A renowned economist, Kwame Pianim, says Ghana is facing a major economic crisis since the dark days of the economic recovery efforts of the 1980s. However, he stated that: "Most public pronouncements seem to be in denial of the gravity of the crisis. It is being claimed the challenges are temporary or largely driven by external factors". According to him, the Senchi Consensus was explicit on the fact that what was needed first and foremost was to get a handle on the growing structural imbalance in government finances and to restore policy credibility which has sunk to a historical low.
Mr. Pianim, who chaired a two-day stakeholders' dialogue on boosting Ghana's Foreign Exchange Resources in Accra noted: "Recent demonstrations reinforce the idea that if the mangers of our national economy do not admit publicly that there is a serious fiscal crisis and open our books to the leadership of organized labour, we cannot agree on a social contract which is badly needed to get labour to give us fiscal space to tackle this urgent problem.
"Once the issue moves unto the streets rational approaches for resolution may be lost. Public economic debate will become a dialogue of the deaf as we talk AT each other instead of TO one another". He told the participants of the forum, which was organised by the Ministry of Finance, in collaboration with the Bank of Ghana (BoG) that the current crisis should be a wake-up-call and help focus their collective national attention to address all the challenges that have kept Ghana punching below its economic weight for decades.
Mr. Pianim, who is also a seasoned investment consultant, added that one of the critical challenges that had been identified and which needed urgent attention was export diversification. He lamented that whether the effort on this stakeholders' dialogue might not be a diversion from focusing on restoring policy credibility and efforts towards fiscal prudence.
Mr. Pianim emphasised that; "Without a stable macro-economic environment, the investment needed to drive growth in export diversification - modernizing agriculture in the Northern Savanna zone through irrigation and high yielding inputs and planting materials and a second international airport in Tamale, for us to participate in the 50 billion Euro tropical fruits and vegetable market in the EU may not be realized!.
Without investment in energy, value addition in our raw material and natural resource for exports may be difficult to realize!" In short, without policy anew and adjusted policy framework that is deemed by business and the investment community both local and foreign, as credible, sustainable and that can be used for business planning because it is predictable, efforts to stimulate business and to boost foreign exchange resources may prove difficult to implement, he stated.
One would have expected the 2014 Mid-Year Budget Review to come out with requests for budget cuts instead of seeking "Parliamentary approval to commit additional resources ... . to fund additional expenditures." The recent review presented by the Minister of Finance states that total Revenue is estimated to be 22.9% of GDP in 2014 fiscal year while total expenditure including arrears clearance is put at 31.7% of GDP!
Mr. Pianim observed that advantage was not taken of the Mid-Year Review to send a strong signal to the Ghanaian public that the time has come to tighten their belts if they want to stabilize and reposition the national economy for transformation and renewed growth.
Over-reliance on few commodities The Vice President, Kwesi Amissah-Arthur who opened the forum admitted that the economy was largely challenged on three fronts, namely an over-reliance on only a few traditional export commodities for over 70% of the country's foreign exchange earnings. He added: "A declining level of export revenues due to unstable and consistently falling prices of cocoa and gold on the international commodities markets, an increasing demand for foreign goods and services leading to an escalating import bill".
The combined effect of these challenges, Mr. Amissah-Arthur, explained was the weakening of the currency and declining sources of foreign inflows from exports in the past few years. The Ghanaian economy has therefore become susceptible to several adverse shocks in the international markets for both export and import commodities of the country. Mr. Amissah-Arthur assured the captains of industry that the government would continue to review and reform tax and tariff regimes, incentive schemes and general costs of doing business to ensure that the country's investment climate is more competitive, attractive and welcoming.
A Deputy of Minister of Finance, Mrs. Mona Quartey noted that the government was pursuing some measures in addition to the current fiscal consolidation measures to address the challenges going forward. These, she mentioned, include efforts to boost SME production through the setup of an SME fund and other funds; provision of stimulus to the private sector; support local industries through the amendment of the Public Procurement Act; and developing of modern farmers' markets.
The Governor of Bank of Ghana, Dr. Henry Kofi Wampah said the theme for the forum was timely, adding that the depreciation of the cedi provides an opportunity for businesses to go into domestic production.