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Opinions of Wednesday, 8 July 2020

Columnist: Dr E.K.Hayfod

Is Ghana's economy still in intensive care unit? Views from the blind side of coronavirus

Sometime in March, COVID-19 entered Ghana. The Caucus for Democratic Governance, Ghana (CDG—Gh), observed with shock that after three weeks our economy was showing signs of collapse, as a result of stresses and strain, from COVID-19.

Macroeconomic figures

It was shocking because we were often fed with excellent macroeconomic figures with a growth rate of between 6.4% to 8%. Ghana was proudly described as one of the best economies in Africa; robust, strong and one of the fastest-growing in Africa. It is, therefore, worrying to note the speed with which our economy went on its knees, barely three weeks after COVID-19.

Call for help

How is Ghana`s early call for a lifeline possible; at a time when all our neighbouring countries in Africa had not openly come out with any request? Experts contend that Ghana`s national reserves must be able to keep us floating for about three months, before any rescue attempt. As I write, we have received 100 million from the IMF. We have also received $1billion from World Bank, the Heritage Fund is running out. Our internally generated reserves for emergency situations like the COVID-19 is used up. This is what happens to a weak economy in crisis time.

Causality of weaknesses

The former President, John Mahama often cautioned the Finance Minister for engaging in creative accounting, indicating that a number of debts are put under the baseline to escape accounting. This weakens the resilience of the economy.

When the baseline to GDP is changed, to induce flowery figures, that presupposes a robust economy, then the economy is bound to collapse in three weeks of strain and stress.

When this Government borrows heavily, the debt distress becomes high. When the debt distress is high, we have no option but to run quickly to the IMF for rescue.

Instead of the Government aggressively embarking on austere measures of pruning down the size of the Government appointees, reducing taxes, reducing imports and investing in productivity to make a saving, she is stampeding the resources of Bank of Ghana (BoG) to weaken the economy.

In an economy where BoG is forced to print 5.5 billion cedis to finance Government operations and is planning to print more; cannot be a robust economy. This action is a breach of the Bank of Ghana Act.

Where the BoG is converted into an extension of the Ministry of Finance, the foundation of the economy, with time, becomes weak.

In an economy where figures on Internal reserves, Fiscal Deficit of GDP and Primary Balance of GDP are manipulated in the 2020 budget, the economy is programmed to go on its knees in three weeks of COVID-19.

Conclusion

CDG-Gh is of the view that the economy is still in the Intensive Care Unit. We need serious restructuring processes to improve its resilience. We need a new Government with fresh ideas, and a new team led by former President John Mahama to do the right job.

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