March 15, 2005 548 VIEWS
Proshare
Ghana was the first country south of the Sahara to gain independence. At the time, it was classified in international circles as being a middle-income country. The economic structure of the country was weighted heavily in the primary sector. Inflation rate of the newly independent country was less than 1%, rate of growth of the population and real GDP growth rate were at par at approximately 2.2%. Fast-forward 48 years, four republics, interlaced with four military regimes, several foiled coup attempts and a countless number of development policies and programmes later… Ghana has evolved into a low-income country, with GDP estimated at US$ 8.6 billion, income per capita of approximately US$ 410, and a population estimated to be growing at a rate of 2.7%. On the macroeconomic front, the economy has in recent years been battling with a myriad of economic problems such as persistently high inflation rates [which erode the confidence of the public in the nation’s currency], high interest rates [which stifle investment by the private sector], excessive growth in money supply, large budget deficits [fuelled by government’s propensity to spend excessively], and external debts that are beyond the servicing threshold of the nation’s budget. Emerging from what some analysts would say were the “dark ages” of the Ghanaian Economy, there are indications that the economy is burgeoning. The economy has since the year 2000 grown at an annual average rage of 4.6%, with key sectors [agriculture, industry and services] also growing steadily from an average of 3.8% [2000] to 5.8% [2004]. Yields on government securities have also enjoyed a steady decline, from an annual average of 38% [2000] to 17% [2004]. Headline inflation as tracked by the CPI has despite periodic spikes, declined from 40.5% [year-end 2000] to 11.8% [year-end 2004]. With the overall budget deficit presently standing at 3.2% of GDP and an accumulated external debt of US $6.2 billion, donor agencies have hailed the Ghanaian economy as being well on the road to recovery. After meeting the criteria to have a portion of the country’s debts forgiven, Ghana has as at July 2004, saved US$1.64 billion in debt service payments owed to the Paris Club creditors, and will receive US$230 million each year, for the next 20 years. Furthermore, Ghana’s qualification to access the Millennium Challenge Account [MCA] once again would mean there would be a massive influx of funds into poverty alleviation and development related programs. The regulatory bodies seem poised to maintain rigid policy stances on both the fiscal and monetary front. The Ghana Poverty Reduction Strategy [GPRS] remains the key development policy framework of the country. Since its implementation began in 2002, the GPRS, which is geared towards achieving the medium term priorities of Government, has been incorporated in subsequent releases of the country’s budget statement and economic policy. All seems well on the macroeconomic front… or is it? What is most disturbing is that though agriculture continues to be the mainstay of the Ghanaian economy [in terms of contribution to total growth; 46.7% in 2004, forecast for 2005 at 41.1%], it continues to remain non-mechanised. Furthermore, in the 2005 Budget Statement, overall allocation to the private sector was approximately 2% of the total expenditure for GPRS in 2005 and less than 1% of the total amount of donor funds to be devoted to the GPRS. This raises serious questions about how the government expects to fulfil its quest to achieve accelerated growth via private sector development. Therefore can we really depend on donor funding to propel the economy to greater heights? Albeit government has been able to average excesses over revenue collection targets of 6%, it would not be remotely feasible to support the entire economy on internally generated funds. Can the Ghanaian economy do without donor support? Evidently not. The country has been the recipient of aid packages in the form of loans and grants from bilateral and multilateral agencies, dating as far back as the colonial era. Why then have we not built on our middle-income status to be like the likes of the Asian Tigers? An educated guess as to why the Ghanaian economy is still not self-sufficient transcends the usual reasons of political strife and misallocation of resources. The absence of the appropriate structures in the economy would stifle growth in any economy, irrespective of the amount of donor or internally generated funds pumped into the economy. An objective look at the indicators would spell out to the discerning reader that the economy was driven mainly by boosts in public spending [which incidentally is in consonance with the fact that 2004 was an election year] and not by the private sector. Approximately 9 million Ghanaians are said to be economically active, with 91% of those that are gainfully employed being placed in the private sector. Ceteris paribus, one can only imagine the opportunities that would open-up to individuals if adequate funds are made available for individuals in this sector to work with. A counter-argument that could be raised as to whether or not we really need donor funding to propel the economy, would lie in the answer to the following question: Does Ghana have the ability to mobilise funds for investment in the private sector? I would say yes. 2004 flagged a lot of possible ways of mobilising funds for investment in the private sector, some of which include the agriculture sector, initial public offerings on the Ghana Stock Exchange, unrequited transfers (remittances), tourism, etc. The challenge is up to government and perhaps the private sector itself to create attractive products that would effectively harness these funds collectively for investment. The passing of the Long Term Savings Plan Bill, and the Venture Capital Fund Bill, is a sure indicator of the regulatory authorities being proactive and forward-looking. What is being proposed is not advocacy to be donor-independent immediately, but for structures to be put in place to gradually wean the Ghanaian economy off donor support. Bias in the economic indicators should clearly distinguish between overall growth in the economy and that of the economy as contributed by the private sector. The “much-tooted” three-pronged approach of human resource development, private sector-led development and good governance, appears to address these issues. However, would extending the number of years spent undertaking basic education, necessarily make products of the existing educational structure more productive? Was the tax regime the only thing hindering growth in the private sector? If and when donors do come to our aid, do we need to concede to the strict conditionalities associated with being granted the loans and/or grants? What about putting in place concrete measures to attract both private sector and foreign investment into the country? I think the genesis of the country’s economic woes are not so much as related to the amount of funds we can generate internally, or are handed out (in the form of loans or grants) but are rooted in the Ghanaian’s lack of faith and a decent work ethic in the country. A scenario was once painted that in the event of a galley showing up at the Tema Port, offering free passage to Ghanaians to North America on condition that they are sold into slavery, they will probably be a stampede unlike the world has never seen. Forty-eight years on, what can Ghanaians boast of doing for their country? Perhaps, we should take a cue from the words expressed by the late American President John F. Kennedy: “Ask not what your country can do for you—ask what you can do for your country.” Source BusinessinAfrica
Related Articles
March 11, 2005 339 VIEWS
Proshare
March 11, 2005 483 VIEWS
Proshare
SCROLL TO TOP