NANA AKUFO-ADDO WAS SPOT ON .... on economic statistics

I have noted the responses given by the CPP to parts of the statement by Nana Addo Dankwa Akufo-Addo on the launch of his presidential campaign. I make the following observations:

Expansion in Ghana’s Economy

The NPP presidential candidate made the point that the NPP government on the 7th of January 2001 inherited an economy of size US$3.9 billion and has been able to expand that to US$15.0. It is obvious that these nominal GDP figures were derived from the 2001 and 2008 budgets statements by taking the cedi figures and applying the relevant exchange rates.

Because he was comparing the size of the economy at a specific points in time (that is, 7th January 2001 and now) when NPP assumed office, he seemed to have applied the exchange rate at that point-in-time to the most current nominal GDP of the country. I find this conversion appropriate. In practice, and for the purpose of what he was communicating, he could not have done anything else. A similar analysis by anybody would arrive at the same dollar equivalents.

The CPP argues that this was wrong, and that the appropriate exchange rate should have been the annual average of interest rates throughout the year. That is an interesting academic point. Ordinarily, I would not challenge anybody who chooses the CPP way to derive the dollar equivalent of the approximate size of Ghana’s economy in 2000. But, by leaning on this approach to challenge what Nana said, the CPP missed the point. They were commenting on something else.

The weakness in the CPP’s appreciation of Ghana’s economic performance became even more obvious when they attempted to praise the economic record of the NDC: “However, when measured in cedis, instead of dollars, Ghana’s nominal GDP actually increased from ¢20.58 trillion in 1999 to ¢25.15 trillion in 2000 (or, GH¢2058 million to GH¢2715.2), a nominal growth rate of 31.9%.”

If the CPP would be consistent, then by similar argument, when measured in cedis, Ghana’s economy has grown from ¢27.15 trillion in 2000 (2001 Budget Statement) to an impressive ¢139.75 trillion in 2007 (2008 Budget Statement). Put in another way, our economy is now more than five (5) times what it was when the NPP assumed office. That is to say, Nana Akufo-Addo’s suggestion that the economy had quadrupled was even an understatement.

It is an undeniable fact that Ghana’s economy under the NPP administration has done very well in the last seven years. As Ghanaians, we should all feel proud about this and build on it.

Manufacturing

Nana Akufo-Addo’s claims about investments in the manufacturing sector increasing from US$0.32 billion under the NDC to US$2.3 billion under the NPP in the last seven years were right. Thankfully, the CPP did not dispute the figures, except to challenge him to state the government agencies that made these investments.

But really, that challenge was neither here nor there. The statement did not mention that these investments all came from government. The point he made was that, due to the favourable atmosphere created by the NPP administration, more investment is going into manufacturing. And that is a fact.

Again, the reference the CPP made about manufacturing in 2007 was a punch below the belt. We all know that as a result of the energy difficulties we went through in 2007, manufacturing was affected. It is encouraging that the lessons have been learnt and government has invested enough in energy delivery (in the short and long terms) to ensure that there wouldn’t be a repetition in the future.

Minimum Wage

On wages, the CPP may want to note that minimum wages are not annual quantities. The minimum wage is revised in the course of the year, and may be revised more than once in the same year, such as occurred in 1984. It is therefore wrong to quote an annual minimum wage and apply an annual average exchange rate to get the dollar equivalent.

For instance, Nana Akufo-Addo’s references to the minimum wage of US$0.60 by the close of 2000 only meant that by the time the NDC handed power to the NPP close of that year, the value of the minimum wage converted to dollars at that time, was US$0.60. This is also a fact.

You see, for the year 2000, the minimum wage was ¢2900 until November when it was revised to ¢4200 but never implemented until the NPP came into office. It was therefore a mistake for the CPP to have used ¢4200 as minimum wage for the year 2000 and applied an annual average exchange rate to get US$0.77. That was completely wrong. They should not do that again.

On how the NPP government has performed on wages, it may be useful to hear the testimony of the Trades Union Congress of Ghana. In a policy research paper on public sector wages in Ghana published in March 2006, the Union’s research found the following:

“First, we notice some significant changes in public sector wages between 2000 and 2005. Basic salary in the public sector was below one US dollar-a-day between 2000 and 2002. As shown in the table below, the basic salary in the public sector was only $17 per month in 2000. It increased to $22 per month in 2001 and to $24 in 2002. It reached the one-dollar-a-day benchmark in 2003 and increased to $41 per month in 2005.

Year Basic Monthly Public Sector Salary (¢) Basic Monthly Public Sector Salary ($) 2000 114 750 17 2001 150 323 22 2002 195 419 24 2003 251 505 30 2004 306 081 34 2005 368 937 41

“Thus, between 2000 and 2005, the nominal value of the basic public sector wage on the GUSS increased (in US dollar terms) by 141 percent. The public sector wage did not only increase in nominal terms but also in real terms (when it is adjusted for inflation using the annual average CPI).” [Page 21].

The research further observed that:

“This has been achieved in spite of the huge pressure on government particularly from the IMF to cap public sector wage bill at a certain percentage of the GDP and government revenue. It is therefore fair to say that the recent public sector wage increases could not be attributed solely to union pressure, but also, it is partly the result of government’s commitment to increase public sector wages as a means of attracting and retaining more qualified professionals into the sector.” [Page 28].

This research was published in March 2006. The picture now is even better. Obviously, the NPP government’s record on formal sector wages is outstanding.

Conclusion

It is the legitimate right of the CPP to recognise itself as a force in the next election. Indeed, if they don’t, nobody will. And efforts by the party to re-assert itself in Ghana politics are welcome. Their determination to put the record of the NPP administration under scrutiny is also welcome.

We only advise that they stick to the relevant issues, and analyse the performance of this government factually and correctly.

Kwaku Kwarteng Government Spokesman (Finance & Economy)