We must resolve to tackle economic challenges head-on
A passionate discourse by well-meaning Ghanaians on the way out of the economic challenges facing the country has dominated the media landscape for some time now.
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In 2019, the World Bank described the Ghanaian economy as the fastest-growing in the world.
Sadly, the economy suffered a crunch after COVID-19, leading to high public debt, inflation and energy costs, low agricultural productivity, regional trade inefficiency, a high unemployment rate and poor resource management.
A section of Ghanaians have also attributed the economic challenges to factors such as corruption, mismanagement and a large government size which has resulted in high public wage bills, among others.
However, the government blamed the country's economic woes on headwinds such as the COVID-19 pandemic and the Russia-Ukraine war – which shot up food, fertiliser and fuel prices in the process.
A 2023 World Bank report indicated that the nation’s economy entered a full-blown macroeconomic crisis in 2022 on the back of pre-existing imbalances and external shocks.
Large financing needs and tightening financing conditions exacerbated debt sustainability concerns, shutting off Ghana from the international market.
It needs to be stated that large capital outflows, combined with monetary policy tightening in advanced economies, put significant pressure on the exchange rate, together with monetary financing of the budget deficit, resulting in high inflation.
These developments interrupted the post-COVID-19 recovery of the economy as the Gross Domestic Product (GDP) growth rate declined from 5.1 per cent in 2021 to 3.1 per cent in 2022.
While public debt rose from 79.6 per cent in 2021 to over 90 per cent of GDP in 2022, debt service-to-revenue reached 117.6 per cent.
To help restore macroeconomic stability, the country secured, for the 17th, time, a three-year International Monetary Fund (IMF) Extended Credit Facility (ECF) programme of about $3 billion and has since embarked on a comprehensive debt restructuring.
Inflation, which was largely driven by food prices, remained elevated at 40.1 per cent in August and dropped to 38.1 per cent in September, according to the Ghana Statistical Service.
But on a more refreshing note, the Daily Graphic believes economist and statesman, Kwame Pianim, was on point last Monday when he diagnosed the economic problems of the country in a presentation at this year’s annual leadership lecture series of the University of Professional Studies, Accra (UPSA).
The lecture was on the theme: “Re-imagining Ghana's development trajectory for a peaceful prosperous nation by 2057; Our 100th anniversary, through the perspective of the people.” (See Monday, December 11,2023 issue of the Daily Graphic).
Mr Pianim argued that the country's economic challenges were largely man-made and called for a concerted effort by all to lift the country out of the murky quagmire.
We have observed with keen interest similar arguments advanced by some economic experts and civil society organisations in the country to the effect that even before the COVID-19 outbreak and the Russia-Ukraine war, the fundamentals of the Ghanaian economy were weak.
The economic experts blamed the crisis largely on domestic economic lapses, pointing out that Ghana’s peers that faced the same external shocks have fared much better.
Even more revealing is the fact that the IMF Board had also identified that large external shocks in recent years exacerbated Ghana’s pre-existing fiscal and debt vulnerabilities, resulting in a loss of international market access, increasingly constrained domestic financing and a reliance on monetary financing of the government.
The IMF Board suggested that clearly, external shocks compounded the country’s existing vulnerabilities, which emanate from underlying structural weaknesses in the economy and chronic policy lapses.
The board stated that decreasing international reserves, cedi depreciation, rising inflation and plummeting domestic investor confidence eventually triggered an acute crisis.
Going forward, therefore, we urge the government to take urgent steps to initiate a discussion to create a national consensus on salvaging the nation's economy.
The process of healing the economy should be a collective action and must start with all Ghanaians as Mr Pianim advocated in his lecture.
We also think that the investment consultant’s argument that the country must “change gears for a new development trajectory” and resolve not to go for an 18th International Monetary Fund (IMF) deal is a timely call.
Mr Pianim said the nation must undertake some preparatory works to change its development path if it wanted to compete favourably on the global market by the time it attained its 100th independence anniversary in 2057.
To this end, the restoration of hope and confidence in the Ghanaian economy must start now.
