Fall Out From Dr. Bawumia’s Address To The Nation About His Vision For Ghana. The Propaganda, Ignorance And Misinformation
Following the address to the nation by H. E. Dr. Mahamudu Bawumia, the Leader and Flagbearer of the ruling NPP, several issues have been raised which are purely out of lack of understanding of Economics and Finance, misinformation or at best propaganda by political opponents or pseudo-political activists who will prefer to be called ‘The Neutrals’. Dr. Bawumia spoke in various themes from the economy they inherited and how they turned it around only for Covid-19 to reverse the gains made and plunged the nation and the entire world into global financial crises not seen since the global depression in the 1930s. As Vice President, he spoke of his assignment and how he has spearheaded the introduction of several policy interventions (about 32 new policies) and what he will do including building on Akufo-Addo legacies, some policy departures and the new things he will bring on board. Unfortunately, some media presenters do not sometime do proper research and are sometimes prone to toe the line of the propagandists and misinform the general public either deliberately or inadvertently.
I will try to address few of the warped logic people have read into his speech as follows:
• Dr. Bawumia is running away from the government’s economic sins. This is a complete lie. Dr. Bawumia will never run away from the Akufo-Addo economic records because it is one of the best if not the best in the Fourth Republic. Why will he run away from the implementation of the Free SHS policy, the National ID card, 1 constituency 1 Ambulance, Mobile Money Interoperability, paperless port system, over 100 factories of new and old revived into operations among other new policies he spearheaded under this government.
In his opening remarks, he explained the conditions the Akufo-Addo-Bawumia’s government met and how they managed to turn the economy from its worst performance in 23 years in 2016 to one the fastest growing economies in the world for the first 3years. He indicated that between 2017-19 all the key economic indicators such as economic growth, agricultural growth, industry growth inflation, interest rates, fiscal deficit, exchange rate depreciation, and trade balance were moving in the right direction until the twin crises of covid-19 and the Russian-Ukraine war hit the world. Ghana was not spared either. In 2020 when the entire world was shut, the government lost about GHc11.94 billion in revenues and had to cough out additional GHC14 billion unbudgeted funds to support the covid-19 fight. He quoted the words of the IMF Managing Director to illustrate the impact of the pandemic as follows “This is a crisis like no other…Pandemics don’t respect borders, neither do the economic shocks they cause. The outlook is dire. We expect global economic activity to decline on a scale we have not seen since the Great Depression.”
This was concurred by former President John Mahama when he addressed the 24th Annual Africa Business Conference at Havard University in 2022. He said and I quote: “The Pandemic has had a generally deleterious effects on the economies of Africa. Data from Economic Commission for Africa (ECA) indicates that the Covid-19 has created the worst recession in 50years in Africa with average GDP shrinking by 3% in 2020. It has dragged about 55 million people into poverty in Africa and exposed another 46 million to the risk of hunger and malnourishment.”
He added that beside the global pandemic and Russian-Ukraine war, the banking sector cleanup and the energy sector excess capacity payments also added additional burden on government finances. The three items (including Covid-19 expenditure) cumulatively amounted to GHC50.1 billion and this was financed from borrowing. The fiscal deficit which was reduced from 8.4% in 2016 to 4.1% by 2019 went up again to 10.8% in 2020.
He concluded that despite all these challenges, data has shown that the government of Nana Akufo-Addo has still performed far better than what was bequeathed to it by the Mahama Administration. In addition, he admitted in most parts of the speech openly and subtly that he will improve and campaign on the structures that the Akufo-Addo Administration has laid although, he has his own path to pursue since the conditions will be different from the conditions in 2017.
• Ghana got more resources from World Bank and IMF for Covid-19 fight and covid should not be blamed for the current economic challenges.
I was appalled watching one of the political discussions on a major media network when the host sort to create an impression that Ghana got more than enough resources under covid-19 to have resolved our economic challenges, but the government mismanaged it. So, the government should not hide under Covid-19 to cover their incompetence in managing the economy. As far as I know, Ghana received $1.0 billion dollars from the IMF, $35 million dollars from the World Bank and €87 million dollars from the European Union. When you sum up all of that at today’s exchange rate, it is approximately GH¢14 billion. This is about 28% of the GH¢50 billion mentioned earlier. Due diligence would have informed serious people that when the issue of mismanagement of Covid-19 funds came up in the media, the World Bank came out to clarify it and said Covid-19 funds were not mismanaged. So, when you sit on radio or TV and still repeat the same propaganda, it shows that you are either not deep or a paid agent doing the bidding of others.
Such misinformation about the mismanagement of the Covid-19 funds must stop.
• Why can’t the current government implement some of Dr. Bawumia’s vision such as downsizing the number of ministers and abolishing some of the taxes?
It is important to note that once a government is formed with ministers, Heads of departments and CEOs of agencies in place, it becomes very difficult to reduce the numbers significantly. That is why President Akufo-Addo had to wait for his second term to reduce the number of his ministers from 126 in the first term to 86 in the second term. So, it will be impossible and unreasonable for the President to take such action especially, in an election year. It wouldn’t be nice for another 36 ministers to lose their jobs just like the 40 others at the beginning of the second term. But this will be possible if the President-elect in 2025 decides to have only 50 ministers.
