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Part One
Part Two
Part Three
Part Four
THE NPP RESPONSE TO THE 2016 BUDGET
STATEMENT, THE 7 YEAR. RECORD OF THE NDC & THE
ALTERNATIVE VISION UNDER AN NPP GOVERNMENT
FISCAL DEFICIT
In the 8 years of the NPP, between 2001-2008, the average
fiscal deficit as a percentage (%) of GDP was 4.4%. In the
last seven years (2009-2015) the fiscal deficit has averaged
8.1%, with three successive years of double digit deficits
between 2012-2014 (the first time in Ghana’s history we had
recorded double digit deficits in two consecutive years, not
to talk of three consecutive years).
Today under the IMF bailout program Ghana is trying to get
to the 2008 fiscal deficit level of 6.5% which the NDC said
was bad. Did we go or did we come?
DEBT STOCK & DEBT SUSTAINABILITY
Unbridled borrowing from the NDC government between
1992-2000 resulted in Ghana’s debt reaching 189% of GDP in
2000. The interest payments on the debt took away critical
fiscal space needed for expenditure on health, education and
infrastructure. The country therefore to opted for the HIPC
initiative in 2001 since Ghana’s debt had become
unsustainable. By the end of 2008, following the adoption
and implementation of the HIPC initiative and the
Government’s policy framework of fiscal discipline, the
country’s debt to GDP ratio had declined to 27% of GDP (GHC
9.5 billion). Indeed, from independence in 1957 to 2008
Ghana’s total debt amounted to GH¢9.5billion.
However, in the last seven years alone under this NDC
government Ghana’s total debt has ballooned from GH¢9.5billion
to a projected GH¢99billion by the end 0f 2015! Of this,
GHC54 billion ($14 billion) is external debt and GHC45
billion is domestic debt. What is clear is that 90% (i.e.
GHC89.5 billion) of Ghana’s total debt since independence
has been accumulated under this NDC government between
2009-2015.
Recently, the President, His Excellency John Mahama, stated
that 41% of Ghana’s external debt of $14 billion was
accumulated by the NPP government between 2001 and 2008.
This is not true, to be mild, as Table 1 shows.
TABLE 1. GHANA’S EXTERNAL DEBT (1981-2015)
YEAR DEBT ($ BILLION)
1981 1.9
2000 6.1
2008 3.8
2015 14
It can be seen that as a result of the HIPC initiative and
prudent borrowing, Ghana’s external debt stock actually
declined from $6.1 billion in 2000 to $3.8 billion by 2008
(the first time in history). The debt has since increased by
$10.2 to $14 billion in 2015. So how is what the President
said in Ho possible? The facts therefore show that 72% of
Ghana’s external debt stock and 90% of Ghana’s total debt
stock was accumulated during the last seven years.
The President’s faulty data on the debt situation, suggests
either an
unwillingness on his part to be honest (as was seen in his
denial of the possibility of Ghana heading to the IMF) to
the Ghanaian people on the reckless borrowing and where it
has landed us or the possibility that his economic advisors
do not tell him the whole truth and thus, he does not
appreciate the true scale of the mess.
The more than GH¢91billion increase in the debt stock over
seven years represents an increase in the stock of debt by
957.9% over the seven-year period (an average increase in
the stock of debt by 136.84% a year!). This is a frightening
rate of accumulation of debt by any standard of measure and
has resulted in Ghana being classified as a country at high
risk of debt distress by the IMF.
It is also important to appreciate the quantum of borrowing
that has actually taken place in the last seven years to set
the record straight. In US dollar terms, this NDC government
has borrowed the equivalent (at the time of borrowing) of
about $37 billion in seven years!! (Table 2).
