Mr. Speaker, where did we go wrong – it seems we are blessed but cursed with poor management.”
He urged government to limit the fiscal deficit, reduce spending, stop the creation of “unnecessary” ministries and fast-track the passage of the Fiscal Responsibility Act “to check the unbridled spending.
Mr Fiifi Kwetey, MP for Ketu South and a former Deputy Finance Minister, did not share Dr Osei-Asibey’s views. He argued that the gloomy picture that Dr Asibey had painted was not a true reflection of Ghana’s economy which still remained resilient despite the current discouraging fiscal deficits.
He said notwithstanding the difficult hurdles that Ghana’s economy had to surmount, “it continued to show a path of sustainable growth, continued to be a beacon for other countries as far as economic management is concerned.”
The Ketu South MP said since the present government assumed power, Ghana’s gross reserves increased from GHS 1.1 billion to the current GHS 5.4 billion, insisting that government should be commended for maintaining single digit inflation for the past three years.
“Mr Speaker, four years ago around this time, we had a deficit in all bases of 14.5%. In the new bases, it’s about 8.5%. Mr. Speaker, it’s more simply an issue about numbers. The issue that happened four years ago had to do with the fundamentals of the economy of Ghana. We are talking about a situation where the reserves of this country had come down to as low as US$1. 8 billion. As we speak today, the same reserves are up in a region of US$ . 5 billion.
Inflation was running away and by the beginning of 2009, inflation had gone up high to 21%.
Dr Akoto -Osei said it was unacceptable for the country to record an excess spending of 8.7 billion in 2012, urging the house to take steps to ensure that the public purse was protected.
He said Ghana overspent by GHS 300 million in 2009 and that by 2010 the country spent in excess of GHS 800 million, but the 2012 figure of GHS 1.8 billion was worrying and amounted to gross indiscipline.
Dr Akoto-Osei called for measures to ensure that government establishments maintain fiscal discipline.
Chairman of the house’s Finance Committee and MP for Ketu North, James Klutse Avedzi, urged critical and urgent tax reforms to meet revenue targets.