The refrain in the country now is “times are hard”. Indeed, this refrain is not far from right but the question is how did we get here? Economics is the most truthful but sensitive discipline.
Whatever you sow in economics, you reap and usually the harvest may be bountiful smiles or debilitating economic quagmire depending on what you sowed. As politicians hustle and jostle to use appropriate or otherwise terminologies to capture our economic situation, our conditions keep worsening. Splitting heads over the appropriate economic description to rightfully capture our economic situation (whether the economy is in crisis/challenges) is neither here nor there. Bottom line, Ghana’s economy is in serious state and we need to brainstorm ways to fixing it to avert further deterioration.
Ghana over the years has been net borrowers/importers. We are not able to raise enough (due to structural challenges, non-proactiveness on the part of successive governments, our wholesale inefficiencies and mismanagement) to foot our expenditure bill. Our lot since the 1960s is fiscal deficit. Fiscal deficit to put plainly means spending beyond your means therefore attracting debt. If one revisits the economic chronicles since 1960s, one will sadly observe the fiscal deficit situation we have suffered and that person may be right to conclude that Ghana is made up of economic managers that do not learn from the mistakes of the past to fashion a better future for posterity.
The recent mid-term budget review delivered by the Finance Minister painted very horrible though truthful economic situation that calls for serious action. For example, the Minister disclosed that the total revenue the nation was able to raise in 2013 was GHS 19.471 billion (21% 0f our Gross Domestic Product) while we spent GHS 28.926 billion in that same year. The difference of GHS 9.4546 billion (10.1% of GDP) constitutes the deficit. Strikingly, despite the deficit, the country’s public debt has moved from GHS 35.999 billion as at 2012 to GHS 52.125 billion as at 2013 and GHS 62.861 billion as at May 2014. So in effect, the resources of the country largely go into repayment of loans.
Therefore it is not surprising that we project to spend over GHS 4.6 billion (of which 2.832billion has been paid as at May 2014) for interest repayments in our 2014 budget. This is worrisome because the budgetary allocations for five (5) most critical ministries (Food and Agric, Roads and Highways, Water Resources, Trade and Education) do not add up to the figure allocated for interest repayment.
For the purposes of those who doubt, in the 2014 budget, the entire allocations to the Ministry of Roads and Highways (GH¢779 million), Trade and Industry (GH¢256.5 million) Ministry of Fisheries (GH¢279 million), Ministry of Food and Agriculture (GH¢128 million), Ministry of Water Resources and Housing (GH¢531 million) and Ministry of Transport (GH¢89 million). Summing these figures will give you a figure which is lesser than the budgetary allocation for interest repayments.
Governments over the years have been trumpeting the role a robust private sector plays in developing economies. The private sector can only play its role to the fullest if government puts in place proper framework both administrative and physical infrastructure. As at May 2014, government has spent GHS 1.767 billion in capital expenditure but successfully spent GHs 2.8 billion just on interest repayment. This shows why we are where we were.
The private sector is in comatose because the systems that need to lubricate its engine have succeeded in strangulating it. Because of governments actions and mismanagement; huge public debt profile coupled with erratic power supply and bad policies from the Bank of Ghana, high interest rate and fast depreciation of the cedi against of the foreign currencies is kicking the private sector out of business. No wonder the industry’s contribution to GDP as at May was 1.1% compared to 8.1% of the analogous year.
The critical hurdle government needs to scale over is public confidence. The level of despondency among the investment community is just alarming. Importers and industry players are just not happy with the turn of events. To bring back public confidence, in the short term, the Bank of Ghana must revert to the old rules where trading in dollar was relatively easy especially in the Banks. Again, a serious attention should be given to our ports.
Secondly the government must get the state’s expenditure under control. Thus we should be honest in telling the populace services the state can no longer deliver. This is where sacrifices come in. The citizens will be willing to sacrifice if leaders themselves take the first sacrificial step. I still don’t understand why Ghana has over 80 ministers. I can’t still comprehend why regional ministers have deputies. I still don’t fathom why the presidency houses so many staffers. We should start cutting cost. We should start reducing number of gallons of fuels officialdom draw weekly. If gestures like these are initiated, the citizens will see the need to also sacrifice. You cannot tell me to tighten my belt because times are hard when I see you busily creating new holes to help you loosen your belt because your stomach is protruding in a geometric progression. For corruption, the country must say a resounding NO to it by taking practical steps to nib it in the bud.
In the medium term, the government must fast track process to get the National Identification Systems and the Street Naming programmes executed. A vibrant financial system is sine qua non for development. There cannot be a vibrant banking system in a country with very poor identification systems. Again, resource mobilization has always been low in this country. The lip service of formalizing the informal sector can be actualized to a very large extent with a proper National database. So if we are indeed serious about development, we need to go to the basics and do things right.
In the long term, we should take just five strategic areas (namely agriculture, railway and transport system, energy, education and tourism) and heavily invest our oil proceeds for the next 10 years. In my opinion, we have comparative advantage in these sectors and any serious investments in these sectors will bring bountiful harvests in the next 10/20 years to come. The government can take up this initiative or it can drive private investments in these areas by putting in place the necessary administrative and physical infrastructure.
We must know developing requires two things; thinking critically and acting passionately. We should know that are problems are locally manufactured and it will only take us to get the challenges fixed.