Economist at the University for Development Studies, Dr Michael Ayamga, has revealed that government has succeeded in creating an economy that has become largely resistant to economic stimulus.
According to him, there is a cause for concern when it comes to the state of the economy. He expressed worry over the declining nature of agriculture in the country which is affecting the economy. This, he explained, is because agriculture is the base for Ghana’s economy.
Dr Ayamga further stated that the finance minister has become largely “predictable” to the market and market players, as Mr Ofori Atta is expected to deploy some changes to running the economy and keep speculators guessing.
“Now, you realize that people have understood that we are going to continuously struggle to meet our foreign exchange obligations. They know that we require almost 400 million dollars to buy petroleum products and other things. So, when we get money, all they do is take a calculator, do the numbers and then they don’t respond. So, we have succeeded in creating an economy that has become largely resistant to economic stimulus and we seem not to be able to nudge the economy in the right direction…”Dr Michael Ayamga
In light of the current state of the economy, Dr Ayamga underscored the need for fresh perspective to be implemented in salvaging the economy. He explained that in as much as people think that Ken Ofori Atta has the right to be the finance minister, he still feels that a change in that area, would have at least given some confidence to investors.
“I generally don’t think that we have succeeded in stabilizing the economy and we have turned around towards a more sustainable trajectory. All we have done is to do what we have been doing in the past, that anytime there are inflows and receipts, we use them to subsidize dollars for people to hoard. So, that’s largely the modus operandi, and that is the strategy the finance minister has adopted. If you look at what we are seeing now, we are beginning to see all the actors describing our economy as it ought to be…”Dr Michael Ayamga
On his part, a senior lecturer at the University for Professional Studies, Accra (UPSA), Dr Eric Boachie Yiadom, in his appraisal of the economy, stated that the first $600 million tranche received from IMF has contributed to about 4.2% growth in GDP, which is for the first quarter of this year. In general terms, he indicated that one would think the economy is doing well, however, he stated that a closer look at the fundamentals of the growth the country is receiving for the 4.2%, the service sector is contributing around 10.1%.
“… And agric sector a little around 3.1% and you’ll see that the manufacturing sector is contracting within the same period. So, what it means is that the funds received in a way, has contributed but the engine of growth, which is industry, is contracting. It’s contracting based on several factors – number one could be the taxes that government is levying on industry and if we continue to charge industry in a certain way, you’ll end up even eating their capital.”Dr Eric Boachie Yiadom
Reviving Ghana’s economy
Dr Yiadom revealed that industry has already suffered in terms of exchange rate losses, as a result of this, piling more taxes to generate more revenue will not augur well for the sector. He noted that government intends to achieve its mid-year budget of ensuring that its tax to GDP moves to around 18.3%, and in achieving the tax to GDP target, those paying the taxes, which is mainly from industry, will be heavily impacted.
“… You are squeezing so much from them, that will not make them sustainable going forward. The IMF has helped, but the focus of the funding has not contributed to the industry.”Dr Eric Boachie Yiadom
Commenting on agriculture, Dr Yiadom noted that agriculture growth over the period is dwindling. He indicated that agriculture is however expected to transition into industry, but that’s not the case for Ghana.
“… So, if we check the Ghana Statistical Service data on the subsectors that contributed to growth, you can see retailing and other part are doing well. So, the cushioning is pushing up importation of goods and services, which in a way will not augur well for the local economy. So, we are expecting the minister of finance to reposition in terms of investments to support industry, so that we will be able to transition properly from agriculture to industry and to service…”Dr Eric Boachie Yiadom
Furthermore, Dr Yiadom highlighted the need for the next tranche of the IMF fund to be invested in targeted areas. This, he indicated, is because the funds from the IMF, has not gone into the direction it is expected, especially in investing more into industry to guarantee sustainability.