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Government must take pragmatic steps to salvage economic crunch – Economist

Theo Acheampong131212 Petroleum economist, Dr. Theo Acheampong

Fri, 12 Aug 2022 Source: www.ghanaweb.com

Petroleum economist, Dr. Theo Acheampong has called on government to take immediate steps to the salvage the current economic crisis.

In the past week, international rating agencies such as Fitch and Standards and Poor have downgraded Ghana's economy.

For instance, Fitch in its latest report noted that the downgrade reflects the deterioration of Ghana's public finances which has contributed to a prolonged lack of access to Eurobond markets.

Reacting to the development in a Facebook post on August 11, Dr Acheampong suggested a reshuffle of government ministers to reflect the current economic crunch and also advised the Bank of Ghana against hikes in the policy rate, cautioning that such a move will strangle the Ghanaian economy.

“With two almost junk status sovereign downgrades in the space of a week by S&P and Fitch, and with inflation also at an unprecedented 32%, any further attempts by the Bank of Ghana to hike the policy rate in an attempt to control inflation will likely strangle the economy by making the cost of credit extraordinarily high for businesses and households.

“The government faces a difficult choice. However, it must signal to the market that it is serious about turning the tide. First, it starts by reducing the government's resort to borrowing from the domestic market using T-bills and other central bank open market operations to compensate for the lack of access to the international capital markets,” he opined.

He further called for a government reshuffle which will cut down on the number of ministers in the governing New Patriotic Party.

“Secondly, the IMF programme must be fast-tracked with an application to the G20 debt framework to delay some debt repayments in order to create much-needed spending space. “Thirdly, cutting down the government's size through a reshuffle to remove many of the deadwood. Mr President, you don't need to tell Ghanaians that your ministers are "outstanding". We'd know it if it was improving our bottom line. Unfortunately, it is not,” he wrote on his page.





Background

On July 1, 2022, government made a decision to engage the International Monetary Fund for a financial bailout.

Subsequently, a team from the IMF arrived in the country from July 6-13 and engaged Ghanaian authorities for a possible economic support programme

Ghana is said to be targeting an amount of $3 billion over a three-year period from the IMF once an agreement on a programme is reached.

The new amount requested as a loan was double the government’s initial target of $1.5 billion.

MA

Source: www.ghanaweb.com
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