Ghana was on the path of trajectory growth of restoring hope, aspirations and creating wealth to the people of the country.
The unprecedented hope of turning the economic fortunes of the country into opportunities and goals was crushed by the COVID-19 pandemic.
This has created an economic downturn with rising unemployment, large fiscal deficit, low household income and widening inequality within the economic space.
As the Government of Ghana prepares to deliver its 2022 Financial Statement, It will be prudent and necessary to provide new policy directions, offer reasonable solutions to drive growth and better opportunities for the populace.
This article provides objective, professional insights and not to pre-judge the work of the Finance Minister. It is solely advisory and not binding.
In a crisis era, building confidence in the system and providing stimulus packages that would keep the economy and citizens afloat is a step in the right direction.
Countries around the world received support from Bretton Woods Institutions, including the International Monetary Fund (IMF) and the World Bank.
Ghana received its portion, including domestic contributions to help sustain the people and the economy during the COVID-19 crisis.
As a result of the economic hardship posed to humans during the time, the IMF categorically advised governments of nations to, “spend whatever you need but keep the receipts, because we don’t want accountability to be lost in the process’’.
In respect, it is important to acknowledge that such a support received at the crucial time was a lifeline to Ghana’s economy; and it is significant that the Finance Minister spells out the breakdown in this 2022 Budget year as a means to give confidence to investors in the international community and give stewardship to the citizenry of the progress made in curbing the pandemic.
The current 2021 Population and Housing Census (PHC) report puts the country’s population at 30.8 million. This indicates that the population is growing at a very fast rate and the resources must be allocated properly to help drive and stimulate economic growth and prosperity for all, particularly the youth.
Ghana currently has a youthful population, therefore, the working population cannot be negated in this current dispensation during the pandemic.
The existing standard of observation across the globe states that an ageing population has lower growth and higher public debt contrary to Ghana’s situation which has a youthful population with a rising unemployment rate and higher levels of public debts.
According to a research paper by Jiro Honda & Hiroaki Miyamoto (Ageing Economies May Benefit Less from Fiscal Stimulus), “fiscal stimulus in economies with a younger population has a significantly positive effect on growth, but the effect is much weaker in ageing economies’’.
This makes it critical that the 2022 budget would, among other things, incorporate strategic policy direction in all sectors of the economy to help boost productivity, create employment opportunities and alleviate the tense economic conditions.
It is very significant to diverge from the excessive reliance on orthodox economic models to present ones which are more focused on building the technological growth of the country.
It is crucial for Ghana to opt for an economic model that will help reduce imports, increase export production, support SMEs, debt financing and encourage greater diversification of the economic assets.
The country’s economy is not under distress or overheating. However, it is progressively retarding due to the high levels of unemployment, coupled with the current changes in domestic commodities due to cash strapped challenges faced by businesses in Ghana. The Ghana CARES programme must be the highlight for recovery.
The Public sector borrowing requirement (PSBR) has been on the ascendancy over the years which is making the nation unattractive for accessing future credit on the international market due to its creditworthiness and refinancing difficulties.
The IMF put Ghana’s national debt at GH¢335 billion at the end of July, 2021 and the interest payments per the 2021 Budgets around GH¢36 billion. Unfortunately, funds have been demanded over and above its required threshold, which in turn affects government liquidity and financing of the economy thereby increasing the cost of borrowing from the international market.
There are only two mitigating measures that the Finance Minister, Ken Ofori-Atta, can adopt to deal with the rising debt issue within the short-to-medium term growth of the economy.
First, he could default on a component of its debt and make what is left sustainable.
Second, he could cancel out the debt held by the central bank based on the debt to GDP ratio.
Entrepreneurial revolution can only take place when there is an enabling environment, capital for SMEs to access constantly and a specialised target technological model that will harness innovations and drive a digitalised economy.
Ghana Enterprises Agency (GEA) is a springboard for the government to drive economic recovery and build a capacity with the private sector, in spite of the risk exposure that makes it difficult to fire up the economy.
There is the need to empower local assemblies to assess the opportunities within their areas that can help create short-to-medium term jobs. Focus should also be on the construction of industrial parks to help bring informal and non-formal sectors of the economy under one umbrella.
Also to consider include mobilising revenue by introducing E-commerce and Courier tax; adjusting the Energy Sector Recovery Levy (Delta Fund) to reduce the transmission effect on the economy to alleviate hardship, the materialisation of the tax incentives provided to the tourism industry and ensuring the establishment of the DBG to facilitate the fragile recovery of the economy.
Others are sustaining the Nation Builders Corps (NABCO) initiative and implementing other effective social intervention programmes that will seek to quickly bridge the rising inequality and alleviate poverty among the people.
The writers are an Investment Banker and A Policy Advisor