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IMF anchor won’t hold; it’s hinged on questionable data – Bawumia

Christine Lagarde IMF CEO.

Christine Lagarde IMF CEO.

The anchor being sought from the International Monetary Fund (IMF) for Ghana’s economy will not hold if the data upon which the programme is built is not credible, says Dr. Mahamudu Bawumia, 2016 Running Mate of the New Patriotic Party’s flagbearer Nana Akufo-Addo.

According to the former Deputy Governor of the Bank of Ghana, there are inconsistencies with the two main sets of data based on which the programme is fashioned – inflation and the GDP.

Dr. Bawumia made the disclosure while speaking on the topic: “The IMF Bailout, Will the Anchor Hold” at a public lecture organised by the Central University College as part of their ‘Distinguished Speaker Series’.

“Mr. Chairman any economic and financial programme is only as good as the data used to formulate the programme. Credible data provides the basis of the analytical framework to respond adequately to economic challenges. If you have make-believe data you will end up with counterproductive or inadequate responses to economic policies. If your data is not credible, the anchor cannot hold. With make-believe data as the basis, the best you can achieve is make-believe results which will soon be exposed as we are witnessing currently,” he said.

Dr. Bawumia explained that the inflation data on which the programme was drafter had question marks on it.

“Mr. Chairman, the data on inflation produced by the [Ghana Statistical Service] GSS does not appear to reflect actual price developments. I have raised this issue before and I have returned to it today with further and better particulars. The year 2014 was a very bad one as far as the economy is concerned.

“The exchange rate depreciated by 31%, utility and petroleum prices went up significantly and economic growth declined but for some reason inflation, especially food price inflation remained relatively subdued according to the Ghana Statistical Service. Between January and December 2014, the rate of increase in food prices as reported by the GSS actually declined marginally from 7.1% in January to 6.8% by December.

“Non-food prices on the other hand increased from 18.9% to 23.9% over the same period. Overall inflation increased from 13.8% to 17% on account of the decline in food price inflation. Clearly, the supposed low rates and even decline in food price inflation accounted for the relatively low inflation figures reported by the GSS,” he noted.

Dr. Bawumia, who doubles as a Visiting Professor at the Central University College explained that the evidence on the ground, did not appear to corroborate the food price inflation being churned out by the GSS and pointed out that since 2009, the normal relationship between food and non-food inflation seemed to no longer exist.

“Mr. Chairman, the decline in food price inflation is a curious phenomenon worthy of further investigation because it defies evidence that suggests otherwise. Most people one has talked to cannot believe that food price inflation has declined. Market survey reports by Joyfm news (under the heading “food prices killing Ghanaians” as well as the Finder newspaper (under the heading “70% hike in food prices in just one year”) indicate very high increases in food prices.

“Mr. Chairman, one can observe a structural break in the relationship between food and non-food inflation since 2009. Between 2001 and 2008, the relationship was much closer. Why did the relationship start to drift apart and even move in opposite directions? Was there a deliberate attempt to keep inflation down by fixing low food price inflation?”

The three-time Running Mate proceeded to reveal that contrary to expectations, the Ministry of Food and Agriculture, which collects the same data on food price inflation, had totally different estimates which appeared to be more realistic than the GSS Data.

“To conclusively challenge the GSS estimates, however, one needs independent data for the individual food items in Consumer Price Index over the period. Thankfully, such data exists and has been collected by the Ministry of Food and Agriculture (MOFA) across all ten regions of the country and published by the Statistics Research and Information Directorate of MOFA.

“Mr. Chairman, since the data was collected for the same commodities, and over the same period across the country, one would expect a close relationship between the two sets of price data, especially since these are both government/state sources. Thus if we even decide to ignore all the experiences of the market women and others, who complain of sharp rises in food prices, we expect that at least, the figures of the Ministry of Food and Agriculture, should to a large extent corroborate the figures of the Ghana Statistical Service.

“However, a comparison of the MOFA and GSS (both official sources) estimates of food price inflation overall and across specific food items shows very divergent estimates.”

On the composite food price inflation data, Dr. Bawumia stated: “While the MOFA estimated an increase in overall food price inflation from 0.7% in January to 26% by December 2014, GSS on the other hand estimated a decline in food price inflation from 5.7% in January to 2.8% by December 2014.”

Going into specific food items, he noted: “For 2014, while the MOFA estimated an increase in yam price inflation from 0.6% in January to 8.4% by December 2014, GSS on the other hand estimated a decline in yam price inflation from 3.4% in January to -1.8% by December 2014. Again, while the MOFA estimated an increase in rice price inflation from -2.3% in January to 5.2% by December 2014, GSS on the other hand estimated a decline in rice price inflation from 4.3% in January to -11.6% by December 2014 and that for 2014, while the MOFA estimated an increase in groundnut price inflation from 7.8% in January to 43.2% by December 2014, GSS on the other hand estimated a decline in groundnut price inflation from 5.9% in January to -2.98% by December 2014.”

Dr. Bawumia further touched on the differences in the data on price inflation for oranges, maize and smoked herrings.

“For 2014, while the MOFA estimated an increase in oranges price inflation from 6.8% in January to 46% by December 2014, GSS on the other hand estimated a decline in oranges price inflation from 9.9% in January to 4.9% by December 2014. MOFA estimated an increase in maize price inflation from 3.5% in January to 48% by December 2014, GSS on the other hand estimated a decline in maize price inflation from 4.8% in January to -2.3% by December 2014. Again, for 2014, while the MOFA estimated an increase in smoked herring price inflation from -0.4% in January to 35% by December 2014, GSS on the other hand estimated an increase in smoked herring price inflation from 4.7% in January to 12.7% by December 2014,” he stated.

Dr. Bawumia also touched on the GDP figures which he said could not be relied upon. “When the 2015 budget was announced, I had the opportunity to point out that the purported growth of real GDP by 6.9% in 2014 was not credible. How can an economy which went through so much turmoil in 2014, with a 31% depreciation of the currency and massive load shedding register real GDP growth of 6.9% only to decline sharply to 3.9% in 2015 when the government claims the economy is in recovery? The Ghana Statistical Service (GSS) subsequently revised the real GDP numbers. These revised numbers are however still very problematic and the Ghana Institute for Fiscal Studies (IFS) has recently pointed out these anomalies.”

“The revised GDP 2014 estimates shows growth rates of non-oil GDP at 2006 constant prices. The data contains some curious data. How can agriculture grow at 7.2%, industry at 4.5% and services at 5.6%, but then overall GDP at basic prices grows at 2.2%?” he queried.

Dr. Bawumia first questioned the data churned out by the GSS in May 2012 when he delivered the Ferdinand Ayim Memorial Lecture. His queries drew rebuttals from the government and the GSS.

Source: Ghana/StarrFMonline.com/103.5FM

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