IEA advocates creation of Ministry of Economy to steer national planning

The Institute of Economic Affairs (IEA) has called for the creation of a separate Ministry of Economy alongside the existing Ministry of Finance as a key step in resetting the economy.

Under this proposal, the new Ministry of Economy would absorb the National Development Planning Commission (NDPC) and be charged with preparing National Development plans. Meanwhile, the Ministry of Finance would focus on managing government finances in line with development strategy prepared by the Ministry of Economy.

“A separate Ministry of Economy (MoE) is needed in addition to the current Ministry of Finance (MoF) to give due attention to economic planning and development while promoting transparency, accountability and efficiency in economic management,” it noted.

This recommendation forms part of a comprehensive reform policy brief unveilled by the think-tank ahead of the December 2024 elections.

This comes as the nation – once hailed as a beacon of stability in the region – has grappled with economic turbulence in recent years.

According to the IEA, “Ghana has been facing multiple economic challenges… resulting from a combination of external shocks and domestic policy shortcomings”.

The statistics paint a sobering picture. Economic growth moderated to 3.1percent in 2022 from 5.1percent in 2021, with a further slowdown to 2.9 percent in 2023. Inflation skyrocketed to a near-record 54.1percent in 2022 before easing to 23.2 percent in 2023. The public debt-to-GDP ratio, while improving, remained alarmingly high at 82.9 percent as of 2023. Despite falling marginally below 70 percent by end-June 2024, amid debt restructuring efforts concerns persist.

“Without transformation, however, the country cannot make much progress and will continue to grapple with many economic problems, while lagging behind the rest of the world,” the IEA cautioned.

Central to the IEA’s recommendations is a radical overhaul of the historical approach to the country’s abundant natural resources. “Ghana is uniquely endowed with a wide range of natural resources -gold, manganese, diamonds, bauxite, uranium, copper, lithium, silicate, iron ore, oil, gas, etc. – believed to be worth trillions of dollars,” the brief stated. Yet the country “remains poor and has to depend on foreign aid that come in trickles and plunge the country into indebtedness”.

The IEA proposes renegotiating existing mineral contracts and establishing a state-owned company for minerals, akin to the Ghana National Petroleum Corporation (GNPC) in the oil sector. “Future mineral agreements should be based on ‘product-sharing’ or ‘service contracts”, a portion of the brief reads, aiming to maximise Ghana’s ownership and benefits from its resources.

On the macroeconomic front, the IEA advocates for stringent fiscal discipline. It suggests reducing the current Fiscal Rule of five percent deficit-to-Gross Domestic Product (GDP) ceiling to a tighter three, in line with ECOWAS criteria. Additionally, it proposes introducing a debt/GDP ceiling of 60 percent, deemed the sustainable level for Ghana by international standards.

The public policy think-tank did not shy away from addressing governance issues. It called for a constitutional review to “reduce powers of the president – generally seen as excessive, especially regarding appointment of public office-holders”.

It also recommended separating the roles of Attorney-General and Minister of Justice to bolster the fight against corruption.

The policy document also shines a spotlight on social issues. It emphasises the need for gender parity in political participation and governance, recommending “a set minimum target representation for each gender in parliament, ministerial positions and at the board level”.

These proposals are in line with previous ones by the institute and serve as a stark reminder of the challenges ahead and a potential roadmap for sustainable economic development.

With the 17th International Monetary Fund (IMF) bailout programme underway, stakes for the next administration could not be higher.

Analysts broadly agree that the incoming government will face a daunting task in implementing these wide-ranging reforms while navigating a complex global economic landscape.

As the IEA aptly put it, “Ghana needs to chart a new path since repeating the same policies will not achieve different outcomes”.

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