Budget Blues ? A Different Rendition

-- LOOKING AT THE ARTICLE BY JOHN MAHAMA--

I?ll openly admit, right from the onset, that I need help in understanding the respected Mahama?s article ? ?Budget Blues.? I have read the article in its entirety several times and I still remain relatively lost. In good faith, I have tried, (perhaps more than the average person), to really get at the ?meat and potatoes? of what was written but there are still a few lingering points I have been unable to reconcile using the author?s own facts as presented in the article.

Before you call me petty, I?d like you to address Mahama?s own assertion that the Finance Minister?s quoted GDP growth rate of 5.2% is bloated as compared to a ?conservative? estimate of 4.9%. In making a case against the bloated figure, Mahama claims, (in his article), that even the Minority Spokesman on Finance ? Moses Asaga ? ?went as far as to describe the figure as ?doctored?!!? So, does it not come as a surprise when he states further that the ?accepted figure? can be conservatively placed at 4.9%? Call me trifling, but it?s important to note that the difference between the ?doctored figure? and the ?accepted? conservative figure is a whopping 0.3%. With this as the basis, I found it odd then that at certain points in the MP?s article, the math wasn?t as meticulous as it promised to be when a difference of 0.3% was referred to as ?bloated.?

Why was I confused?

Well people, I was a science student in Ghana and my only prolonged exposure to Finance and Economics was at the Sixth Form level ? so bear with me. My knowledge in financial matters and governance is admittedly shaky at best, and even on my good days, it is severely limited. This could be lending itself to my present predicament in understanding what the MP/Minority Spokesman on Communications was alluding to in his article. I like to keep things simple and where things don?t add up ? especially in a case where I know the person obviously knows better ? then I can only hope to have things developed to my level of understanding. In that spirit, I?d appreciate any clarification on ?Budget Blues,? which remains as clear as mud to me right now. Against this backdrop, we can now delve into the topics where my confusion lingers.

Under the sub-heading ?Ghanaians Are Eating Well,? the MP challenges the Finance Minister?s assertion that food is plentiful on the dinner table in Ghanaian households. I tend to agree with Mahama on this issue. I don?t, for a second, believe that Ghanaians are indeed well fed as yet. People are suffering and those in high places, (being effectively cushioned from the crunching poverty on the streets) may have reality ?slightly? altered! However, Mahama goes on to utilize figures here to buttress his argument on why nearly hyper-inflationary rates in Ghana may be the cause of people not being well fed.

In the article, he claims the inflation target of ?single digit? was thrown out of loop by an almost 100% hike in petroleum prices. Well, that could very well be true ? and a cause in fact of numbers being off. I followed the argument very well to that point. Furthermore, the MP alleges that the nearly 100% hike then resulted in a revision of the inflation targets, (by year end), from the single digits to 26%, of which the revised value, (26%) was again missed by 1.6% by year-end. In effect, Mahama claims at the end of the year, inflation stood at 23.6%.

But reader, this is where I, as a reader of his article gets lost. 23.6% plus 1.6% does not equal 26%. The shortfall i.e. (26% ?(23.6%+1.6%)) is 0.8%. Clearly 0.8% is greater than the 0.3% that the MP picks on in the Finance Minister ?exaggerated? GDP rate as recounted by the MP. Given the MP?s attention to the ?numbers,? in the Finance Minister?s report, I?m hesitant and would need some direction on what I am failing to see that is obvious to the trained eye?.or perhaps the untrained one. What am I missing here? Is this merely an oversight or deliberate slanted politics as usual?

Under the sub-heading ?Total National Debt Stock,? the MP again makes some good arguments if true but once again, I detected that, ?slight of hand,? that reads well on paper but doesn?t yield much when one tries to really understand the underpinning for the argument. For the incumbent government to have doubled the national debt in a period of just about three years is indeed daunting. He rightly (or perhaps wrongly) points out that combining the external and internal debt in order to attain total debt is an Osafo Marfo-ish trick, which is wrong and creates a very frightening specter of ?insolvency.?