Table 2. Dollar Value of Government Borrowing (2009-2015) -
Billions
Total Debt (GHC) Additional Debt (GHC) Exchange Rate GHC/US
Dollar Additional Debt (US$)
2008 9.5
2009 13.2 3.7 1.42 2.61
2010 17.3 4.1 1.47 2.79
2011 26.1 8.8 1.55 5.68
2012 37.7 11.6 1.88 6.17
2013 49.9 12.2 2.2 5.55
2014 76.1 26.2 3.2 8.19
2015 99 23 3.8 6.05
Total 89.6 37.03
Contrary to what the government will have us believe,
exchange rate depreciation has rather reduced the book value
of Ghana’s debt in dollar terms.
So that even though government has borrowed the equivalent
of $37 billion in 7 years, the book value of the debt would
be some $26 billion (GHC 99 billion) by the end of 2015. It
is important to understand this point because it appears
that this government does not.
Take the following example. Assume that today the exchange
rate of the cedi to the dollar is 1:1. If you borrow GHC100
today, it would mean that you have borrowed the equivalent
of $100 dollars and you should be able to do projectsworth
$100. In a few years time if the exchange rate depreciates
to 4 cedis to one dollar, then the 100 cedis you borrowed a
few years ago would be worth
some $25 today. This does not however mean that you did not
borrow the equivalent of a $100 dollars initially and we
should expect to see a $100 worth of projects. You cannot
suddenly claim that you actually borrowed $25 a few years
ago and so you are only to account for $25 worth of
projects. Using current exchange rates in determining the
equivalent amount borrowed in the past is misleading because
it ignores the value of the debt at the time it was
Borrowed. Using current exchange rates would underestimate
the value of the borrowing because of exchange rate
depreciation. We are here concerned about the value of the
projects that could have been financed at the time the money
was borrowed.
In 2015, interest payment amounted to more than GH¢9.6
billion. That figure was more than the total debt stock of
GH¢9.5 billion in 2008 at the end of President Kufuor’s term
for which debt stock both President Mills and John Mahama
lampooned the NPP government.
To put the interest payments on the debt in context, we
should note that the entire allocations in the 2016 budget
to the Ministries of Roads and Highways, Trade and Industry,
Food and Agriculture, Water Resources, Works and Housing,
Youth and Sports, and Ministry of Transport amounted to a
total of GH¢2.1 billion. Interest payment in 2016 (GHC10.5
billion) would be five times what was allocated to these six
key ministries combined. In 2015 the GH¢9.6
billion allocated to interest payment on the debt stock was
about 3.4 times the entire allocations to the six key
ministries listed above. So it gets worse by the year – as
interest payments go up, the space for development shrinks.
Given the precarious nature of Ghana’s debt situation, one
would have expected some bold measures in the 2016 budget to
fundamentally reduce the increasing debt overhang which, if
not dealt with, would push Ghana into the high debt/low
growth trap for several years. Rather, there is no sign of a
slowdown in borrowing as the government is planning more
Eurobond issues in 2016 and 2017.
The interest payments on the debt stock in 2015 was six
times Ghana’s oilrevenue. The oil discovery has basically
been compromised over the last seven years by the
government’s recklessness and incompetence. The government’s
willingness to borrow $1 billion on the international
capital markets at an interest rate of 10.75% is a
demonstration of recklessness. We should recall that this is
the same government that criticized the NPP government for
borrowing at 8.5% on its debut bond in 2007 when interest
rates were much higher internationally. While the 2007
Eurobond was obtained at a spread of 3.8% above US
treasuries, the 2015 Eurobond was obtained at a spread of
some 8.4% above US Treasuries. What the government has done
in this regard can be compared to taking a microfinance loan
to refinance a bank loan. Yet instead of bowing its head in
shame, this government rather unbelievably attempted to pass
it on as some sort of achievement.
