Government Squandered $20billion - Bawumia

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Category: Business & Finance

Created on Wednesday, 26 March 2014 00:00

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Government Squandered $20billion - Bawumia

{sidebar id=10 align=right}Dr Mahamudu Bawumia, a former Deputy Governor of the Bank of Ghana (BoG), has warned that the country could be on its feet by the end of 2014 if the government did not reverse course in its management of the economy.

In a lecture Tuesday at the Central University College in Accra, Dr Bawumia painted a very gloomy picture of the economy, stressing that a bailout by the International Monetary Fund (IMF) is inevitable if the government's management of the economy does not improve.

“I’ll like to repeat without exaggeration that the Ghanaian economy is in a crisis”, he stated, pointing to high inflation, double digit budget deficit, depreciation of the cedi and the general lack of growth in the economy. GDP growth, according to him, declined from 9.4 per cent in 2011 to 3.4 per cent in 2013.

Dr Bawumia bemoaned what he said was the weak economic fundamentals of the country - a development he said had severely hampered the government's ability to make statutory payments and pay contractors.

He said Ghana had been inundated with huge debt as a result of reckless borrowing on the part of the government, adding that interest payment on this debt had taken away "critical fiscal space" that was available for Ghana.

Explaining further, Dr Bawumia said whereas only about GH¢ 2 billion was allocated to six key ministries - including the works and agric ministries- in the 2014 budget, about GH¢6.6 billion is going to be spent on paying interest on Ghana's debt, which he said had risen from GH¢9.5 billion in 2008 to GH¢49.9 billion in 2013.

This, the former Head of Monetary Policy at BoG said, represents an increase in Ghana’s stock of debt by GH¢40 billion.

“This is equivalent to the government borrowing over $20 billion in the last five years”, he noted, saying: "It's not clear what the money has been used for."

"At this rate of debt accumulation, Ghana is heading back towards HIPC," he added. Dr Bawumia expressed worry at what he said was a "dramatic increase" in the BoG's financing of the government.

He said whereas the law stipulated that BoG’s total financing of the government should not exceed 10 per cent, net domestic financing reached 45 per cent in 2012.

He said it had increased by 700 per cent - from GH¢1.4 billion in 2008 to GH¢11.3 billion in 2013.

Source: Daily Graphic

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AKUFO-ADDO’S SLOGAN FOR 2016? UNITE FOR CHANGE… CHANGE TO TRANSFORM GHANA

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Category: Politics

Created on Wednesday, 26 March 2014 00:00

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AKUFO-ADDO’S SLOGAN FOR 2016? UNITE FOR CHANGE… CHANGE TO TRANSFORM GHANA

Last Thursday, the ears and eyes of the whole nation were focused on Nana Akufo-Addo’s Nima residence, where 165 journalists from 82 media houses gathered for the announcement on his political future. The news was straight and simple: “I thank the Almighty I am able to say that I feel spiritually, psychologically, emotionally, intellectually, physically, and patriotically strong enough to remain in the hurly burly of frontline politics.

{sidebar id=10 align=right}With great humility, therefore, I can announce that when the party opens nominations sometime this year I shall be ready, God willing, to contest for the position of NPP presidential candidate for the 2016 general elections,” Nana Akufo-Addo said to deafening applause from party supporters and even from some of the journalists gathered.

But, what was difficult to miss, but perhaps did not register in the minds of many, was the big banner backdrop for the platform mounted for Nana Akufo-Addo, Mrs Rebecca Akufo-Addo, Dr Mahamudu Bawumia and Mrs Samira Bawumia.

The huge banner read: ‘UNITE FOR CHANGE… CHANGE TO TRANSFORM GHANA’

Is this the campaign slogan for Akufo-Addo 2016? This was a question we posed to a close aide to the 2012 presidential candidate of the New Patriotic Party.

With a big smile, he said, whiles it is too early to say, the slogan definitely depicts the philosophy behind Akufo-Addo’s third bid for the presidency “because it represents what he seeks to do and what he believes needs to be done first in order to achieve it.”

