We don't need stimulus package - Finance Minister

The current state of Ghana's economy does not require any fiscal stimulus package, says Dr. Kwabena Duffour.

"The economy is not in crisis as compared to countries that are developing stimulus packages to support their economies," he stated.

Speaking in an exclusive interview with the Times in Accra on Friday, he described as misplaced, calls by a section of the public that in the face of the global economic turmoil, the government should provide a• stimulus package to boost the economy.

Dr Duffour was reacting to suggestions by a number of people, prominent among whom is Dr Paa Kwesi Nduom, Convention People's Party Presidential Candidate in 2008, that Ghana should introduce a stimulus package to prop up .her economy to absorb the global credit crunch.

"Countries such as the United States of America are providing stimulus packages to distressed companies because their banking sector has collapsed and the government has to pump money to support them," Dr Duffour, a former Governor of the Central Bank, said.

He said in the case of Ghana, the financial sector is strong and bank credit to the private sector has been on the increase, whilst the financial sector in the US is facing difficulties because of the failure of financial institutions to follow their banking regulations:"

"Americans need a stimulus package because the consumers are not spending and bankers are also not lending, which is different from the Ghanaian situation.”

Quoting the Bank of Ghana Monetary Policy Committee's report, Dr Duffour said bank credits to the private sector and public institutions last year increased to GH¢ 1, 820.3 million, as against GH¢ 1,626.7 million, the previous year.

The trend, the Minister said, was continuing this year and "it would be economically unwise to be thinking of any fiscal stimulus package".

He dismissed as not implementable, suggestions that the Bank of Ghana should set aside its reserve as a seed capital to provide low interest loans to companies as part of a stimulus package, saying that would lead to further depreciation of the cedi.

"If we set aside our reserves for contingencies for this purpose, what do we fall on in times of dire difficulties? The idea is not right."

Dr. Duffour said the global financial crisis presented an opportunity for the country to explore domestic means of generating revenue, adding that the threat of the global financial crisis on the Ghanaian economy would not be as direct as being experienced by developed countries.

"I am not downplaying the impact of the global financial crisis on our economy, but we don't have to send false alarms that the economy is in dire need of a fiscal stimulus package," he said.

Mr. Seth E. Terkper, the Deputy Finance Minister, said the major problem confronting the country is the huge budget deficit that the government has inherited.

He said the issue of reducing the' budget deficit from 14.9 per cent of Gross Domestic Product (GDP) to 9.4 per cent is of a major priority to the government and not a stimulus for the economy.

The Deputy Minister said the government is also forecasting an economic growth of 5.9 per cent this year, down from last year's provisional growth rate of 6.2 per cent.

He said in the face of surging inflation and depreciation of the local currency, the government cannot afford any fiscal stimulus package.