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Opinions of Tuesday, 3 June 2014

Columnist: Korsi, Citizen

Fixing the nation’s ailing economy: Who is in Charge?

-Veep, Terkper, Nii Moi or Baffoe?

It is now clear and indisputable across the country and beyond that the Ghanaian economy is in distressed. But what is not clear and disputable is the person in charge of the direction and policies that drive the economy.

After needless dithering for almost a year and half, President Mahama has now heeded to numerous calls across the country to make some changes (or additions) at the top echelon of the team that manages the nation’s struggling economy.
Dr. John Kofi Baffoe from the Africa Development Bank was last week, as part of the announcement heralding ministerial reshuffle, appointed as technical advisor to the Finance Minister Seth Terkper.

The aL-hAJJ has gathered that this is not the convention at the Finance Ministry, as Finance Ministers in the past were at liberty to appoint their own advisors to help them manage the economy.
With background in Macro and Development Economics, it is not clear what the actual role of Dr. Baffoe will be at the Ministry of Finance and what he is bringing on board to correct the short term challenges the economy is facing.
Presently, the Vice-President, Mr. Paa Kwesi Amissah Arthur is the head of the Economic Management Team, having been a Governor of the Bank of Ghana and also a former deputy Finance Minister for over ten years. Mr. Seth Terkper is the Finance Minister, and has been part of the economic management team of NDC since February 2009 as a deputy to former Finance and Economic Planning Minister, Dr. Kwabena Duffuor. Dr. Nii Moi Thomson, a consummate economist of international repute is also ensconced at the Flag Staff House as the Presidential Economic Advisor.

The appointment of Dr. Baffoe is raising eyebrows among experts who spoke to The aL-hAJJ given the fact that the above-mentioned individuals have already covered the available turf in the scheme of things so far as the management and direction of the economy is concerned.

In a series of rhetorical questions, an expert familiar with the Ghanaian economy asked “Is he going to be in charge of the policy direction of the economy? Is he going to help with the implementation of economic policy coming from the Flag Staff House? Would he get the needed co-operation from both the presidency and the ministry of finance? Does he have the requisite practical knowledge of the Ghanaian economy that he can use to bring about the much needed economic turnaround? Can he help the government to navigate through the short term challenges the economy is facing now and how long?”

According to the expert, if government is able to answer the above questions on the appointment of Dr. Baffoe as a technical advisor to the Finance Minister, then “we can make some headway towards diagnosing the real problems facing the economy before finding the appropriate solutions.”

The aL-hAJJ believes that despite the much- touted Senchi Consensus and the so-called 22 Communiqué, government has still not been able to diagnose the real problems that have created the current short term challenges facing the economy much more finding the needed solutions.

Until the right diagnosis and the right solutions are found, the local Currency, the Cedi would continue to depreciate and inflation rate will also rise, exacerbating the current hardship facing Ghanaians.

A source at the Ministry of Finance told The aL-hAJJ that presently there are two key professionals at the ministry who could have been elevated and given the status of the said Dr. Baffoe, depending on the thinking of the President.
Dr. Samuel Ameyaw, a macro economist at the Ministry of Finance and Dr. Sam Mensah, a technical advisor to the minister could easily be elevated to play whatever roles Dr. Baffoe is coming to play at the ministry.

Dr. Ameyaw is the Acting Director of the Debt Management Division of the Ministry of Finance, having worked for over two decades at the Bank of Ghana (BoG).

The above individuals are part of the policy implementation at the ministry and have little or no say in the policy direction of the economy which is within the domain of the Finance Minister Seth Terkper, President’s economic advisor, Dr. Nii Moi Thomson; vice-president Amissah Arthur and may be the newly appointed Technical Advisor of the Finance Minister, Dr. John Kofi Baffoe.
As former Governor of the BoG, Vice-president Amissah Arthur was appointed running mate by President Mahama in the run up to the 2012 elections to help neutralize the political value of Dr. Mahamudu Bawumia of the NPP in the campaign and also help provide solution to the nation’s economic problems after winning power.
However, critics have argued that almost a year and half after becoming the vice-president and head of the economic management team, very little has been seen of His Excellency Amissah Arthur, especially in the area of economic management where he is supposed to have expertise.

The economy has seen one of its disastrous performances in decades under the watch of the experienced former Governor and one of the longest-serving deputy Finance Ministers in Ghana’s history.

Even when his rival on the opposite side, Dr. Bawumia gave a well-researched lecture on the economy some few months ago with subtle attacks against the economic performance of the NDC government, the vice-president went mum.
What he could do was to organize a national economic forum at Akosombo which came out with a 22 point directives now popularly referred to as the Senchi Consensus. These 22 points have been said over and over again in this country by both members of the government and the opposition and thus, are nothing new.
However, they failed to address the short term challenges the economy is facing and instead deal with the medium to long-term.

A source at the presidency told this paper that when the Economic Management Team was taking its share of criticisms from participants of one of the groups at the Akosombo forum, the vice-president quickly went into defensive and argued that the Economic Management Team which he heads is just there to reconcile data for cabinet meetings and so has very little role in the management and direction of the economy.