But as I understand it, we are (or were indeed) INSOLVENT when declared an HIPC nation Mr. Mahama! Maybe, we weren?t bankrupt ? yet, but insolvency means the person or entity is having trouble paying bills as they become due. Ideally, you wouldn?t wait to be bankrupt to restructure a debt burden when trouble is detected! What I also fail to comprehend in the article is why the MP views, as contemptible, the fact that the entire amount owed was denominated in cedis. In fact, the MP?s words are: ?the Finance Minister Osafo Marfo gleefully computed the national debt stock left by the NDC Government as 41 trillion cedis.? Would it have been any better if the amount owed had been denominated in Pounds Sterling ? a weightier currency?

Assuming people find it harder to ?wrap their minds? around debt (or figures) in foreign currency, would that not be justification enough to denominate them in locally understood terms so the people, (locals), it affects the most can understand it? To knowingly present to them, figures in a form that is designed to deaden the impact of a grave predicament is deceptive!! In fact, I?d argue it should be required by law that wherever possible, these outrageous amounts owed and transactions entered into for the benefit of the people be denominated in the local currency (cedis) or locally understood terms so the indigenes can grasp (with clarity) just what it is the ?big men? are getting them into!

Let us revisit the GDP rate under the sub-heading it appeared: ?Disputed GDP Growth.? According to Mahama, a few well-known economists have expressed doubt about the figure that was given i.e., 5.2%. In Mahama?s discussions with these well-known economists, a very relevant question was purportedly raised. The big question, as raised, was if we actually grew at a rate of 5.2%, why would the Finance Minister put the growth target for the following year at the same figure of 5.2%? He claims the Finance Minister, by so doing, would in actuality be implying that there?d be stagnation for the coming year. The Finance Minister?s actual motive for putting the numbers at the same rate as the prior calendar year?s, (Mahama slyly suggests), is to afford the economy an opportunity to play ?catch up? with the padded GDP growth figure due to it being an election year.

My ignorance in such matters may become readily apparent here or the matter is indeed as simple as my mind perceives it. Either way, people who are in the same boat, as myself, would appreciate a rendering on the differences. Here?s my thinking on this issue: I?m assuming when people talk of growth, it generally implies the percentage change from a preceding period. To illustrate, assume at age twelve, I was five feet tall. By age thirteen, I had attained five feet six inches, and by age fourteen, I was six feet tall. The percentage change for each of the previous years remains at 10%?, Would it then be prudent to imply from the numbers, (same percent change over the years), that my growth has remained ?stunted? over the years?

Would you conclude from the data that somehow, my height at age fourteen has been able to ?catch up? to my initially inflated growth rate? I say even though the percentage change was fixed, having attained a height of six feet by age fourteen from my initial five feet must count for something. To me, that, conclusively, is an indication of an improvement in my height over the years regardless of what the percentage change is so long as it registers positive numbers! What is it with economics and numbers that leaves me baffled more often than not?

Under the sub-heading ?Exchange Rate,? the MP makes a marginally convincing argument. The cedi performed acceptably against the dollar (emphasized by the Finance Minister) ? but the dollar, in itself, didn?t perform well as compared to other world currencies. This means the cedi, measured against the dollar, is meaningless and unreliable and must be measured against the currencies of our major trading partners. Good point MP?but I don?t believe it?s all downhill.

My 2X4 economics informs me that this is ?prime time? for USA exports in terms of their weak currency. The same would hold true for Ghana exports. Therefore, were we able to compete in international markets, our goods would be cheaper than those offered from competing countries. However goods imported from Ghana?s major trading partners would be at a premium to consumers in Ghana. We are indeed too dependent on foreign goods and the present fiscal situation would undoubtedly hurt the people who can least afford these things. It also appears the MP is admitting that the cedi stood its ground, albeit a shaky one, against the dollar. Harnessing the freefall of the cedi in my view is not party dependent. Because of my views, I?m not too clear on where the MP was trying to go with the glaring fact that he needed to point out ? regarding the cedis? performance against other currencies as opposed to the dollar. The knife cuts both ways ? to insinuate that the problem is political platform dependent would be misleading ? in and of itself.

