Opinions of Mon, 23 Feb 20096
Fiscal policy must improve living conditions
It is heart-warming to note that the new ministers of state are starting work today, to fill the yawning gap already existing in the governance system immediately after the new Government was sworn into office.
And for those of us who are in the financial fraternity, we are elated that one of the first ministers to be sworn in is the Minister of Finance and Economic Planning.
We believe that being a former governor of the central bank; a seasoned economist who has been an avid player in the financial sector of the economy over the past two decades from a regulator to a private banker, Dr. Kwabena Dufuor is in pole-position to deliver as a finance minister.
It is also heart-warming to note that the new exchequer has already sent strong signals to the world of finance that a new era was dawning. The former Bank of Ghana Governor indicated that he would, in the first year; work towards an 8% budget deficit and below five percent in subsequent years.
For us at the Financial Intelligence, what matters most is for the government to prosecute a macro-economic policy that would also reflect in the socio-economic development of the country and its people.
This is because, good macro-economic indicators such as low inflationary rates, lower budget deficit, and low interest rates in themselves do not mean anything to the ordinary Ghanaian who queues every four years to elect a government.
It is when these indicators become relevant in the creation of jobs for thousands of graduates, artisans, middle level trainees and unskilled labour that we, as a people can boast of a robust economy.
We therefore believe that the promise by Dr. Dufuor to balance the fiscal policy so as to create an enabling environment for investments that would lead to job creation, needs the support of all especially players in the sector so that this dream would come to fruition.
In this direction, one important step that the government through its exchequer must take in consultation with whoever manages the monetary side of policy formulation is a second look at the levels of interest rates which investors and industrialists have complained of consistently over the past years.
Available data suggests that rates in Ghana rank around one of the highest in the sub-region, a situation , which, if not checked could derail every attempt by government to attract, promote and sustain investments.
This situation is believed to have cost the nation so much already, in terms of losses in investor opportunities.
The financial institutions also complain about high overheads which compel them to charge so much interest in order to balance their books. This situation calls for a holistic approach to socio-economic development.
Laying a firm foundation for industrialization by making electric power available and affordable, promoting agriculture and agro-processing, so that Ghanaians would have enough, first to eat and then for export, making good drinking water available, housing, roads and public transportation so that investors’ overheads would come down considerably.
We believe when this is done, the sector players would have no excuse not to slash interest rates and soften lending conditions.
Already, the Credit Reference Bureau project is underway and the new government must pay particular attention to its success, because it would help instill discipline in the borrowing and lending regime.
Finally, we believe that just as western countries are taking pains to protect their own financial institutions, because of the global financial crunch; we believe the times are ripe for government to take a second look at certain practices that do not auger well for national development.
Government of Ghana must also put in policy measures that would insulate national financial institutions from the vagaries of the credit crunch that has hit the west.