Together we can stabilise the economy

A former Minister of Finance, Dr Kwabena Duffuor, has suggested the need for the government to use its first year in office to stabilise the economy before pursuing growth.

Dr Duffuor, who has also had the rare chance of being Governor of the Bank of Ghana, as well as a private sector practitioner, believes that although accelerating growth was important for the country, that would be easier to attain when the economic fundamentals, such as interest rates, inflation and exchange rates are stable (refer to our story on pages 32/33).

His advice comes within the context that the economic fundamentals have deteriorated over the past six years, from a double digit growth of 11.7 per cent of Gross Domestic Product (GDP) in 2011 to the 3.6 per cent of GDP last year.

Inflation reduced from 14.8 per cent in January 2010 to 8.5 per cent by the end of that year but started rising again, reaching 10.9 per cent by May 2011, ending the year above 13 per cent.
The benchmark interest rates also followed a similar trend. They increased from an average of 22 per cent in 2013 to about 26 per cent on the average in 2015, before reducing to an average of 16.5 per cent in December 2016.

Last year, the country spent about 10.3 per cent as a percentage of GDP more than it had budgeted, but growth was below the 4.1 per cent of GDP target.

During a recent encounter with the media, the Finance Minister, Mr Ken Ofori-Atta, tended to downplay pigeon-holing the budget as either expansionary or contradictory as an economist such as Dr Duffuor would like to examine it.

As it turns out, the government has rather opted for growth in 2017 in the hope that the policy initiatives will allow the private sector to take its rightful place and crank up again in order to create jobs.

In the estimation of the government, such measures will rather enable the economy to pick up and self-correct the imbalances, rather than shelve growth initiatives just to restore stability. To the government, it is possible to do both.

Much as the Daily Graphic identifies with the position taken by managers of the economy to pursue the twin objective of growth and stabilisation, we are urging precision in implementation to ensure that every policy initiative happens according to plan.

The Daily Graphic is aware that the policy stance of the government amounts to walking the tightrope of cutting waste and sealing loopholes in order to rake in more revenues to offset the ambitious concessions made to the private sector and households.

We, therefore, call on the Finance Ministry to ensure strict implementation of the policy initiatives, especially the revenue mobilisation measures which are necessary to bring about the stability that Dr Duffuor is worried about. The Daily Graphic would, therefore, like to call on all economic actors, especially the segments that will benefit most from the tax reliefs and generally lower the cost of doing business, to work extra hard to ensure that the ultimate beneficiary is the larger economy and not just a few individuals or entities within it.

Be that as it may, the government ought to be tough with the decision to ensure that growth can start quickly again to help everybody.

Dr Duffuor is on record to have said that in 2001 and 2009 in his capacity as governor of the central bank and Minister of Finance, respectively, he was part of the team that restored the economy on the path of growth.

Despite the difficulties in the system, the government must take the policy initiatives within six months to stabilise the economy.

The Daily Graphic believes it can be done just as was the case in 2001 and 2009 since some of the managers such as Mr Yaw Osafo-Maafo, Senior Minister, and Dr Duffuor can be relied on to salvage the economy.