First, according to the aide, Nana Akufo-Addo, as he made clear in his speech, has no desire to lead a divided battalion to the 2016 political battle for power.

“He believes we need unity to succeed. Ghanaians are yearning for a change in government but there has to be an attractive alternative and in order for the NPP to be that attractive alternative and appeal to the overwhelming number of voters it must be seen to be credible and that credibility comes from unity, candidate and message,” the aide said, adding, “We have the candidate. We will have the message. But, we need unity.”

Hence, the first part of the slogan, “Unity For Change”. The aide further explained, “We need unity within NPP for change in 2016. We also need to get Ghanaians united behind the clarion call for change. So the phrase ‘Unity for Change’ works for both internal unity and unity among the general electorate.”

He added, “But, the NPP does not want a change in government for the sake of it. Akufo-Addo has been consistent since 2008 that the biggest project before Ghana today is the structural transformation of the economy. It is obvious that a government, like the NDC, that cannot even give us electricity can not be trusted to transform the economy. So, Ghanaians must be made to know that it is the NPP that has the formula, the programme and the leadership to bring about the needed transformation. So, let us have change to transform.”

The aide said Akufo-Addo sees the job ahead as including a transformation in the way our children are educated, a transformation in the way the public service serves the people, a transformation in the way government spends public funds, especially a significant transformation in both the cost and quality of infrastructural projects. So, yes, we need to change government to transform our country. That is the task ahead and that is the message and that is the priority of an Akufo-Addo government, God willing.”

In conclusion, “UNITY FOR CHANGE… CHANGE TO TRANSFORM GHANA” may end up being the slogan for both Akufo-Addo’s NPP leadership campaign this year and the NPP’s 2016 campaign. But, the aide cautioned, slogans are not just imposed on a campaign, they must be proven to resonate on the ground. Sometimes they can directly emanate from the ground.

“What we can be sure of is, like I said, NPP must unite and be seen to be united and get he whole nation largely united behind the party to bring about that desired change in 2016 for an Akufo-Addo government to set the country on that needed transformation journey. I am hopeful,” the aide beamed with optimism.

Source: thestatesmanonline.com

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EC To Register Voters Daily

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Category: Elections & Governance

Created on Wednesday, 26 March 2014 00:00

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EC To Register Voters Daily

{sidebar id=10 align=right}The Electoral Commission (EC) has proposed the daily registration of qualified voters to address the challenges that it faces during nationwide registration exercises.

According to the commission, it now had the capacity to engage in the continuous registration of qualified voters.

Continuous registration, which is the opportunity for qualified applicants to walk into any office of the EC at any time to get themselves registered and their names added to the voters register, is provided for in Constitutional Instrument (CI) 72.

This means that apart from periodic national registration exercises prior to voting, any person who has attained the qualified age for voting or who, for some reason, does not have his or her name on the voters register can, at any time, walk into the offices of the EC to get registered.

Consultative forum

Dr Afari-Gyan was speaking at a consultative forum on voter registration facilitated by the KAB Governance Consult in Accra Tuesday.

The forum brought together representatives of all the political parties, some civil society organisations, the Coalition of Domestic Election Observers (CODEO), the National Identification Authority (NIA), the media and other individuals and groups.

Continuous registration

The EC has, however, been carrying out continuous registration, based on a Supreme Court ruling that the right to register as a voter is so fundamental that the EC cannot determine when Ghanaians can enjoy the right; that is, set particular times for the registration of voters.

But the continuous registration has, until now, been on very limited basis, since, according to the Chairman of the EC, Dr Kwadwo Afari-Gyan, that could not be publicised because the EC had no capacity to contain the influx if an announcement were to be made.

Dr Afari-Gyan, in his introductory remarks, expressed satisfaction at the number of participants from political parties, saying that it showed that the parties were still active, even after an election year.

He said the forum, the first of its kind, was to broaden the EC's consultations on its activities, the reason for inviting many civil society organisations.

