President John Evan Atta Mills
By William Yaw Owusu
President John Evans Atta Mills on Thursday, July 24 died in Accra. His death shook the nation and left the business community and foreign investors trying to revise their notes and await what his successor would bring onboard.
His Vice, John Dramani Mahama was immediately sworn in as President according to the 1992 Constitution and he has since assured that he will continue to pursue the legacy of the late professor of law whose specialty was in taxation.
BUSINESS GUIDE assesses what President Mills stood for on the economic front, his economic management style and the legacy he left behind. Professor Mills was the first President in Ghana under whose tenure Ghana began to export oil in commercial quantities.
Inflation
Until the President’s death, inflation rate stood at 9.40 per cent (June 2012). Historically, from 1998 until 2012, Ghana Inflation Rate averaged 17.9200 percent reaching an all time high of 63.0000 percent in March of 2001 and a record low of 0.4000 per cent ( May of 1999).
According to the ruling National Democratic Congress (NDC), the late President supervised a healthy economy and was able to reduce inflation from double-digit hovering around (18%) to single digit (now around 9%). They said inflation continued to drop consistently for a period of 18 and has remained in single digit from June 2010.
However, critics of the government say the effort was not enough as it did not reflect realities on the ground. They argue that a country with single digit inflation should encounter high prices of goods and services which have resulted in high cost of living but the President’s economic management team have always insisted Ghanaians are better off under them.
Cedi Management
The daily depreciation of the Ghana cedi against major currencies has become a headache for economic managers of the country. The cedi, which from January to June 2009 suffered a rapid monthly depreciation of about 3 percent, slowed down considerably to 0.9 percent in July 2009. It bounced back in mid 2010 and remained relatively strong for some time. However, since January 2012, the cedi has continued to depreciate against the major currencies.
Some analysts attributed the decline to the surging demand for the dollar and other currencies by both local and foreign investors, and businesses mainly to cover import bills and that compelled the government to set up an economic management team and economic advisory committee to address the situation but the measures do not seem to work and Renaissance Capital has even predicted another 5% to 10% depreciation is likely by (the end of 2012).
GDP
According to Index Mundi, Ghana's economy has been strengthened by a quarter century of relatively sound management, a competitive business environment, and sustained reductions in poverty levels. Ghana is well endowed with natural resources and agriculture accounts for roughly one-quarter of Gross Domestic Product (GDP) and employs more than half of the workforce, mainly small landholders. The services sector accounts for 50% of GDP. Gold and cocoa production and individual remittances are major sources of foreign exchange. Oil production at Ghana's offshore Jubilee field is expected to inject some capital into the economy.
GDP (purchasing power parity), $74.77 billion (2011 est.), GDP (official exchange rate), $38.6 billion (2011 est.), GDP - real growth rate13.5% (2011 est.), GDP - per capita (PPP), $3,100 (2011 est.), GDP - composition by sector, agriculture: 28.3%, industry: 21%, services: 50.7% (2011 est.), Labor force: 11.44 million (2011 est.)
Investment (gross fixed) 19.9% of GDP (2011 est.), Budget: revenues: $8.796 billion, expenditures: $10.38 billion (2011 est.), Taxes and other revenues: 19.1% of GDP (2011 est.), Budget surplus (+) or deficit (-), -5.4% of GDP (2011 est.), Public debt: 38.7% of GDP (2011 est.).
Africa Economic Outlook (2010) projected that the GDP growth for 2011 was to increase sharply from 7.7 % in 2010 to 13.7 % (7.5 % non-oil) aided by oil revenues and strong export performance of cocoa and gold and said future growth prospects remain strongly positive with projections of 8.3 % and 7.7 % for 2012 and 2013 respectively.
They said key risk to the fiscal outlook for 2012 is the possibility of higher public spending pressure due to the elections and wage pressures from the implementation of the new pay policy.
In the government’s supplementary budget for 2012 financial year, total expenditure including payments of arrears and commitments in 2011, amounted to GH¢ 15,367.4 million, equivalent to 27.3 per cent of GDP. The outrun was 6.7 per cent higher than the budget estimates of GH¢14, 397.4 million.
Wage Bill
Government's wage bill for the first time in the first half of 2011 almost doubled. The difference was attributed to pensions, gratuities and other wage related expenditure which shot up to GH¢2.1 billion (3.9 percent of GDP) in June 2011 as against GH¢1.4 billion (3.2 percent of GDP) recorded during the same period in 2011. The government said that following the implementation of the Single Spine Salary Structure (SSSS), it spends over GH¢4 billion every month on the scheme.
Loans
The government since 2009 has been contracting loans from Europe, Americas and Asia. In August 2011, parliament for instance approved a 3 billion dollars (USD) loan from the China Development Bank (CDB). This facility is the largest ever secured by Ghana and will be used to finance the infrastructure gap identified in the national development strategy, the Ghana Shared Growth and Development Agenda (GSGDA).
Debt Servicing
As Ghana starts accessing non-concessional financing to meet its development needs, the government will need to ensure the preservation of the country’s debt sustainability and the development of a strong institutional framework for public investment decisions.
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