Vice Presidential Candidate of the New Patriotic Party, Mahamudu Bawumia, has issued a damning verdict on the “supposed fiscal consolidation that the government claims to be taking place,” saying that is still not credible and that the Mahama government is lying to Ghanaians.
According to Dr Bawumia, since the implementation of the International Monetary Fund programme over the last two years, it is clear that the Ghana’s fiscal consolidation under the programme is a sham.
In the period of 2012-14, Ghana experienced – for the first time in the country’s history – double digit fiscal deficits for three straight years, with the deficit settling at almost 12 percent of GDP in 2014.
This, the former Deputy Governor of the Bank of Ghana said, demonstrated the “deep fiscal hole that Ghana’s public finances had plunged into” following the reckless increases in public expenses during the 2012 election year and following years.
Because of this, public finances were struggling and policies were not properly implemented. As a result, Ghana requested an IMF bailout in August 2014, which the nation was granted.
“There was a clear expectation that the process of fiscal consolidation – a sustained decline in the fiscal deficit/GDP ratio – would take place. This, after all, is what IMF austerity programs are supposed to achieve,” Dr Bawumia noted in a statement.
Such a decline in the fiscal deficit is commonly very beneficial, and often helps to bring down inflation, improve debt sustainability, help lower interest rates, increase investment and increase economic growth. These factors would greatly contribute to the establishment of job opportunities as well as alleviate poverty.
In 2015, after the implementation of the IMF supported programme, the fiscal deficit/GDP ratio dropped drastically to 6.7 percent. However, the actual economic hardships that the public experienced did not greatly improve in proportion to the benefits of the fiscal consolidation, the NPP Vice Presidential Candidate notes further.
According to Dr Bawumia, “what Ghana is experiencing is a unique type of fiscal consolidation which has defied all expectations.”
He explains that Ghana’s fiscal consolidation is taking place in the midst of public debt levels rising to unsustainable levels, while inflation is currently the second highest in Africa at 18.2%. Consequentially, interest rates are rising, business confidence is being reduced, the banking system has the potential to collapse, and the economic growth is declining even further.
“The Ghanaian experience, under this NDC government, is exactly the opposite of what Fiscal Consolidation is supposed to achieve,” he maintains.
After an IMF staff visit in April this year, it was a clear expectation that a review would be presented for IMF Board approval by June 2016. This has still not happened. “Amongst the reasons is the IMF statement that the fiscal data for 2015, which provided the basis for the positive assessments of the first and second reviews, is yet to be reconciled,” Dr Bawumia said.
“How can 2015 fiscal data not be reconciled by July 2016?” he asked, adding: “This points to the government not coming clean on the fiscal data.”
For the first time in almost 15 years, the Central Bank has failed to report on fiscal developments, a development Dr Bawumia takes as a confirmation that something is very wrong.
He criticizes the NDC, stating: “This John Mahama led NDC government may just be setting the stage to deliberately or technically abrogate or suspend the IMF program to give it the space to go on another spending binge for the 2016 election as they did in the 2012 election year.”
Now, Dr Bawumia wants the government to publish the fully reconciled fiscal data for 2015 and the first half of 2016 immediately, for the benefit of the public and the financial markets.
This lack of transparency, he says, is undermining confidence in not only the economy, but in the government as well.
“This NDC government is simply not being honest with itself, the good people of Ghana, the IMF and the international community about the state of Ghana’s public finances,” Dr Bawumia concludes.