The red lights are flashing
Red lights are flashing on the dashboard of the economy – Ghanaians are finding the going much tougher.
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On the monetary policy side, inflation has been at a four-year high and it is also true that the Bank of Ghana has kept the cost of credit much more higher than one would have expected.
These are conditions that have not bode well for businesses and individuals.
The Governor of the Central Bank, Dr H.K. Wampah, has pretty much advocated it in his press conferences that he needed fiscal and monetary policy working together. Of course, he is right, he can’t rescue the economy alone: It needs help from fiscal reforms.
It is true that monetary policy cannot initiate fiscal consolidation which is essential to an economy’s long-term health. But the central bank can help determine whether either of those things succeeds.
For fiscal policy makers – the Executive side of government – to do their jobs, it will help immensely if the Bank of Ghana does its part.
Some of its actions and inactions have been blamed for the high interest rates. We need to keep the pressure on our governments who have gained the notoriety for being recalcitrant as far as fiscal discipline is concerned.
Structural reforms will never be politically popular. And when governments will not do their job? That's unfortunate, but it cannot be a reason for the central bank to fail at its own.
But you might also wonder, for example, where is the commitment to work as a team to reduce the indebtedness – since there is recognition that the country’s high debt levels is probably the biggest weight on growth.
Last week, the pwc’s Country Senior Partner, Mr Felix Addo, warned that the country needed to be cautious about its debt levels, saying although the 60.8 per cent looked modest when viewed in the context of some European countries, the United States and Britain, Ghana’s ability to afford it should be the most important factor to consider.
“The 60.8 per cent debt level for Ghana seems mild, but the question is: Can we afford it? Deficit financing may be tolerated but can we afford it – are we not going to spend all our resources servicing loans and debts?” he asked.
We share Mr Addo’s view because currently we are paying more for debt servicing than we are doing for capital expenditure. How can it be explained that for every GH¢1 that goes into capital expenditure, a higher amount of GH¢1.45 is used on interest charges?
The economy grew by 15 per cent in 2011; dipped to 8.8 per cent in 2012, posted 7.6 per cent last year and is projected to grow at 6.9 per cent by the close of the year.
In a sharp deviation from these growth figures, the 2015 growth target is 3.9 per cent, but still projects at economic transformation. Let us hope they are right. We hope to see the notable fruits of the transformation agenda.
But having pored over the 2015 Budget which is aimed at pursuing a transformation agenda, we could hardly see any spending, investment, job creation or trade initiatives of size that looked spanking, brand new.
To achieve an overall growth rate of 3.9 per cent, certainly, this is not audacious enough, especially for an oil-and- gas-producing economy such as ours.
The growth projection did not also support analysis that the country should be growing at between eight and 10 per cent or more to move people out of poverty.
For it to have a transformational agenda, bold decisions would have to be taken regarding industrialisation, mechanisation of agriculture, infrastructural and human resource development.
We are still trying hard to come to terms with the direction of the economy and the path being charted.