Government Must Remain Prudent

The Minister of Finance and Economic Planning, Dr Kwabena Duffuor’s bullish assessment of the Ghanaian economy on June 16 was very refreshing.

It is very obvious now that the current government is looking seriously at tackling the problems it believes, were inherited from the previous government before it looks seriously at implementing far-ranging policies that will spur on growth further.

This is understandable because you always need stability before growth, so if the foundation is not solid enough, there is every reason to ensure that it is firmed up before you pile on more blocks.

It is against this background that we call on the government to ensure that it remains completely focused on the task it has set itself to do in terms of improving the economic balance.

“Some of you may know the Ghanaian economy at end-2008 was characterised by severe imbalances, reflected in the fiscal deficit which widened from 9 per cent of GDP in 2007 to 14.9 per cent of GDP in 2008. The 2008 deficit does not include expenditure arrears running into millions of cedis we are currently uncovering. The deficit was largely driven by a lack of prudence in public spending and misplaced priorities”, the Minister said.

As the Minister rightly pointed out, it was the lack of prudence that caused the problems, meaning that at any point in term, it could also become the bane of this government also.

To be prudent means that you have to be careful, cautious and sensible at all times. Above all, you should be prepared to exercise good judgement. Lack of prudential controls is a serious problem for every institution, be they government or private institutions.

As the government believes that it has set its stall right to ensure that the nation moves along the path of effective prudential economic management, it must follow through the process to the letter. The economic figures, from what the Minister read out on June 16, show that we are a nation that can collectively achieve better growth in the near future. We therefore call on the Minister and his team to ensure that they do not become so much observed with figures, and that they focus on the real issues on the ground.

As we have repeatedly stressed in this paper, economists sometimes get so much observed with the mathematical calculations that they sometimes do not realise it when they are out of touch with reality.

GDP growth alone does not mean that society is enjoying a better standard of living. No. Not at all. As the Minister rightly pointed out, although the economy registered an estimated growth of 7.3 per cent in 2008, this was largely caused by the massive injection of funds, including the 2007 sovereign Eurobond, sale of majority stake in Ghana telecom, and draw-down of the foreign currency reserves.

Therefore, “the expansionary fiscal stance of the Government caused inflation to rise significantly, reaching 18.1 per cent at end-2008”, the Minister said. The government must indeed remain prudent in its running of the economy if this country is to achieve the crescendo it is striving to attain.