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Opinions of Friday, 20 August 2010

Columnist: Ampong, Charles Horace

Synergy between Political and Economic Freedom in Ghana

Synergy between Political and Economic Freedom in Ghana – A Review (Part 1)

It is possible for us as Ghanaians to have a perception that synergy exist between political freedom and economic freedom. And that political freedom is synonymous with political stability and good governance, which can be antecedent to economic freedom or growth. However, the association between economic freedom and political freedom can be statistically insignificant and non-realistic in actuality if the mediating factor which is an appropriate strategic plan is not in place. Political freedom and Economic freedom can be in tandem and what keeps them in tandem is a strategic plan. As a matter of fact, for Ghana to move from its current political freedom state (which we are so enthused about) to a higher level of economic freedom, the current government must have a prodigious strategic plan. Amassing loans from IMF and other financial organizations may not suffice unless there is an appropriate strategic plan in place. Next, such a plan when drawn should be made easily accessible by the public. Taking this step would depict the government’s desire to promote transparency in its governance. The government would also earn public trust with regards to its deliberations and the direction it is taking the country. I am of the view that the recent rating of Ghana as the 9th. worst economy in the world by Forbes may be the ramifications of the desultory nature of the economy. Such a rating may have been exaggerated yet it is true that the direction the country is taking is not clear enough. The country cannot continue to live on the slogan “so far so good” when the economic conditions are not good. In spite of reduced inflation (9.46% recorded for July 2010), unemployment rate and prime rate of interest for loans are still high because of slackened job creation and the high risk of bank defaults respectively. Much as banks are expected to be meticulous in their transactions to avoid accumulation of bad debts, they should be ready to extend credit to local investors to stimulate and expand the small businesses sector especially the non-agricultural sector in Ghana. Banks may have reduced the prime rate recently yet what Ghanaians need is availability of credit to do business. The country has too much untapped resources and cannot continue to rely on foreign investment when there is more room for improvement in the small business sector to take advantage of the massive resources. Fortunately, reduced inflation can translate into jobs in the long term if the government can increase the momentum for job creation. That is by seeking to improve the other macrofactors of the economy such as interest rate reduction, exchange rate volatility and extension of credit or bank loans to small businesses. So far with regards to inflation and exchange rate volatility, the government is doing fine based on the figures available but that is not the whole story. Unemployment rate a key factor which provides information on the level of socio-economic hardships the labor population and their households are facing has not been given much publicity by the current government. In fact, unemployment rate would also give a true reflection of the impact of the policies of the government on the people economically. The last time an official unemployment rate of 11.2% was measured was in 2002. It appears gathering data for the determination of unemployment rate is a problem for the country and we need to back up. Meanwhile, the current economic conditions in the country suggest a higher unemployment rate somewhat bigger than 11.2%. Now, the GDP growth rate of 4.1% (2008 to 2009) as against 7.3% (2007 to 2008) depicts a very steep decrease (about 44% decline) in GDP since the end of 2008 and this should be an issue of concern. The fact is that unemployment rate is a lagging economic indicator and tends to reduce some time latter after GDP improves. It presupposes the reduced GDP growth is not a good sign for potential reduction in unemployment rate in the near future. Next, the government should review its fiscals by toning down on its spending, effecting some changes in the tax system and most importantly reducing its gross debt or international debt or its negative balance of payment. I believe the country is capable of higher economic growth and better life for Ghanaians if government can maintain its resoluteness in dealing with macrofactors based on an exhaustive but potent strategic plan. The government should learn a lesson from the Black Stars whose uncompromising strategy saw them advance very far in the just ended 2010 Soccer World Cup.

God bless our homeland Ghana and make our nation great and strong!

Charles Horace Ampong