Parliament debates 2013 budget with focus on fiscal deficit

Parliament on Tuesday started the debate on the 2013 budget statement and economic policy, delivered by Finance and Economic planning Minister, with both sides of the House putting up spirited opinions on the financial plan.

Whilst the majority hailed the economic policy as one that would sustain the economy to achieve the country’s desired development goals, the Minority described the budget as “a job killing budget” that was stealthily leading Ghana into the Highly Indebted Poor Country (HIPC) status.

The Motion for the debate on the budget statement was moved by the Minister of Finance, Seth Terkper and was seconded by Dr Anthony Akoto-Osei, MP for Old Tafo and Ranking Member of the Finance Committee.

Contributing to the debate, MP for New Juaben North, Dr Mark Osei-Asibey, said the country’s economy was headed for recession considering the rising public debts and decreasing gross domestic products (GDP).

The said government was derailing the economy and creating a financial quagmire for Ghana’s future generations by the numerous borrowing and financial commitments it was making adding that the situation should be urgently arrested to put the economy back on track.

Ghana’s current public debt stands at GHȼ33.5 billion from a post 2009 figure of GHȼ9.6 billion.

“Even without the inclusion of the Chinese Development Bank $3 billion loan, this is a whopping 248% increase in public debt in four years. Mr Speaker, as we speak right here now, each Ghanaian owes GHȼ1,340.00.

Dr Osei-Asibey said Ghana was classified as HIPC in 2008 when its fiscal deficit hit 9 percent, moving up to 12 percent in 2012 “and we are coming to 9% again in 2013. So, without a doubt, Mr Speaker, Ghana again, is a HIPC country.”

He said it was heart-wrenching that the prudent economic measures instituted by the government  between 2001 and 2008 had been whittled by the present government’s negative handling of the economy that has resulted in “excessive borrowing, increasing national debt stock, reckless spending and payment of dubious judgment debts”.

The New Juaben North MP said that Ghana missed its target in 2012 since that years’ financial outlook projected a growth of 9.4 percent and recorded a marginal 7.1 percent growth, comparing the period to the NPP’s last three years where the economy grew progressively from 7.6 percent to 8.4 percent without the oil proceeds.

He said the agriculture sector that was projected to grow at 4.8 percent managed a meagre 2.6 percentage growth because government had not committed the needed investment in  the sector, arguing that government should pay more attention to the country’s other traditional sources of income and not fall into the “Dutch Disease Syndrome”.

Dr Osei-Asibey questioned why Ghana’s was registering negative growth when its neighbours like Nigeria, Liberia and Sierra Leone were recording positive economic performances, indicating that Liberia registered a budget surplus while Nigeria reduced its deficit to 2.17 percent.

“Mr Speaker, we missed all the convergent criteria. The only one I know that my colleagues on the other side will talk about is the single digit inflation. Let me address that single digit inflation hoax – that single digit inflation is a hoax.

“Mr Speaker, there are established relationships in economics. If you have low inflation, there have to be attendant low interest rates, low cost of living, stable currency. It is only in Mills and Mahama’s Ghana that you have a single digit inflation that the cost of borrowing is 22.9%, Mr Speaker, the single digit inflation that is being talked about is a hoax,” he said.

The Finance Minister, however, quickly countered the argument, insisting that the Member’s submission was not accurate.

“Mr Speaker, the correlation which the Hon. Member is speaking about is not accurate. It is such that if you go back between May 2009 and early 2012, there is a correlation which is quite clear between the interest rates, the fall in inflation. It is when we started using interest rates a measure to correct the economy that that correlation was misplaced,” he noted.

Responding to the Finance Minister’s intervention, Dr Osei-Asibey drew the House’s attention to the 8.6 percent rate of inflation in 2010 and the 12.3 percent Treasury Bill rate, which drew no correlation.

“The Treasury Bill Rate was 12.3 percent, inflation has only inched up from 0.2 to 8.8 percent and the government itself is borrowing at 22.9 percent.  Do we call this a correlation?  Mr. Speaker, where did we go wrong – it seems we are blessed but cursed with poor management.”

He urged government to limit the fiscal deficit, reduce spending, stop the creation of “unnecessary” Ministries and fast-track the passage of the Fiscal Responsibility Act “to check the unbridled spending.

Mr Fiifi Kwetey, MP for Ketu South and a former Deputy Finance Minister, did not share Dr Osei-Asibey’s views, arguing that the gloomy picture that he had painted was not a true reflection of Ghana’s economy which still remained resilient despite the current discouraging fiscal deficits.

He said notwithstanding the difficult hurdles that Ghana’s economy had to surmount, “it continued to show a path of sustainable growth, continued to be a beacon for other countries as far as economic management is concerned.”

The Ketu South MP said since the present government assumed power, Ghana’s gross reserves increased from Ghȼ1.1billion to the current Ghȼ5.4billion, insisting that government should be commended for maintaining single digit inflation for the past three years.

“Mr Speaker, four years ago around this time, we had a deficit in all bases of 14.5%. In the new bases, its about 8.5%. Mr. Speaker, it’s more simply an issue about numbers. The issue that happened four years ago had to do with the fundamentals of the economy of Ghana. We are talking about a situation where the reserves of this country had come down to as low as US$1.8billion. As we speak today, the same reserves are up at a region of $10.5 billion. Inflation was running away and by the beginning of 2009, inflation had gone up high to 21%.

Dr Akoto -Osei said it was unacceptable for the country to record an excess spending of GHȼ8.7 billion in 2012, urging the House to take steps to ensure that the public purse was protected.

He said Ghana overspent by Ghȼ300 million in 2009 and that by 2010 the country spent in excess of Ghȼ800 million, but the 2012 figure of Ghȼ1.8 billion was worrying and  amounted to gross indiscipline and called for measures to ensure that government establishments maintain fiscal discipline.

Chairman of the House’s Finance Committee and MP for Ketu North, James  Klutse Avedzi, urged critical and urgent tax reforms to meet revenue targets.

Source: GNA