[ 2012-05-04 ]

Finance Ministry responds to Bawumia's 'inaccurate' speech
The Ministry of Finance and Economic Planning has
strongly responded to issues raised by the running
mate of the New Patriotic Party, Dr Mahamudu
Bawumia during his delivery at the 5th Ferdinand
Ayim Memorial Lectures on Wednesday.

According to the Ministry, Dr. Bawumia’s speech
was full of “inaccuracies and distortions”.

A statement signed by Abdul Hakim Ahmed, Media
Laison Officer at the Ministry Of Finance And
Economic Planning said “Among many other
inaccuracies and distortions; Dr. Bawumiah claimed
that the NPP government implemented a large number
of policy reforms and structural interventions
between 2001 and 2008.

“He strangely asserted that the NPP Government
constructed a stadium at Cape Coast when this does
not exist. Similarly he claimed the NPP built
universities when the facts show that the NPP did
not establish a single university.

“Additionally, Dr. Bawumia strangely takes credit
for the Single Spine Pay Policy which the NPP did
not implement. The LEAP and Millennium Challenge
Account cannot also be presented as NPP
interventions. The World Bank and the US
Government respectively would not be enthused by
such misrepresentation.”

Below is the full statement by the Finance
Ministry

FINANCE MINISTRY RESPONDS TO DR. BAWUMIA’S SPEECH

ON TH STATE OF THE ECONOMY

1. The attention of the Ministry of Finance has
been drawn to a presentation made by Dr. Mahamudu
Bawumia, the Vice Presidential Candidate of the
NPP on the state of the economy on the 2nd of May,
2012.
2. Among many other inaccuracies and distortions;
Dr. Bawumiah claimed that the NPP government
implemented a large number of policy reforms and
structural interventions between 2001 and 2008. He
strangely asserted that the NPP Government
constructed a stadium at Cape Coast when this does
not exist. Similarly he claimed the NPP built
universities when the facts show that the NPP did
not establish a single university. Additionally,
Dr. Bawumia strangely takes credit for the Single
Spine Pay Policy which the NPP did not implement.
The LEAP and Millennium Challenge Account cannot
also be presented as NPP interventions. The World
Bank and the US Government respectively would not
be enthused by such misrepresentation.


3. Another major weakness in Dr. Bawumia’s
analysis is that he mixes the rebased GDP series
with that of the old series thereby drawing
invalid conclusions. For example,


1. The statement that the growth rate of the
economy has increased from 3.7% to 8.4% from 2000
to 2008 is misleading as the 3.7% is based on the
old GDP series (1993=100) and the 8.4% is based on
the rebased GDP series (2006=100).


2. That the economy expanded six fold between
2000 and 2008 is not factually correct. This is
because the GDP of US$16,496 million (old series)
in 2008 is only a multiple of 3.3 of the GDP of
US$4,983 million (old series) in 2000.


4. The growth rates of 7.4%, 15.1% and 8% for
Agriculture, Industry, and Services sectors
respectively for 2008 based on the new series does
not tell the story. However, in 2007, the
Agriculture Sector grew by negative 1.7%. In
addition the Industry Sector which grew by 15.1%
in 2008 was mainly due to the growth in the
electricity subsector of 19.4%. This was up from a
negative growth of 17.2% in 2007. Such deliberate
concealment of the facts undermines the integrity
of Dr Bawumia, if any.


5. Dr. Bawumiah rather strangely disputes the
fiscal deficit of 14.5% of GDP (old series) the
NPP government left behind in 2008. It should be
noted that the fiscal deficit of 6.5% of GDP he
quoted for 2008 is based on the new series and
includes divestiture receipts. If divestiture
receipts are excluded, the fiscal deficit for 2008
was 8.5% of GDP (new series) which is equivalent
to the 14.5% (old series) quoted in the 2009
budget.


6. Dr. Bawumiah also states that the debt to GDP
ratio reduced from 189% in 2000 to 29% by 2008.
The 189% debt to GDP ratio is based on the old
series whilst the 29% ratio is based on the new
series. The statistics, however, show that the
debt to GDP ratio in 2000 is 181% (old series) and
49% in 2008 (old series). Again, it is
intellectually dishonest to deliberately confuse
the ratios based on the old and new series.


