The Ministry of Finance and Economic Planning has responded to issues raised by the NPP?s flag-bearer running mate Dr Mahamudu Bawumia when he delivered the 5th Ferdinand Ayim Memorial Lectures on Wednesday.

A statement signed by Abdul Hakim Ahmed, Media Laison Officer at the Ministry Of Finance And Economic Planning, accused Dr Bawumia of churning out many ?inaccuracies and distortions?.


?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


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,

a. 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).

b. 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.