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Opinions of Friday, 9 May 2014

Columnist: Abrefah, Kwame Attakorah

National economic forum is a window dressing for the government

It is redundant to say that Ghana’s economy is seriously ill and on life support. Ghana’s economy is so dysfunctional now that all the major rating agencies have downgraded our sovereign credit rating. The IMF and the World Bank have both warned the government to rein in spending and to rebalance the macroeconomic fundamentals to resuscitate the economy.
The ruling NDC government, which has spent considerable resources in a public relations fight to project confidence and a positive spin on the economy, has finally conceded that the economy is in serious trouble. Now, the pressure is on the government for structural and attitudinal reforms covering everything from civil service retrenchment to fiscal reforms (e.g. taxation and fiscal deficits, etc).
The bad economic fundamentals have been compounded by the ongoing energy crisis. The high cost of energy and sporadic supply of electricity has led to low industrial output and high unemployment. The energy situation has also undermined the competiveness of small and medium sized companies and contributed to the inflationary pressures in the country.
Notwithstanding the economic challenges, the government faces significant political crises on two fronts—how to reign in the hawks within the party and how to gain the confidence of external stakeholders including business people, the financial markets, the IMF and the World Bank. Internally, the hawks in the NDC party still do not appreciate the seriousness of the economic challenges facing the country. In fact, they cannot analyze the current economic problems and threats in the context of the government’s failed policies. They continue to resort to diversionary tactics such as blaming the NPP government; the TUC and external pressures (remember Ofosu Kwakye and Fiifi Kwetey’s statements, etc) for the current economic woes. The reality is that the government cannot ignore these problems forever and with elections coming, the pressure is on to shift out of first gear.
The government also faces external challenges. The financial markets, business people and external stakeholders including the IMF, the World Bank and our donor partners do not trust the government with the management of the economy. In fact, our partners see Ghana’s economic problems as self-inflicted. They believe that our economic problems are symptoms of unprecedented corruption in the country and an incessant appetite for consumption financed by our depleted foreign reserves.
So what does my elementary analysis of Ghana’s current economic problems have to do with the scheduled national economic forum? After all, good governance requires that the government engage all stakeholders and collaborate with them to identify opportunities that will help to strengthen the economy and spur growth. However, I think that it is naive to believe that the NDC government is holding the national economic forum to build collaboration with stakeholders and find solutions to Ghana’s economic problems. The national economic forum is not the governments “eureka”—it does not signal that the government has finally seen the light and is changing course to listen to good counsel.
On the contrary, an interest based analysis will show that the government is using the national economic forum to divert attention from its mismanagement of the country. In other words, the government’s true intentions underlying the national economic forum can best be understood by digging deeper and by exploring the government’s fears, needs, hopes, priorities, expectations and concerns to unveil its real interests.
The government is afraid of losing the elections if the prevailing economic situation continues into 2016. Also, the government is concerned about the tepid attitude of the donor communities and the international financial institutions towards the administration: for example, the Chinese continue to withhold a significant portion of a 3 billion loan. Therefore, the government hopes to use the national economic forum to garner sympathy from local and external partners in an attempt to change the narrative regarding its responsibility for the current economic problems in the country.
The government also faces a number of insurmountable challenges with respect to policy alternatives that will address the economic problems. On one hand, the government needs a massive inflow of money into the economy from foreign loans, grants and higher prices for cocoa and other primary commodity exports. On the other hand, the government needs to undertake massive austerity measures to recalibrate the macroeconomic fundamentals for long-term growth.
Neither of these scenarios bodes well for the government’s prospects in the 2016 elections. There is no indication that the Chinese will release the 3 billion dollar loan or that prices of gold and cocoa will hit their peak levels again. Even if these scenarios magically occur, there is always going to be a lag time between the implementation period and the expected outcomes. In other words, the expected outcomes of either scenario will not materialize until after the 2016 elections.
Thus, the government’s priority is to change the narrative in the country about the root causes of the economic problems. The government is hoping to use the national economic forum as a cover to apportion blame for the consequences of its decisions (or indecision). Additionally, the government’s priority is to create the impression that the current economic problems preceded its tenure in office. In essence, the government is trying to divert the responsibility for its failed economic policies to other stakeholders.
In my humble opinion, the national economic forum is a trap for the NPP and other political parties intended to legitimatize the narrative the government is trying to sell. I am therefore appealing to the NPP to not lend credence to the government’s narrative. The national economic forum is part of the government’s 2016 election strategy – designed to create the impression that the economic conditions are long-standing, national in nature, and unrelated to its failed economic policies. Therefore, the NPP should seriously consider the cost of its participation in the forum.
Written by Mr. Kwame Attakorah Abrefah, Edmonton, Canada.