Chairman of the Economic Management Team, Dr. Mahamudu Bawumia says Ghana’s persistent economic difficulties are largely dependent on the challenges in cleaning up the post-election mess and the management of public finance especially during election years.
He indicated that the country’s public financial management and the fiscal excesses particularly in the run up to the 2012 elections was very damaging to the prospects of managing the economic that is trying to climb up the middle income ladder.
Giving his opening remarks at the maiden Town Hall Meeting on Wednesday as Chairman of the Economic Management Team, he said “the economy in 2012 ended with the fiscal deficit of 12.2% of GDP; however in 2011, 11.7% GDP deficit was recorded, whereas in 2013, GDP growth was at 11.7% and in 2014, 11.9% of a fiscal deficit was recorded before falling to 6.7% in 2015 but rose again to 9.3% in 2016”.
He hinted that Ghana recorded in this period for the first time in history, double digit fiscal deficits in three consecutive years and plunged into a deep fiscal hole; thus “the debt piled up begun, debt service became burdensome on the budgets, inflation soared, and external trade balances worsened and the economy became more and more vulnerable to external shocks”.
“This poor state of public finance, weak implementation and lack of policy credibility resulted in Ghana requesting an IMF bailout in August 2014. Since there was no meat on the bone to fill the deep hole in public finances, government resorted to some tough fiscal measures notably the increase in the tax burden on every conceivable consumer item and production activities,” he remarked.
He added there were cuts to a number of areas of spending, most notably cuts to research allowances for lecturers, nursing training allowances and teacher training allowances.
“By the end of 2016, the fundamentals of the economy were generally weak. Real GDP growth declined from 9.1% in 2008 to 3.4% in 2016. Growth in Agriculture was declining, growth in industry was declining, the public debt which stood at 32% of GDP in 2008 had reached 70.2% of GDP by 2014 and at that point Ghana became classified as a country at high risk of debt distress and we are still trying to get ourselves out of this classification,” he narrated.
He stressed that the overall performance of the previous government, per the available data on the macro-economic indicators shows distinctly a different performance between 2009 and 2011 period and then 2012 to 2016.
“Interest rates were high and the banking system was weak with rising unemployment; unemployed graduates association became the new enviable club in town...The 2012 to the 2016 period was much worse even though the external environment was favourable”, he hinted.