INTEREST RATES
One of the consequences of the insatiable appetite for
government borrowing to finance large fiscal deficits has
been the high and rising interest rates faced by borrowers
in Ghana. Ghana today is amongst the countries with the
highest interest rates in the world. The Bank of Ghana
Policy rate was recently increased to 26%, the highest
policy rate since the start of the inflation targeting
regime in 2002. 91-day Treasury bill rates are at some 24%
and mortgage loans are at some 33%! Banks and savings and
loans companies are charging interest rates at over 30%. The
days when banks used to chase customers to come for loans
are long gone. Today banks are shying away from lending to
businesses. Why risk lending to business when you can get a
25% risk-free return from government? Banks are therefore
focusing on lending to government and crowding out the
private sector in the process. This used to also be the case
when the NDC was last in government – the value indeed is
still the same.
EXCHANGE RATE
The Ghana cedi has recently obtained the dubious distinction
of being one of the worst performing currencies in the world
as a result of weak fundamentals and some misguided policies
by the central bank. The cedi has depreciated from some
GHc1.2 to the dollar in 2009 to GHC 3.80 to the dollar
currently, having reached GHC4.7 to the US dollar earlier
this year. The cumulative depreciation of cedi in the last
seven years stands at 70% and by the end of 2016 the
cumulative cedi depreciation would likely be at least 90% in
eight years. This is in contrast to the remarkable stability
of the cedi during the eight years of NPP government, with a
cumulative cedi depreciation of some 40% in eight years.
THE ENERGY CRISIS – THE LOAD SHEDDING (“DUMSOR”) PROBLEM
Over the last four years Ghana
has been experiencing severe shortages of electricity for
domestic and industrial use. This has resulted in
implementation of a regular as well as irregular
load-shedding program that has been christened “dumsor” by
Ghanaians. It is a fact that this government inherited an
economy without dumsor in 2009. By 2012 however dumsor was
the order of the day. In response, Government started a
promising spree which with hindsight shows either they did
not quite understand the problem or they were deliberately
misleading Ghanaians. The timeline of promises are as
follows:
1. September 4th 2012 -- "I have directed an
Inter-ministerial
committee chaired by the minister with immediate effect....
to ensure that your power supply are not unduly
disrupted “While we are assured that there would be
resumption of supply from WAGP in next few weeks, we will
redouble our efforts to make up the shortfall ourselves by
speeding up projects we have been working on. We have
galvanized every effort to increase our generating capacity,
in order that the minimum demand by our industries is met.
By the end of October, we will have an additional 300
megawatts of electricity production that will come online
for distribution, and this should greatly reduce the
inconvenience of load-shedding.”- At the time,Dumsor was
only a few hours per every 72 hours
2. October 4 2012 -- Load shedding will soon be a thing of
the past- Mahama -- Launch of NDC Manifesto
“Ghana has a comparative advantage when it comes to
production of energy. In the second NDC administration the
issue of load shedding will be a thing of the past. It will
never happen again. I say this because we have established
the foundation to be able to achieve this promise “our
vision is to hit 5000 megawatts of power production a day in
Ghana by 2015. Currently, Ghana produces a little over 2000
megawatts. Between now and the end of the year it is our
hope to put in about 350 more megawatts. Early next year, we
expect another 700 megawatts to come into the system and
this
will make Ghana a net exporter of power.”
3. October 29th 2012 - Load
Shedding to End by November 30 – VRA (Kweku Awotwi, CEO
speaking to Joy News)
4. 30 October 2012 – Dumsor Act of God to end by 1st year of
next term
(2012)-- IEA Debate
‘A ship’s anchor cut off the West African Gas Pipeline and
so 320 mw taken from the system which has necessitated load
shedding at peak hours. That would end by mid November. The
pipeline has been repaired, the sea water has been pumped
out, the pipeline is being dried for transmission of gas to
begin. We are putting in additional thermal plants to ensure
that load shedding is a thing of
the past. And I have said as President that by the end of
the first year of my next term of office, load shedding will
be a thing of the past because we are going to add 820
megawatts of new generation into our system’
5. 2nd November 2012 – Off Peak Load shedding to end by 5th
November 2012 and load shedding to end by 15th November –
Joe
Oteng Adjei, Minister of Energy at Press Conference
Organized by
Ministry of Energy. “The full complement of the fuel
required to fully integrate the system should be in the
country by November 15, 2012. The first batch of fuel supply
is being off-loaded now and we expect it to be ready for use
by Monday 5th November 2012. Our target is to eliminate
completely the load shedding program for offpeak from Monday
5th November and that for the peak period whenever the full
complement of fuel supply arrives in the country.”
