Cedi falls, inflation rises

Macro-stability Elusive?

…After NEF, How long can Ghanaians wait?


Many Ghanaians have high hopes and expectations in the just-ended National Economic Forum (NEF) at Senchi in Akosombo in the Eastern Region. They were justified to be hopeful because of the agony they have been going through in the past year and half due to the deteriorating macro-economic environment, the harshest of which is the depreciating currency and concomitant rise in inflation. Added to this is the agonizing life in one of the most severe economic austerity measures in recent history. Utility and fuel subsidies have been scrapped, almost everything under the sun in this country has been taxed and government has savagely cut spending in most of the social safety net areas of the economy. The austere measures are in an unprecedented second year without any sign that they will be eased for Ghanaians to get some respite. These are in response to two years of twin deficits and a potential third year. There is the risk of social unrest and a threat to the nation’s democracy if the state continues to squeeze the people through these punishing austerity measures. The just ended National Economic Forum, however, failed to give concrete steps to the people for an end to the economic hardship brought about by the deteriorating macro environment. Instead, a raft of vague policy directives whose implementation could take three or more years, were announced at the end of the forum. Most of the directives are medium to long-term initiatives aimed at transforming the structure of the economy from its current dependent on primary commodities to an industrialized one. Very little was said on when and how macro-economic stability would be restored, so that sustainable and inclusive growth would continue for the said economic transformation to materialize. The aL-hAJJ is cautioning that NEF could be a mere Public Relations exercise if urgent steps are not taken immediately to correct the raging macro-imbalances especially inflation and currency depreciation that have been eroding the ordinary peoples’ purchasing power in the past year and half. Cost of goods and services in the market have seen astronomical increase especially from January this year, forcing demands to decline. Businesses have therefore, been hit hard. For instances, in the real estate industry, a house that cost about GHS200,000 in January this year is going for about GHS350,000 due mainly to the Cedi depreciation and various forms of taxes imposed on the industry.


Below are the 22 points of consensus reached at the National Economic Forum:


1. That the Directive Principles of State Policy (Chapter 6 of the 1992 Constitution) must continue to guide the national development effort, anchored in a long term national development framework with a compelling vision.


2. That long term national interest should supersede all other interests.

3. That the State encourages and promotes indigenous entrepreneurship and continues to execute projects and programmes commenced by the previous Government.


4. Foster a state whose day-to-day management is supported by a professionally competent civil service working in an environment devoid of political victimization and intimidation and where support for the Government is not interpreted as political affiliation.


5. It is imperative to strengthen the public accounts and finance committees of Parliament to play their oversight responsibilities more effectively; and also to develop a mechanism for effective synergy and coordination between the Monitoring Units of Ministries, Departments and Agencies (MDAs), the National Development Planning Commission (NDPC) and the Office of the President.


6. That a mechanism to effectively monitor, evaluate and reform the use of statutory funds transferred to public sector institutions such as the District Assembly Common Fund (DACF), National Health Insurance Authority (NHIA), Ghana Education Trust Fund (GETFUND) must be established.


7. That government should establish a One-Stop-Shop for investments, electronic templates to simplify business processes, streamline the activities of the Ghana Export Promotion Council (GEPC), Ghana Investment Promotion Council (GIPC) and Free zones Board, and strengthen the capacity of the Ghana Statistical Service (GSS) and other statistical reporting agencies to deliver reliable and timely economic and social statistics for planning, research and development.

8. The Ministry of Finance should as a matter of urgency review the targets set in the 2014 budget. The review must identify likely deviations and make proposals for plugging the resultant financing gap while the Bank of Ghana traces the implications of the revisions for monetary policy.


9. That a mechanism must established to realign the budget whenever the economy is affected by unanticipated shocks.


10. Government must strengthen the regulatory authorities to protect consumers and ensure the enforcement of standards.


11. Further steps must be taken to support Small-Medium Enterprises (SME) in order to protect jobs.


12. That further efforts must be made to improve the efficiency of tax collection as well as broaden the tax base and reduce recourse to the introduction of new taxes. The incidence of discretionary tax exemptions should be reviewed and reduced.

13. Bank of Ghana should expedite work on the assessment of the recently announced foreign exchange measures and take speedy and appropriate action to restore confidence and relieve the unintended consequences of the measures.


14. Consideration should be given to the amendment of the Bank of Ghana Act to set a ceiling on its lending to government that is based on government's revenue collection in the previous year, rather than the current year as is currently that case. This should be separated from the ceiling on total net domestic borrowing by government.


15. An investment programme to deal with the energy crisis must be put in place as a matter of urgency in order to propel growth, employment, competitiveness, and macroeconomic stability.


16. That government must take steps to revamp the manufacturing and agriculture sectors to encourage domestic production of some agricultural products as well as import substitutable manufactured goods.


17. Ghana needs accelerated implementation of the current plan to develop the interbank foreign exchange and money markets to ensure active primary and secondary trading.

18. For the purposes of encouraging high national productivity, government, labour and the private sector must collaborate to institute a management and labour productivity crusade including the introduction of a Service Charter that ensures that productivity is matched with remuneration.


19. Take steps to develop long term financing instruments to minimize reliance on short term financing.


20. That a clear and simplified policy framework to help grow and migrate the informal sectors into the formal is urgently required. As such steps must be taken to simplify business registration process, non-mandatory SSNIT contribution up to a minimum number of employees by informal sector operators.


21. We your fellow Ghanaians recognize that socio-economic development is a journey, not a destination. As such, efforts to build a national consensus and long-term plan must also take the mode of a journey. We therefore recommend that the National Economic Forum be institutionalized and that a committee be established to explore various options and model for undertaking this process of institutionalization.


22. Government must take steps to galvanize consensus around other issues of national importance, especially with respect to political governance nation-building matters, and should initiate a process of involving citizens whose experience, insight and expertise will enhance economic policy management and national governance.