Ghana’s economic woes is self inflicted – Think Progress Ghana

The group says Ghana cannot attribute its current economic woes to the COVID-19 pandemic and the Russian-Ukraine war without looking at its own poor economic management practices.

“We are poor because our political leaders made certain choices. Economic mismanagement and corruption are the choices our leaders make when they are given the opportunity to manage the country,” Think Progress Ghana stated in a statement issued on July 13, 2022, concerning Ghana’s return to the International Monetary Fund for economic support.

For Think Progress Ghana, Ghana is not the only country that was hit by the COVID-19 pandemic or the Russian-Ukraine war, and that using the two instances to defend why the country finds itself in an economic mess was not tenable.

“It is disingenuous to argue that exogenous shocks (the COVID-19 Pandemic, and the Russia-Ukraine war) caused the harsh economic conditions we are currently facing. Our neighbors (including Cote d’Ivoire and Togo) faced the same global challenges, but they have not gone to the IMF for financial assistance,” the statement stated.

Below is the statement

PRESS RELEASE ISSUED BY THE THINK TANK, THINK PROGRESS GHANA, ON GHANA’S RETURN TO THE IMF

DATE: July 13, 2022

Across the political divide, except the political elites in power, every Ghanaian is complaining about the current harsh economic conditions. Inflation and interest rates are unbearably high (making times very hard in Ghana). Our industries are going through very difficult times, importers are losing their working capital due to the cedi depreciating against the dollar. Consumers are crying due to high cost of living (inflation) and low wages. Students are going through a phase of hopelessness, as teachers of the pre-tertiary sector are on strike. Indeed, teachers are facing avoidable challenges and low morale leading to many leaving the profession. Our hardworking market women whose ingenuity and innovation helps to put food on the table have become exasperated and sweating under the weight of skyrocketing prices. The list is not exhaustive.

The question we should ask ourselves is “why are we poor?”. The answer is not farfetched. We are poor because our political leaders made certain choices. Economic mismanagement and corruption are the choices our leaders make when they are given the opportunity to manage the country. These choices have led us into this economic mess. It is disingenuous to argue that exogenous shocks (the COVID-19 Pandemic, and the Russia-Ukraine war) caused the harsh economic conditions we are currently facing. Our neighbors (including Cote d’Ivoire and Togo) faced the same global challenges, but they have not gone to the IMF for financial assistance. Indeed, we do not believe that global economic challenges could have a multiplier effect and the raison d’etre for going to the IMF. In any case, Dr. Mahamudu Bawumia, the Vice-President of the Republic, in the not-too distant past dismantled this political economic theory when he posited “how can a global phenomenon skip Cote d’Ivoire and all the surrounding countries and only attack Ghana?” 

Our reckless and excessive borrowing, wasteful spending, and corruption crippled our economy.  We give credit to President Nana Akufo-Addo for finally reaching out to the IMF for a bailout program. It is the only suitable option available to address our economic challenges in the short-term. We should note that the government would not have initiated a bailout conversation with the IMF if better alternatives to solve our economic problems existed. Our bond credit rating has deteriorated, we do not have access to the sovereign bond market, and the domestic market is significantly inadequate and expensive. The usual way to finance our budget deficit is out of the question. Thus, going to the IMF is the plausible solution for us since the government has lost the fight against corruption. From the Auditor General’s report, Ghana lost Ghc 50.8 billion due to irregularities from 2017 to 2021. This amount is equivalent to $6.35 billion (at the current exchange rate of Ghc 8 to $1), which is more than three times the amount ($2 billion) the government is allegedly receiving from the IMF bailout.

The question Ghanaians are asking is whether the IMF supported program will help our country. Clearly, it is a legitimate question since we have been to the IMF 17 times in our nation’s history, none of which helped our country in the long-term.

Think Progress Ghana is of the view that only appropriate monetary and fiscal policies that are shaped by our circumstances as well as our long-term growth agenda will lead to sustainable long-term economic growth. Our problems are not beyond us. We created them by being obstinate and ostentatious. Thus, they can be solved by us, not by foreigners or by external entities. The latter can offer some form of assistance in the short-term only. This time calls for good faith effort to deal with our sovereign debt burden that has crushed our economy.

As the government begins talks with the IMF team, Think Progress Ghana is calling on the government to negotiate for structural policies that will improve macroeconomic and financial market stability, and drive sustainable long-term economic growth. With that said, any fiscal adjustment program the government negotiates for should protect the poor and the vulnerable in the country as well as the emerging middle class, protect our industries, protect our jobs, and improve productivity as well as increase the purchasing power of the Ghanaian worker.

We call on both the IMF and the government of Ghana to consider the following in the negotiation and assessment of the data on the economy:

1. The government should adhere to a strict fiscal program to restore and maintain debt sustainability. It should eliminate wasteful spending. To this end, we call for a reduction in the number of ministers and their deputies, get rid of deputy CEOs at state institutions, reduce debt portfolio of State-Owned Enterprises (SOEs) and establish proper corporate governance, drawdown on the number of Presidential Staffers employed under Article 71 of the 1992 Constitution, and eliminate ex-gratia.

1. We call for significant improvement in expenditure efficiency and strict adherence to procurement law and processes. Social expenditures should be thoroughly examined. We call for a complete review of some of the government’s flagship programs such as Free SHS and develop relevant and appropriate funding mechanism. Funding for this program in its current form is not sustainable. We support free access to education for the poor and the vulnerable in our society as enshrined in Article 25 of the 1992 constitution. Those who can afford should be made to pay. The government should design and implement mechanisms to identify the needy and grant them access to free quality education.

1. The government should focus on making long-term investments that have potential to generate revenue to service debts incurred from making those investments. We need to make long-term strategic social and infrastructural investments. We call for strategic investment in human capital, technology, health, agriculture, and roads. We should not continue to borrow for consumption.

1. Publish the home-grown policy based on which the negotiation with the IMF is ongoing. This will help restore some modicum of trust to governance and to allow for public scrutiny to engender some level of credibility.
2. Announce interim findings regarding public debt, interest payments requirements, and comprehensive fiscal and international reserves. And immediately provide information about the status of the stabilization and the heritage funds. Subsequently, the government should design and implement sound debt management strategies. The goal is to improve our credit risk profile, reduce inflation to a single digit from the current 30+%, reduce interest rates, and restore and maintain confidence in the cedi.
3. Immediately start the buildup of our sovereign wealth funds.
4. Monetary and fiscal policies should be well coordinated.
5. We call for an improvement in budget transparency.
6. Design and implement strategies to improve revenue collection as well as identify additional revenue sources. For example, property tax is a potential revenue source that is untapped by the government. Publish areas that are likely to be affected by tax increases.
7. Design and implement policies that will let the private sector work. Jobs are best created by businesses and entrepreneurs, not by government.
8. Hold leadership accountable for their decisions and actions. The government should make corruption unattractive to government officials. Provide pragmatic information about measures to be taken to deal with official corruption.
9. Provide information on wage and emolument statistics and possible employment developments under an IMF program
10. We call on the IMF to take extra steps to interact with the public about public debts, reserves, balance of payment status and the general situation as assessed by the agreed data. This is important because all the fiscal misdeeds in terms of borrowing, procurement breaches, and corruption that culminated into the bad state of the economy happened when Ghana was under an IMF program from 2017 to early part of 2019.