6. 8th November 2012 - Load shedding to end by December –
VRA (Kweku Awortwi) at a news conference was organized in
collaboration with Ghana Grid Company (GridCo) and the
Electricity Company of Ghana (ECG)
7. 20th February 2013 -- Load Shedding will end Mid-Year –
Mahama -Swearing in of Council of State
“If the West African gas pipe line comes on in April then
Asogli can come back on and that will bring another 220
megawatts immediately and that will give us more than
enough. I wish to assure the people of Ghana that we are
working very hard to reduce the load shedding”.
“I’m as uncomfortable with it as everybody else is and I’ll
do everything possible to make sure that we end the load
shedding by the middle of the year”.
8. March 2013 --Power crisis to end in June; consumers to
pay more – VRA presentation to Parliamentary select
committee on energy
9. April 8th 2013 -- Never Again Shall Ghana Experience Load
Shedding … Off Peak Dumsor ended - Mahama Assures Nation
Government will ensure that never again shall we experience
the load shedding in the coming years,” he added. President
Mahama said this when at the National Prayer and
Thanksgiving Service at the Black Star Square, in Accra.
10. April 30 2013 -- Load shedding to end first week in May
–Energy Ministry statement signed by Edward Bawa
“The Ministry can therefore state that based on our current
peak load demand and available generation capacity, the Load
management programme should end by the first week of May
2013 as promised earlier by the President of the Republic. “
11. December 15, 2013--- Energy Crisis is solved – Mahama
(at the nauguration of the Revival Restoration Centre of the
Assemblies of God Church in Accra)
We had the energy crises, which was popularly called
‘Dumsor’ and I was appropriately labelled the “apostle of ‘Dumsor’,
‘Dumsor” and Ghanaians in their usual humour crafted a very
interesting greeting that said “Yema mo dumsor oo,” then
another responds “Yaa Mahama”.
I told them that I was working on the energy crises and we
would solve it and I said that when we did, they should
remember to use the greeting ‘Yama mo Kania oo’, with a
response ‘Yaa Mahama’. However, very often in Ghana we have
a very short memory.
The energy crises is solved and we don’t remember the
darkness we were in.
We have put that behind us and we are looking at what the
other challenges are,” said the President.
12. May 2014 -- Pray for rains to end power crisis -Energy
Minister rallies Ghanaians on Good Evening Ghana
"What we have to do is to pray that this year the rains will
come enough for Bui [dam] to give us at least 200
megawatts".
13. October 10 2014 -- Gov’t taking immediate steps to
tackle
energy crisis; Gov't adopts 'cocktail strategy' to end power
crisis –
Energy Ministry, Edward Bawa speaking to Joy News
14. 27 November 2014 -- I will reduce the Impact of Dumsor
---
Mahama - Good Evening Ghana.
President John Mahama says he
has learnt not to make anymore promises on when the current
power crisis facing the country will end. If anything, he
said his government is working assiduously to reduce the
intensity of what has been described as the dumsor regime.
15. 27th November 2014 -- Power Crisis Over In May … Energy
Ministry assures nation – Jinapor told Parliament when he
represented his Minister to answer questions
16. 16th December -- I will End Dumsor -- Power Minister,
Kwabena Donkor at his vetting
28
17. 24th December 2014 -- Minister Orders VRA to End Dumsor….
Generators to be disconnected within six months ( On his
maiden
visit to the Aboadze Thermal Plant )
“I urge you to put measures in place to end the current
power crisis within six onths”, he stressed.