Dr Afari-Gyan said since the 2012 elections, the EC had received many suggestions on how to improve upon its work, but none had been on voter registration, although a few suggestions had been received on continuous voter registration.

No verification, no vote

The forum brought up for discussion some of the challenges encountered in the previous elections, for instance, the verification of voters.

Dr Afari-Gyan, setting the issue in perspective, said political parties had to agree on what to do about voters who had properly been registered but could not enjoy the right to vote because the verification device could not verify their identities at the last minute.

He was of the view that a voter, having been properly identified in the register at the initial stage of the voting process and facing no resistance from other voters at the polling station, should not lose the right to vote at the last minute if the verification device could not validate his or her identity.

He, however, deferred the matter to the Inter-Party Advisory Committee (IPAC), saying the parties had to further discuss the issue and reach a consensus on it.

Exhibition

Dr Afari-Gyan said the EC would, in the middle of the year, carry out a registration exercise for those whose names were not yet in the register.

He stressed that the exercise was for only those whose names were not on the voters register, adding, however, that when the register was subsequently exhibited, all had to participate in the exercise.

He explained that the involvement of all in the voters exhibition exercise was the civic responsibility of all Ghanaians who had to use the opportunity to ensure that the register was clean.

Issues

The General Secretary of the National Democratic Congress (NDC), Mr Johnson Asiedu Nketia, was forthright in declaring that it was still the position of all the parties that, "No verification, no vote".

A representative of the New Patriotic Party (NPP), Mr O. B. Amoah, said the NPP had already submitted its proposals for reforms to the EC.

Nevertheless, he wanted to know if the EC would involve political parties in the cleaning of the voters register.

He pointed out that the continuous registration exercise did not pre-empt the periodic mass registration exercises and said the challenge with the continuous registration exercise was that it was between the EC and the individual, thereby limiting the ability of parties to validate the applicant being registered.

Mr Kwesi Jonah of the Institute of Democratic Governance (IDEG) said by convention, political parties and other civil society organisations always observed the periodic mass voter registration exercise, pointing out, however, that with the continuous registration, that would be impracticable.

Overview

In an overview of past elections, a Deputy Chairman of the EC, Mr Amadu Sulley, said logistical, technological and operational challenges had been noted.

He said 6,000 multiple entries had been identified and referred to the police.

Source: Daily Graphic

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Dr Bawumia: Dollarization not the cause of cedi depreciation

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Category: Business & Finance

Created on Wednesday, 26 March 2014 00:00

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Dr Bawumia: Dollarization not the cause of cedi depreciation

Mahamudu Bawumia, Visiting Professor of Economic Governance at the Central University College and former Deputy Governor of the Bank of Ghana has said that dollarization is not the cause of depreciation but rather the effect of weak economic fundamentals and the loss of confidence in the cedi. He, therefore, says any attempt to solve the rapid depreciation of the cedi by focusing on de-dollarization will ultimately be an exercise in futility.

Dr Bawumia made these observations while delivering a lecture on the topic “Restoring the Value of the Cedi” at the Miotso Campus of the Central University College yesterday.

Speaking on some of the alternative views on the causes of the cedi which were largely faulty, Dr. Bawumia stated “One of the key functions of money is to act as a store of value. Throughout history, when money ceases to perform this function, people have found refuge in other commodities as a replacement store of value. “Dollarization” is the replacement of a country’s legal tender with another currency e.g. the US dollar.

{sidebar id=10 align=right}This happens in countries with a history of high inflation and exchange rate instability. The resort to dollars for savings is essentially a risk mitigation measure. There is a vast empirical literature that supports the view that dollarization is a reaction by rational economic players to expected depreciation of a currency. It is not the cause of depreciation. Ghanaians have over the years learnt the hard way that they cannot trust governments to keep the cedi stable. Cedi depreciation has become a fact of life and therefore Ghanaians have come up with coping strategies to deal with exchange rate depreciation, including the holding of foreign currency.”

Dr. Bawumia, who was speaking as part of the Distinguished Speaker Series, noted that the cedi can depreciate against the dollar without the dollar even being present in the country since exchange rates basically reflect the purchasing power of one currency to another.