In the same vein, taxes cannot just be abolished when a country is under the IMF program especially so, when you have to meet a revenue to GDP target. Approval will have to be given by the IMF upon satisfactory presentation of an alternative revenue measure or a corresponding cut in the programmed expenditure. With labour unions already up in arms for some taxes to be abolished, it could create a complicated situation for Ghana under the IMF. However, the IMF as a human institution could vary its conditions under certain conditions such as the coming into office of a new administration to provide some grace period for the new administration to settle. For instance, while the Mahama Administration was not allowed to recruit for 4years, the Akufo-Addo’s government was allowed to recruit after negotiations. Therefore Dr. Bawumia as President elect in 2025 could present alternative policies such as capping ministers to 50, new tax policy to widen the tax net without overburdening the existing taxpayers and leveraging on the private sector to provide public goods and services among other policies for consideration by the IMF. For instance, In Rwanda, the government does not own vehicles and fuel them. Most of the vehicular needs of the government are provided by the private sector who are responsible for drivers, fuel, and maintenance at a service charge to the government. A cut in the purchase of V8 and other brands of vehicles, fuel and maintenance will be very significant in government fiscal management. In Tanzania, citizens do not pay the total amount of rent to their landlords. They pay the portion of rent tax to the Tax Authorities before paying what is due to their landlords to them. You can be awakened in the middle of the night to show proof of your rent tax paid. The sanctions for violating the law are so prohibitive that no one violates it. These are some of the policy measures government could consider in 2025.
Dr. Bawumia proposing alternative tax policies in 2025 does not mean he is disagreeing or distancing himself from the government’s current tax regime. The conditions will be different in 2025. The current Cabinet is Chaired by a renowned Lawyer. In 2025 when H. E. Dr. Bawumia becomes the President, Cabinet will be chaired by a Venerable Economist. The two situations cannot be the same. It is reported that, in Cabinet, a lot of arguments are advanced before a decision is made finally usually with the arguments appealing to the President carrying the day. For instance, it is reported that in President Kufour’s regime, over 80% of Cabinet members were against Ghana going HIPC, but the President vetoed Cabinet decision in support of the then Finance Minister, Hon. Yaw Osafo-Maafo when he was convinced by him as the best way to go. Ghana eventually went HIPC, and the benefits were enormous. That is how the Driver-Mate scenario plays out in Cabinet if you are the Executive President.
• It was in bad taste for DMB to have praised the Governor of the Central Bank for the budgetary support during the difficult times. The banking sector cleanups caused so much pain and made the unemployment situation worse. Why should the Central Bank be praised? According to them, it was the lowest point in his speech.
First is that the banking sector cleanup was one of the conditions of the IMF in the 2014-16 programme with Ghana. Without it, Ghana wouldn’t have been able to exit from the programme in 2019. We may disagree on how it was conducted. We may also forgive the Central Bank for the unintended consequences of the policy. They may not have anticipated the ballooning of the cost at the beginning. But what it is certain is that over 4.6 million Ghanaians depositors were saved from losing their lifelong savings and the banking sector became much stronger after the cleanup.
On the issue of the Central Bank Quantitative Easing support to the government, I am at a lost as to why anyone with understanding of how the global economy works will want to chastise the Central Bank for saving Ghana from descending into economic crisis like Sri Lanka. It is important to note that what sank the Ghanaian economy in 2022 was the brouhaha leading to the passage of the e-levy including the near fisticuffs in Parliament. It triggered the rating agencies to downgrade Ghana’s economic outlook resulting in Ghana being shut from the international capital market. This resulted in a balance of payments crisis as Ghana had to continue to honour its debt service obligations, energy payments, import bill and the exchange rate crises. Ghana faced serious global and domestic economic crisis especially from 2022. If the Central Bank had not intervened, Ghana could have ended up like the Sri Lanka. The cedi did not suffer throughout the Pandemic neither did the Sovereign Rating agencies downgrade Ghana until the brouhaha with the e-levy occured. As the saying goes “Money does not like chaotic environment”.
For those who follow global economic developments, you would have realized that several Central Banks across the globe intervened to save their economies through quantitative easing. So, the Central Bank did no wrong. A policy Brief (No. 129) document from UN Desa on the Monetary Policy response to Covid-19 published on 9th February, 2022 stated that since the start of the pandemic, the Central Banks of Japan, the United Kingdom, the United States, and the euro area had added roughly $10.2 trillion in security assets to their already large balance sheets, letting their total assets soar to over $25.9 trillion (as of end-September 2021). These are countries with deep pockets. If they are doing it to save their economies, why shouldn’t we do the same?
CONCLUDING REMARKS
Dr. Bawumia speech on his vision proposed about 70 different interventions across the various sectors of the economy. The media will do Ghanaians a lot of good if they were to pick each one of them or select few of them and discuss them thoroughly rather than concentrate on the periphery or the misinformation as some media outlets sort to do.
Finally, I will go with Kofi Bentil analysis. Assuming the NPP is as bad as NDC or even worse. It means Ghanaians have been hoodwinked into making a choice between Dr. Bawumia and John Mahama. Forget about the anger, the disappointments, and the frustrations. Analyze the contributions of these two gentlemen dispassionately in terms of their contributions as politicians and as Vice Presidents with one having been a President before. What policy interventions have they spearheaded? Who has integrity and can be trusted? Who is not corrupt?
If you were to go into a supermarket to buy the same product but different brand names as in product Mahama and Product Bawumia, which one would you choose?
Over to you respected Ghanaians.
Assallamu Allaikum!
Habibu Adam
Senior Economist
Office of Senior Presidential Advisor