One therefore wonders what the precise role of the vice-president is in finding solutions to these raging economic challenges that this country is facing.
President Mahama is said to have on numerous occasions expressed reservations and disappointment on the performance of his vice in managing the economy. This has resulted in calls across the party for the vice-president Amissah Arthur to be replaced with preferably the charming and industrious even if haughty Foreign Affairs Minister, Hon Hanna Tetteh for the 2016 elections.
President Mahama’s disappointment in the vice-president is said to have precipitated the on-going changes at the Ministry of Finance with the appointment of both Dr. Baffor and Mrs. Mona Quartey, the new deputy minister. Mrs. Quartey is to replace Mr. Kweku Rikets Hagan, a protégé of Vice-president Amissah Arthur, as a deputy Finance Minister.

Mr. Rikets Hagan is said to have had a serious professional and personal differences with the finance minister Seth Terkper and observers believe this might have informed the president’s decision to re-assign him to a different ministry.

A source at the presidency told the aL-hAJJ on condition of anonymity that, President Mahama’s intention in this new appointment is to effectively divide the powers of the finance minister Seth Terkper and give a bigger chunk of it to Dr. Baffoe.

Dr. Baffoe may therefore take charge of the ministry of finance with Mr. Terkper relegated to a much more ceremonial status akin to what happened during the Kufuor era where the late BaahWiredu was a ceremonial figure as a finance minister while Dr. AkotoOsei was running the ministry as a Minister of State at the Finance Ministry.

Coincidentally, both the late BaahWiredu and Mr. Seth Terkper are accountants.
“I spoke to the people at the Finance Ministry and they told me that never in the history of the ministry, has the President appointed a technical advisor or any kind of advisor for the minister and announce it as part of a ministerial reshuffle. The convention is that, the minister would appoint his own advisor(s) and if the president has somebody in mind, he may have to recommend him to the minster but not to impose him as we are seeing in the case of Dr. Baffoe. So there is something peculiar to this appointment, but we have to wait and see what will happen when Dr. Baffoe begins his duties at the ministry,” the source told this paper.

Again, TheaL-hAJJ has gathered that the finance minister Seth Terkper and president’s economic advisor, Dr. NiiMoi Thomson are having professional differences on certain policy issues on the economy.

The big question among many Ghanaian economic experts therefore is who runs the show at the finance ministry; will it be the Veep, Terkper, NiiMoi or Baffoe?
Ghana’s economy has been facing severe macro challenges following an unprecedented double digit fiscal and current account deficits for two years in succession, and a potential third year. This has exacerbated the short term vulnerabilities of the economy, creating widespread hardship and a potential social unrest among the unemployed youth.

In the past year, the international (both gross and net) reserve position has deteriorated alongside mounting public debt. The debt position is inching beyond the sustainability threshold of 60 per cent of GDP.

High interest rates and a depreciating currency have begun to weaken private sector activity, and spreads on Ghana’s Eurobonds have risen above those of regional peers.

T-Bill rate has gone beyond the 23 per cent mark and the 3-year bond rate is almost 25 per cent adding to the national debt burden.

This is further aggravating the fiscal pressures on the economy creating much bleak picture for the future of the Ghanaian economy, which is the second biggest in West Africa after Nigeria.
According to the International Monetary Fund (IMF), economic growth in Ghana is slowing from previously high levels. Growth rate was 8 per cent in 2010, 15 per cent in 2011 and 8.8 per cent in 2012. The Ghana Statistical Service’s provisional data put the 2013 growth rate at 7.1 per cent.

However, the IMF estimated GDP growth of 5.5 percent in 2013 and projected a further deceleration to about 4 percent in 2014.

Driven by the currency depreciation and administered price increases, inflation reached 13.5 percent at end-2013 and 14.5 percent in March, 2014, ending the much-trumpeted longest sustained single digit which started in the second half of 2010.

In response, government further tightens monetary policy, as the fiscal consolidation target was missed in 2013.

Despite significant policy efforts, the 2013 fiscal (cash) deficit reached an estimated 10.9 percent of GDP, versus a target of 9 percent.
The IMF predicted that in the absence of additional measures from the managers of the economy, the 2014 budget deficit is projected to yet again go beyond 10 percent of GDP, with consolidation made more difficult by slower growth in both 2013 and 2014. This will effectively mean that the Ghanaian economy has in an unprecedented manner registered double fiscal deficit for three years consecutively.

To address the rising inflation, the BoG raised the monetary policy rate to 18 percent and reserve requirements were tightened.

Despite the Senchi Consensus and its 22 communiqué, the current vulnerabilities facing the economy put Ghana’s economic transformation agenda at risk.
The government’s objectives of economic diversification, shared growth and job creation, and macroeconomic stability rely on the reallocation of resources from current to capital spending. Yet, high twin deficits and large interest payments on rising public debt are crowding out priority expenditure and private sector activity.

As a matter of urgency, macroeconomic stability needs to be restored to preserve a positive medium- term outlook.

Finance Minister, Mr. Seth Terkper has come under intense pressure and widespread criticisms especially from members of his own party and government.
Many party and government officials have questioned his style of economic management and called for his dismissal.

But President Mahama defended him saying he supports the reforms the finance minister was bringing in the management of the economy.