“Exchange rates fundamentally reflect the purchasing power of one currency relative to another for a given basket of goods. So if for whatever reason the value of the cedi declines (e.g. because of high inflation), we can expect, other things being equal, that its value relative to other currencies would fall. There is no requirement that these other currencies be even present in the country for such an exchange rate depreciation to take place.

This is why the cedi has been depreciating recently against the Hong Kong dollar, East Caribbean Dollar, Korean Won and the Chinese Yuan recently even though there is very little trading of these currencies on the Ghanaian market. In fact, I am sure very few people in this hall tonight have seen the Chinese Yuan or Hong Kong dollar even though the cedi has been depreciating at similar rates against these currencies as it has been against the US dollar.”

Dr. Bawumia noted that while the law mandating firms to quote prices in cedis is a good law, the key to the problem of dollarization is for government to pursue policies that will stabilize the cedi and thus make the dollar irrelevant in domestic transactions.

“On the issue of pricing goods in foreign currency in Ghana, it is the law that firms should be required to quote their prices in cedis, the legal tender. It is a good law and should be enforced. While that is so, as long as the economic fundamentals are weak, there is no law that can stop any firm or individual from wanting to hold dollars as a store of value or thinking in dollar terms even though they price in cedis. Shakepeare said in Macbeth that ‘There is no art to find the mind’s construction on the face’. So if a trader thinks in dollars and prices in cedis, how would you know?

Once they receive the cedi equivalent of the dollar price they would immediately buy dollars to save either from forex bureau or black market. People will buy dollars if they want dollars. There is not much a government can do about this once people lose confidence in the cedi. Even in the revolutionary days of military enforcement of foreign exchange laws, the black market thrived. Governments should rather focus on pursuing policies that would stabilize the cedi and make the dollar irrelevant in domestic transactions,” he stated.

Dr Bawumia added: “We should ask ourselves why dollarization disappeared in the five year period between 2002-2007 when the exchange rate of the cedi was very stable? And if the argument is that it didn’t disappear, then why did dollarization not cause a similar rapid depreciation of the cedi? Why is dollarization suddenly rearing its head again at an unprecedented rate? The fact is that dollarization only rears its head when the economic fundamentals are weak and people lose confidence in the ability of the cedi to maintain its value.

Dollarization is and has been a consequence of weak economic fundamentals and not the cause of poor economic performance. Persistent depreciation of a currency would result in dollarization. The lesson here is that, trying to solve the problem of cedi depreciation by focusing on de-dollarization is attacking the effects of a problem and not its causes; it is ultimately an exercise in futility.”

Touching on the measures introduced by the Bank of Ghana, he noted that despite the good intentions of the Bank, the imposition of foreign exchange controls had rather added an element of uncertainty to Ghana’s exchange rate regime and this discourages the very investment needed to grow the economy.

He stated that the Foreign Exchange Act (2006) was designed to give individuals and businesses, the confidence to bring their dollar and other foreign exchange holdings into the banking system and that since 1988, successive efforts had been made to make the banking system the channel for foreign exchange transactions and not the black market.

“The Bank of Ghana also encouraged people to bring their foreign exchange into the banking system as Foreign Exchange Accounts (deposited in Ghana with restrictions on transfer) and Foreign Currency Accounts (deposited from abroad and without restrictions on transfer). To give people the confidence to bring their foreign currency holdings into the banking system, the rules allowed them to withdraw their deposits in foreign currency.

After all it is their money. If they want to withdraw it and put it on their center table to look at it all night, that is their prerogative. Forcible conversion into cedis and restrictions on dollar withdrawals amount to a breach of contract which would undermine confidence in the banking system.

It would discourage people from bringing in their foreign exchange holdings into the banking system and drive foreign exchange transactions into the black market. If these two new directives are meant to stop the depreciation of the cedi, then they are bound to fail because dollarization, as I stated earlier, is not the cause of depreciation but rather a vote of no confidence in the local currency.”, he stated.

Source: thestatesmanonline.com

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