EIU commends govt’s spending on infrastructure

Page 38: Daily Graphic, March 9, 2012 Story: Albert K. Salia THE Economist and Intelligence Unit (EIU) has commended the government’s planned spending on infrastructural development for 2012 as it will reduce infrastructural deficits holding back Ghana’s development. It has, however, cautioned against the government taking on “too much too soon” especially ahead of elections as it seeks to boost jobs at the cost of proper project evaluation and monitoring. In its March, 2012 monthly review of Ghana, the EIU noted that although it expected the government to exceed its fiscal target of 4.8 per cent of Gross Domestic Product (GDP) for 2012, the anticipated robust revenue growth should help offset that increase. The EIU, a London-based specialist publishing organisation, predicted a slightly higher deficit of an NPP government in 2013-14, “as it would attempt to implement its campaign promises and reward those who helped it back into power”. Moreover, it said the NPP’s record of fiscal discipline is also slightly weaker than that of the NDC. It said the government would increasingly use foreign borrowing to meet the deficits and cited China, as an ever-larger source of the financing although Western lenders would also be keen to be involved in a promising country such as Ghana. The report said “greater external borrowing will help to allay concerns that domestic public borrowing is increasingly crowding out the private sector, but will also bring new concerns over transparency, as some of the foreign lending will come in the form of oil-backed borrowing”. On oil revenue, it said, oil production was behind target and so revenue, in the early years of the forecast at least, would be below official projections while much of the revenue that was generated by the oil industry during the early years of production would go towards reducing the domestic payment arrears that grew heavily in 2008 and remained large in 2009-10, reaching the equivalent of around seven per cent of GDP. The report said that oil revenue could represent a boom for Ghana and an opportunity for Ghana to make great strides in reducing poverty and speeding up the development agenda, which it said had been hindered in the past by political bickering and intra-party tensions On the political front, the EIU said the power of incumbency would give some advantage to the NDC, especially in terms of spending the early oil windfall although that advantage was more pronounced in other African countries than in the country, given its history of voters evicting the ruling party in favour of the opposition. It said although party wrangling within the NDC and the emergence of the financial scandal would all play into the hands of the opposition NPP in the run-up to the 2012 presidential and legislative elections, the NDC should benefit from the favourable economic picture of high growth and relatively low inflation. “The outcome of the 2012 presidential election could be just as close as that in 2008 and could well hinge on how the public perceives the ongoing payments scandal gripping the NDC at the moment,” it said. On the payments made to businessman Alfred Agbesi Woyome, the EIU said the Economic and Organised Crimes Office (EOCO) interim report found that Mr Woyome received the payments under false pretences and, as a result, he, as well as the director of legal services at the Ministry of Finance and Economic Planning, Paul Asimenu, and the chief state attorney, Samuel Nerquaye-Tetteh, had been charged over the matter. According to the EIU, although the swiftness of the EOCO report and the decisiveness of the arrests that followed its publication helped to demonstrate that Prof. Mills was taking the matter seriously, the whole issue continued to damage his reputation. It noted that the EOCO report found that Prof. Mills had twice intervened to stop the payments to Mr Woyome but that his officials had ignored his requests. “This is problematic for two reasons: first, it makes Prof. Mills appear weak in that his own officials ignored him; and second, Prof. Mills had previously claimed that he had no knowledge of the payments made to Mr Woyome, a claim that the report clearly refutes,” it stated. “Unsurprisingly, the media and opposition parties have jumped on the scandal as proof of corruption and ineffectiveness within the Mills regime. The leading opposition party, the New Patriotic Party (NPP), and its 2012 presidential candidate, Nana Akufo-Addo, have been quick to paint Prof. Mills as an ineffective leader and the NDC as corrupt and damaging to the state,” it said, stressing that “the loss of two cabinet ministers (Ms Mould-Iddrisu and Mr Amidu) demonstrates the seriousness of the scandal for Prof. Mills and the NDC less than one year from presidential and legislative elections. It is likely that more names will emerge in the coming weeks as the government’s investigation continues, doing more damage to Prof. Mills’s and the NDC’s image with the electorate”.