Dr. Donkor, indicated that he would authorise all power
generators at the various VRA bungalows and chief executive
officers’ residences to be disconnected if the crisis
continued after the six-month period.
He noted that his intended action would make workers of VRA
and TiCO experience how it feels to sleep in darkness as
being experienced by ordinary Ghanaians.
18. 31st December 2014 -- "I will banish Dumsor Forever"-
John
Mahama
“Now this is the interesting part; it [2015] will be one in
which we will banish darkness from our land and put an end
to dumsor forever,” he said
19. May 1 2015- Lack of money not cause of 'dumsor' – Prez
Mahama at May Day Celebrations
“Our current challenge is not because we don’t have money to
buy crude oil as some people will want us to believe.
20. "If you want Dumsor to end then you have to PAY
HIGHER ELECTRICITY BILLS".... John Mahama, October 19, 2015
Speaking on Garden City Radio in the Ashanti Region,
President Mahama said dumsor would only end if Ghanaians
would become realistic and pay more for power supply. “If we
genuinely want reliable, sustainable power then the price
will have to go up…that is the reality…if we don’t want any
more dumsor then we will have to
pay more,” President Mahama said.
21. November 14th 2015 - “Dumsor will end before elections
2016”
– Mahama told supporters in Tamale
KARPOWER
After promising to resign if dumsor is not over by the end
of the year (2015) the Minister of Power now says he was
talking about load shedding and not dumsor. We are still
trying to understand what he means. The fact remains that
four years down the road, dumsor is still present and the
government has just announced the arrival of an emergency
solution for ten years by contracting a power barge from
Turkey with a reported $100 million guarantee
for fuel at the same time as VRA has shut down its plants
because it cannot purchase fuel. A 225 mw plant like the
Karpower plant will cost some $225 million and we will own
it – with the unit cost of a megawatt plant at $1million.
Under the Karpower deal, we will pay for the power from the
barge for the next 30 ten years whether we use it or not.
ACEP estimates that based on the capacity charge alone which
is 5.6cents per kWh, it will cost Ghana some $1 billion for
10 years. This however excludes the fuel cost of a
requirement of 35000 tonnes per month. After 10 years the
barge will sail away; when we could have built a 1,000
megawatt plant for ourselves. Power from the barge would
also cost at least twice that supplied currently from
Takoradi. This really does not make sense.
Dumsor not Technical but Financial
After several denials by Government, it should now be clear
to Ghanaians that the current energy crisis is not a result
of inadequate installed capacity but rather a lack of
financial resources to utilize the installed capacity.
Installed capacity in Ghana stands at 2,923.5 mw, with peak
system demand at 2,200.0
mw, leaving excess capacity over demand of 723.5 mw.
Government is highly indebted to VRA and ECG. Government
owes ECG some GHC700 million and owes VRA GHC1.0 billion.
VRA, owes its creditors, including Nigeria gas and West
Africa Pipeline Company, a total of $1.3 billion.
This has compromised the balance sheet of VRA and its
ability to import crude oil for the generation of power.
Currently VRA has shut down a number of its plants because
it is unable to purchase fuel to run them. Ghana owes
Nigeria Gas some US$170 million which the country is
struggling to pay.
Why is it that after four years of trying, the government
has still not found a solution to the problem? The simple
answer is that the government has been in denial and has not
prioritized this issue. The government has borrowed
$3billion in the last three years from the issue of
Eurobonds alone. In total government has borrowed the
equivalent at the time of borrowing of $37 billion. How much
of these borrowed funds have been used to address the
umsor problem? If this was a priority for government, the
necessary
allocation of resources would have been made to solve it.
President Mahama’s latest comments in Tamale that Dumsor
will end before the 2016 Election and cannot be used for
politics exposes the thinking of the government and the
President. For the President and his government, Dumsor is
not an economic issue but a political issue. They care
little about the businesses dumsor has collapsed or the jobs
dumsor has collapsed in the past 4 years. Rather, their
major concern is what can be used come the election year and
what cannot be used. Solving dumsor clearly has not been a
priority these past four years and may only become a
priority as we get close to the election.