Under the sub-heading ?Tax Breaks,? the most I can say on this is that there are enough ideas to go around. So what if the incumbent government recognizes that Professor Attah Mills? idea of giving corporate tax breaks is a good one and has chosen to short-circuit the agenda by implementing it before the Professor? Please provide more winning ideas (and lobby for the ideas) that we all hope will be implemented ? we all stand to gain! There are ideas aplenty and surely, the Good Professor can find something else to make his battle cry in his bid to win the presidency. I am also not politically savvy enough to know why the effective date of this new tax-break was set for 2005 even though it showed up on the 2004 budget ? I?d like an explanation on this since it appears to be an issue.

Under the sub-heading ?Petroleum Pricing,? it would be refreshing to read some of Mahama?s own ideas on how such a two-headed beast (petroleum financing) can be tamed. It appears the IMF/World Bank has put an asphyxiating stranglehold on the present government to pass on a 10% and growing deficit in petroleum pricing to the people who consume the product. What I noticed immediately here is that if there?s a growing ?deficit,? which must be passed on to the people, how would another government, like the one Mahama advocates, be able to plug such a deficit while insulating consumers from the pressures of the growing deficit?

Numbers have to be worked here and if what is apparent (i.e. rising petroleum pricing) is immediately reduced through artificial means, what other services, goods, infrastructure, would have to suffer? It?s almost a one-to-one relationship so I?d prefer to see what, how, and where things would need to be cutback in order to support a structure we know cannot be cheap. Petroleum is expensive to mine, refine and distribute, and it all has to be paid for?..the question then is HOW? Africans have been gullible in the past with politicians who make huge and sometimes ridiculous promises. That some remain surprised when politicians renege on some of the appalling promises is the real surprise to me!

Under the sub-heading ?HIPC,? Mahama, once again, points out that after the country reaches the completion point of HIPC, it?d still be indebted to the tune of 80 trillion cedis. Looking at the facts solely as presented, it?s be hard to argue against the fact that the country is still highly indebted and poor ? and will be so even after the HIPC initiative. One wonders what might have happened had Ghanaians not chosen this HIPC road of ?redemption.? Figures are hard to dispute and it?ll be greatly appreciated if the benefits of going HIPC can be adequately broken-down to the layman in the face of what seems to be a colossal failure based on relevant figures presented.

Under the sub-heading ?Financing Gap,? my initial reaction was: get real MP! When has the budget not been dependent on the benevolence of donors to close the shortfall? Must it be specifically stated in the budget for us to know what has been obvious over the years? Have we not consistently ?cried? or in fact, begged for alms from wealthier nations to support the nation?s budget? It is however troubling to note that a 300% increase in government expenditure over three years ?where such expenditure appears to have been gobbled up in unbridled over-bloated government? has raised little concern with the government of the day. Generally, I believe there?s some truth to this ? and the MP is in a better position to note such wanton use or abuse of the nations resources better than I. I see no sense of urgency surrounding the incumbent government in reining in a runaway government!!

Finally, I have remained queasy over the President?s incessant travels abroad. I can?t for the life of me fathom what can be in those nations that require the President?s presence so frequent a time when his presence is needed right there in the country. Is there anyone in Ghana to advise on the Cost-Benefit-Analysis? I have heard this term thrown around a myriad times ? and it sounds good right about now!! Like I stated earlier, I wouldn?t be the person to ask what factors influence supply v. demand if you want a doctoral dissertation on the subject. The layman on the street will tell you that when OPEC reduces oil production, prices go up ? and it?s at once, both amazing and an eye-opener on how effective that simple formula works. Also, I only know that sometimes, things have to be kept simple in order to offer the most workable solutions to make sense!!

Please keep your explanations to this article, if any, that simple too for my sake and the sake of our progeny!

POLITICS IS KILLING US ? and I fail to believe that the absolutely best way to practice it is as we do in Ghana. Enough already?please, politicians must help us support them!!! We are making strides but the thinking in the institutions must also change right along as our democracy grows!