Sep 22, 2021

Grovel, grovel, cringe, bow, stoop fall....

I thought perhaps what I could do today is to bring before you some very prosaic but very important issues which, I think lies within your concerns.

Ghana has suffered from misguided monetary policy views, lack of solution-oriented approaches, no advocacy of economic and political freedom and large fiscal volatility around election cycles for the past two decades. Ghana needs to be more intentional about what it wants to become economically by effectuating the links between politics and business and redefining independence through sustainable fiscal consolidation in an expanding and diverse economy. This volatility is one of the key challenges for Ghana’s future development path in the 2018 World Bank Systematic Country Diagnostic. Policies and fiscal behaviour typically fall into procyclic patterns in periods of boom and bust. Procyclic refers to a condition of a positive correlation between the value of a good, a service, or an economic indicator and the overall state of the economy.

Fiscal policy in Ghana is notably procyclical. Ghana was among the most procyclical countries over the period 1980 to 1999, with a correlation of 0.7. When there is economic prosperity, many members of the population will engage in behaviour that not only falls in line with that growth but serves to extend the period. There is a clear bias towards overspending during good times, which explains why procyclicality is higher in boom than in bust periods. The further the economy moves away from that crisis period, spending increases, and certain legislation that was deemed onerous by financial institutions might be questioned. Such behaviour is procyclic because, unless there is some motivation to act differently, there is a desire to remove what would be seen as constraints on choice when the market seems prosperous. Strikingly, Ghana has become even more procyclical in the recent period 2000-17, while many countries were able to leave fiscal procyclicality behind.

The trouble with strictly procyclic reactions to the economy is they do not allow for forward-thinking behaviour that would prepare the market for the declines that will eventually return. If preventative legislation is only supported during times of crisis, in all likelihood, the behaviour that contributed to the collapse of the market will be repeated.

Growth in productivity has been stagnant in recent years, macroeconomic volatility (associated with the country’s increasing natural resource dependency) is taking a toll on growth, and continued governance challenges constrain policy reforms. According to Michael Geiger, the Senior Country Economist for Ghana, “The country’s heavy reliance on primary commodities, including cocoa, gold, and oil—all prone to volatility in international commodity prices—create uncertainty about its actual future paths for growth, inflation, export receipts, and domestic revenue." A set of priority areas of intervention to accelerate economic growth and achieve the twin goals of ending extreme poverty and boosting shared prosperity could be offered through a systematic diagnosis of the economy and originality of financial insight. Ghana still trails its peers in some key areas like poverty reduction which has slowed, with persistent inequalities holding back lagging areas.

Ghana needs to save and invest more of its large, but time-bound, natural resources into new sources of growth. Firstly, efforts will be required to stabilize the economy and minimize future macroeconomic volatility, including through fiscal consolidation, and economic diversification. This will require a strategic approach to invigorating overall private sector development. However, increasing investment by itself will not be sufficient to accelerate growth and poverty reduction. Ghana’s population needs to access high-quality jobs and opportunities, which in turn require the country to continue to focus on raising labour productivity and building human capital. These reforms require improved governance and government effectiveness in key areas, more efficient resource allocation and greater private sector involvement in core services.

All these proposed pathways to shared prosperity are well-known by those who have been charged to lead the country in the various sectors to a land of milk and honey but most of them have renounced pride, they have hesitated, temporized, concealed the truth, woven a tissue of lies, to serve their personal interests rather than national interests. And so, intellectual anaemia, joining hands with moral debility, they have deceived their country and felt no remorse. Ghana gained independence at the same time as countries like Singapore and Malaysia, at a time when the economy was nothing to write home about. Sixty-two years down the line, we are looking at a new picture of an old disease. One crucial point that could get lost in all the minutiae: the government is not capital-constrained like a private enterprise. The government spends its own money. The real constraint on government spending is politics. This is unfortunate but true.