RESOURCE INFLOWS
It is important to re-emphasize for the records that no
government since
independence has had the amount of resources in terms tax
revenue, cocoa
exports, gold exports, oil revenues and loans as the NDC
administrations
between 2009 and 2015.
In the eight years of the Kufuor administration i.e.
2001-2008, the total tax
revenue collected was GH¢15.2billion. Between 2009 and 2015
the Mills-
Mahama administration has collected GH¢ 90billion in taxes,
six times more in these 7 years.
Between 2001-2008 gold exports amounted to US$9billion;
between 2009-
2015 gold exports have grossed $28billion.
Cocoa exports between 2001-2008 yielded US$7.4 billion. In
the seven years
of the Mills-Mahama regime cocoa exports have amounted to
US$17billion.
The Revenue from the last year is yet to be reckoned.
During the period of the Mills-Mahama administration Ghana
has become an
oil exporter. By the end of the seventh year Ghana would
have exported over
US$15.5billion of oil over the past five years. The country
has earned about
$4billion from oil during the 5-year period. From
independence up to 2008 no
government had earned any revenues from petroleum exports.
Taxes, oil revenue, and loans alone over the past 7 years
amount to some
GH¢200billion.
In contrast, under the 8 years of the NPP government, from
2001-2008, taxes,
loans and exports amounted to GH¢20billion. The Mills-Mahama
governments
have had, in seven years, more than 10 times the nominal
resources that the
NPP had in 8 years.
The tragedy is that despite all these resources at its
disposal, the economy is
in deep trouble:
Government is in arrears with NHIS payments
Government is in arrears with GETFUND payments
Government is in arrears with DACF payments
Government is in arrears with payments to contractors
Government cannot pay teacher trainee allowances
Government cannot pay nursing trainee allowances
Government is in arrears for the payment of national service
staff
Government is having trouble paying salaries of workers.
Some workers
have gone for 18 months without salary
The government has put Ghana in a state of high indebtedness
as was the
case under HIPC. Ghana’s debt to GDP ratio at the end of
2015 would
stand at 74% (beyond the threshold for debt sustainability).
Economic growth has slowed down to 4.0% this year.
Ghana’s currency is the worst performing currency in Africa
over the last
two years.
“Dumsor” is still the order of the day after four years
Businesses are collapsing
Government has already committed under the IMF program to
increasing
utility tariffs. The PURC’s purported consultations with the
public on the
utility price increase is, simply put, a charade. They are
as usual throwing
dust into the eyes of Ghanaians.
Unemployment is high and increasing – Government has
committed
under the IMF program to lay off workers after the 2016
election. But
they will not admit it today if you ask them. The fact,
however, is that one
of the conditionalities for the IMF bailout program, was a
commitment by
this NDC government to rationalize the size of the civil
service. Paragraph
65 of the agreement with the IMF states as follows:
What is clear from this is that the government has agreed to
rationalize the
“SIZE” of the civil service. Secondly the Plan to do this
rationalization will be
ready by December 2015 (next month). Thirdly, the
implementation of the plan
will begin in 2017 (i.e. after the elections).
On this issue, we demand maximum transparency from the
Government and the IMF. If the plan for the rationalization of the size of
the civil service (i.e.
layoffs) would be ready in December 2015 why wait till 2017
for
implementation? Isn’t this reform supposed to help this
struggling economy?
Why the delay in implementing it if it is so good for the
economy? The
government is not being transparent on this issue. It is
only because this
government does not want workers to know the truth about
what they have
agreed to do before the election in 2016. We are therefore
asking that the plan
for the rationalization of the size of the civil service be
made public by both the
Government and the IMF in the spirit of transparency and
accountability.
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