Is Ghana’s Economy Heating Up?

Asks Margaret Jackson

October 8, 2013

Suddenly, Ghana is besieged with cash flow or liquidity problem. There is talk everywhere about this situation. Whilst the country has not been able to meet its revenue targets, its overall expenditure on the other hand keeps growing, which has thrown the country’s 2013 budget out of gear.

At a recently held Meet-the-Press, Minister of Finance and Economic Planning, Seth Terkper, stated that Ghana’s expected revenue of GH¢14.15 billion fell to GH¢11.9 billion, which represents a whopping shortfall of GH¢2.2 billion (16%) at the end of the second quarter.

This year has experienced the removal of subsidies on fuel and other utilities to help narrow the fiscal hole. In addition, government has widened the tax net to include other areas which previously were ignored. There have also been deep cuts in government expenditure to help balance the budget.

But all these interventions have not helped that much as the country continues to experience liquidity problem, which is being felt everywhere. The economy has become front and centre with even market women taking the centre stage in talking in earnest about rising cost of goods and services.

The government has attributed the problem to the rising wage bill which represents about 72 percent of the country’s total income in addition to the non-disbursement of certain grants by Ghana’s Development Partners for this year.

As a result of these problems, we have recently seen the price hike of electricity and water by the Electricity Corporation of Ghana and Ghana Water Company respectively which has created uproar in many quarters.

Prices of sachet water, public transport fares, fish and other basic foods on the market have all gone up. The issue of unpaid salaries to nurses at the Korle Bu Teaching Hospital for the past 20 months has also not escaped the radar, whilst there have been series of industrial agitations and strikes coming from the corridors of teachers and doctors.

All these are pointers that the country’s economy is definitely heating up. Indeed if your income cannot match your expenditure, then you are in deep trouble. The situation even becomes worse when the Development Partners who tend to fund more than 50 percent of the country’s budget are not disbursing funds due to disagreements over the country’s rising expenditure which is more than 70 percent of the budget.

With Ghana being cuffed with the accolade as a lower middle income country, the situation even becomes more unsolidified because conventional loans and grants which previously flowed to the country have now become more difficult to tap into.

Ghana now stand at a crossroad as far as putting the economy back on track is concerned. It is gratifying that Seth Terkper has been able to identify the key ingredients that have negatively affected the budget for the past two quarters. But the government has to do more since time is not on its side.

The issues that have to be resolved with the country’s Development Partners in order to get the promised grants flowing as quickly as possible have to be done quickly since the heating economy is being felt everywhere. And whenever a country’s economy heats up, it does not bode well for the sitting government.

Fiscal discipline is another way to go. You don’t spend what you don’t have. Therefore, the government must ensure that the country’s expenditure bucket does not balloon beyond what has been budgeted for. Ghana is noted for swelling up its expenditure bucket year after year. I am yet to hear of a single year since independence whereby we have been able to balance our budget without any negative variance between income and expenditure. If we take a deep peek back, no past government will escape this fiscal indiscipline. This has been the bane of the country.

It is therefore time to spend within our projections. It does not help the country if we continue to spend more than our projections and then try to justify it. This will not cut it if we resort to this kind of financial indiscipline every year.

We always jump on the neck of government when something goes wrong with the economy, but we hardly blame companies and individuals who have become perpetual artful tax dodgers. If Ghanaians have been faithful and truthful with their tax obligations, there will not be any need for the government to rely on the benevolence of Development Partners for crumbs every year.

Even though the government has expanded the tax scope, there are miles and miles of holes still to cover. In Ghana today many of the big, medium and small scale businesses do not honour their tax obligations, yet it is these same businesses who have always been shouting on top of their voices against government. It is time some drastic measures are adopted in order to compel those businesses who have been dodging the payment of taxes to do so. If Ghana can get at least 50 to 60 percent of businesses to honour their tax obligations, government will not go begging year after year.

We have big leakages at the country’s ports of entry, whereby custom officers collude with importers to cheat the country big time. Imported goods are under-invoiced by some paid custom officers leading the country to lose millions of cedis every month at the ports of entry. Even with the establishment of the Special Tax Force by the Presidency to curtail such collusions, some custom officers have developed new ways to go around the tax force.

We have tens of thousands of sellers all over the country who do not pay any taxes. Just interview some of the sellers on the streets especially those selling phone cards and you will be amazed to hear how much they make every week. Some are able to make more than GH¢1,500 every week, yet they pay nothing in terms of taxes, but leave piles of refuse on the streets for the government to clean up.

Some tax collectors from the metropolis and districts are known to have their own tickets and receipts books which they issue to traders and pocket the proceeds. This is an age old problem that needs fresh eyes. We cannot continue to cry about shortfalls in revenue if we refuse to address such gaping issues.

If you miss your forecast by 2-5 points, you can be forgiven, but if you miss your forecast for the first two quarters of the year by a whopping 16 points, then there is a serious problem on hand. The Ministry of Finance and Economic Planning has a lot of explanation to do as to why they missed the forecast by a whopping GH¢2.2 billion, which has led to a deep negative variance between income as compared to expenditure. Something is definitely wrong with the projections made.

Economic forecast is a serious business that is why analysts always make sure that they are very conservative with their numbers or projections. You do not want to miss the forecast by a large percentage points to give room for so many whys. That is the reason why Seth Terkper has a lot of explanation to give. And with economic or financial forecasts you do not wait for six long months to come out when your numbers are not tweaking right. You have every right to do a re-forecast if you realize down the road that your numbers are off. Waiting for two quarters is too long a time.

The country’s Economic Advisors have to take a closer look at the forecast made by the finance ministry. It will be a huge embarrassment if the advisors do not “taste” the numbers being projected before being finalized.

The economic heat is on, whether you like it or not. But it will take the collective efforts of all Ghanaians to steer the economy from the current stormy weather. The wastage in the public sector which takes more than 70 percent of the country’s budget is too huge.

Thousands of workers are being paid every month for doing practically nothing. These workers are not difficult to find in the ministries and other public institutions. We have instances whereby there are too many secretaries in the ministries. Apart from the ministers, all the directors and other notables have secretaries, messengers and drivers who are too many to count and they are all charged at the end of the month to the public purse.

If government is looking to cut down on wastage in the public sector it must be bold enough to cut down on the huge employment in the public sector. Workers who are paid for doing nothing must be pruned from the public sector to save the government some money.

These are some of the issues that have to engage the attention of Ghanaians when they discuss issues concerning the economy. We had doctors who laid down their tools for well over a month this year and then rushed to the banks to collect their salaries at the end of the month. Nobody raised issues over this, and imagine the uproar if government had dared to withhold the salaries for the period. If you don’t work for something, you don’t get paid!

We have reached a point whereby the government should bring stakeholders together to brainstorm on the heating up of the economy. It should not be all talk, but concrete steps have to be taken stabilize the economy, because when the economy heats up we all feel it since we all “Dey inside”.

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