An African Monetary Fund: A Ghanaian Perspective

Wed, 10 Aug 2011 Source: The Emperor

I think that the President’s economic advisor, whoever he is, should be made redundant. Ghana’s economy isn’t heading the right direction! I am sure that most of you have taken notice. For the past two years or so, the price of commodities has been a major cause for concern. It has been flying off the roof! So, how did this come about? Well, about two years ago, the Mills’ administration decided to increase the taxes on imported commodities. I, for one, questioned the economic soundness of it. I was utterly convinced that this particular decision, if implemented, would have a negative effect on the economy. For years, Ghana’s market-economy has been in the hands of retailers, whose commodities are mostly imported. As a result, Ghanaian consumers have familiarized themselves with imported commodities. To the detriment of Made-in-Ghana commodities, of course! One thing is certain; Ghanaian manufacturers are losing billions of cedis. Simply because; there’s no market for Made-in-Ghana commodities in Ghana.

In an effort to reverse this trend, Atta Mills has been advised by the IMF to increase the taxes on imported commodities. In the name of market-protectionism, this move might seem the right move to make! But, is it? Ghana, as you all know, has a laissez-faire market-economy in which price control is non-existent. Usually, in a laissez-faire market-economy, consumer protectionism has to be firmly in place. We all know how greedy retailers could get! In Ghana, however, consumer protectionism is non-existent. As a result, the consumer is, more or less, left at the mercy of greedy retailers. Now, the question is; could the tax increment on imported commodities have a positive effect on Ghana’s laissez-faire market-economy? The answer to this question is a big no! If anything, this action would inflate consumers’ expenditure. Retailers would increase their prices to reclaim the monies paid in taxes! In the end, Ghana’s consumers would see a decrement in their purchasing power. Their wallets will run dry due to the high prices!

An increment of taxation on imported commodities wouldn’t necessarily diminish their demand. This must be clearly understood! Yes, some retailers would start importing less commodities due to the high taxation. After awhile, imported commodities would be less in rotation, but not necessarily in demand. Retailers would then take advantage of the situation! They would overprice the imported commodities due to their scarcity. In short, retailers would be making more monies than they ever did before. And, at whose expense? Ghana’s consumers, of course! Remember, this is what happens in a market-economy in which demand exceeds supply. In a laissez-faire market-economy; scarcity of commodities--in correlation with demand of commodities, equals to inflation. Inflation, if it goes unchecked, could devalue a currency! So, in essence, the IMF isn’t helping Ghana at all, let alone her economy. If anything, the opposite is being done. Market-protectionism has its place! However, if it inflates the cost of living, then, what’s the sense?

That said, ever since most of us could remember, most African countries have been running to the IMF or the World Bank for financial assistance. We have been depending on these two European institutions to bail us out! We borrow from these two institutions with stringent conditions attached. We borrow from them as if we are poor. So, are we? Africa is the richest continent on this planet. Everybody knows this! So, instead of Africa going to the IMF or the World Bank to borrow, why can’t Africa set up a financial institution of her own? To be precise, a financial institution set up by Africans for the development of the African continent? In terms of wealth, an African Monetary Fund could surpass the wealth of the IMF and the World Bank put together. So, what are we waiting for? How long are we going to sit and allow the Europeans to tell us what or what not to do with our respective economies? Remember, the Europeans created the IMF and the World Bank to build Europe after the Second World War. Africa wasn’t on their agenda! She’s still not on their agenda. We Africans need to stop fooling ourselves and come to grips with this reality. No benevolent European institution is going to build Africa, except an African institution set up by ourselves. We need to remember that! Of course, some would argue that African countries don’t have strong currencies. So, this should be a problem. Well, I will say this; what if all the African countries were to have a single currency? An African currency backed by the continent’s natural assets. Just imagine what this currency would be worth!

Welcome 2 the New age of Consciousness!

Source: The Emperor

Columnist: The Emperor