7. Dr. Bawumiah questions the credibility and
independence of the Ghana Statistical Service
(GSS) in producing credible inflation figures.
However, he gives credit to the NPP government for
“transforming the economy from a low HIPC economy
to a lower middle income economy in 8 years”. One
may ask about the data he used in assessing
Ghana’s lower middle income status: answer? The
same GSS data. When the data suits him, he uses it
but when it doesn’t he condemns it.


8. Dr. Bawumiah paints the picture as though
Ghana should fully benefit from the oil price
increase of 13% between 2009 and 2011 but forgets
that the country started exporting oil only in
2011. Indeed the entire oil revenue is not
available to the country as the country’s carried
and participating interest in the Jubilee Fields
is limited to only 13.5%. For example in 2011 the
state only realized revenue of US$444 million
equivalent to 1% of GDP.


9. Dr. Bawumia prides his administration for
prudent management of the economy in spite of high
oil prices of US$147 per barrel in 2008. This is
very misleading as the average oil price in 2008
was US$102 per barrel compared to a more difficult
situation today when Government is currently
paying an average of US$112 per barrel for oil
imports.


10. On the real sector, Dr. Bawumiah uses
selective statistics to describe the performance
of the agriculture sector. He claims that rather
than expanding, the agriculture Sector saw steady
decline from growth rates of 7.4% in 2008 to 0.8%
by 2011. It should be pointed out that the
agriculture Sector’s growth was negative 1.7% in
2007, a situation which never occurred during
2009-2011 period. In 2007, all the subsectors in
agriculture showed negative growth rates except
Livestock. Crops, Cocoa, Forestry & Logging and
Fishing grew by negative 1.4%, 8.2%, 4.1%, and
7.2% respectively. One wonders why Dr. Bawumiah
conveniently concealed these facts. He also
excludes cocoa in his analysis of the crop
subsector for reasons best known to him.


11. The fishing sub-sector has for years
witnessed fluctuations. For example in 2007, the
sub-sector posted a negative growth of 7.2% but
rebounded to 17.4% in 2008 before contracting
again to 5.7% in 2009.


12. The analysis of the industrial sector
performance also left out the negative growth of
the Electricity sub-sector in 2007 by 17.2% which
was much worse than the contraction of 0.8% in
2011.


13. He also alleges that there is no policy
framework targeted at supporting the private
sector to become competitive globally. Is Dr.
Bawumiah not aware of the Private Sector
Development Strategy II, which is currently being
implemented to support private sector
competitiveness? In fact in addition to creating
the enabling environment for the private sector,
government has supported the sector directly
through such means as the provision of government
guarantees and direct borrowing for some private
sector operators. Similarly, government has
formulated a PPP policy to enable the private
sector partner the public sector to engage in
mutually beneficial economic activities. If this
is not private sector support then what is it?


14. On unemployment, Dr. Bawumiah asserts that
the growth of the economy is jobless without
reference to any employment survey. One wonders
the source of his evidence for his claim of
jobless growth of the economy. This is unbecoming
of a person touted by the NPP as an economic
guru.


15. Dr. Bawumia amply demonstrated his lack of
understanding of the computation of the inflation.
He compares the price of six selected items in
three years to make a case that the increases in
those prices are not consistent with single-digit
inflation figures. The calculation of inflation as
exhibited in the table on page 16 of his speech
violates any inflation formula. Inflation is
calculated as a monthly change, point-to-point
(year-on-year), and annual average by the Ghana
Statistical Service. None of these inflation rates
mentioned above conforms to the calculations in
the table on page 16. Nowhere in the world is
inflation calculated the way Dr. Bawumiah
calculated it. The argument presented in that
table constitutes what is usually called the “rate
of change fallacy” or the "Politicians Error". The
rate of change fallacy occurs when comparing rates
of change in two numbers that start out at
different levels. What Dr. Bawumiah calculated is
a cumulative price change and not inflation. What
any first year student of Economics would do would
be to collect the prices of those items in April
2011 and compare them with that of April 2012 and
not December 2008. While dabbling in this
intellectual dishonesty, Dr Bawumia failed to
explain to the people of Ghana that the price
increases he was lamenting pale into
insignificance when set against astronomical
increases in prices of consumer items between 2001
and 2008 under his NPP government. The table below
illustrates this point.

Source - RadioXYZonline.com

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