Pressure Group, OccupyGhana said Ghana’s economy desperately requires ‘root-and-stem’ reforms since the ‘Guggisberg Economy’ that is still being used is not sustainable.
It said government needs to debate and implement bold economic measures that will break the country out from where it is and to put it to where the people want to and should be.
“To help achieve this, Ghana is desperately crying for that bold leadership that is just and respects the future of its citizens.”
It said, the fight to rescue the economy must demand good economic management, which in turn requires a good understanding of the current vulnerability of the Ghanaian economy.
In a statement issued by OccupyGhana on Ghana’s current economic situation, it indicated that some of the current vulnerabilities did not let Ghanaians focus their energies on debt sustainability, spot vulnerabilities very early “especially when we are implementing programs like Free SHS, seek help from the IMF and maintain our access to capital markets as we are having to deal with ‘Ghana Beyond Eurobonds’ in a couple of years.”
“We believe that these would have avoided a long debt-sustainability analysis and negotiation and would not have involved fears of restructuring of domestic debt (and its adverse effect on the cedi). We therefore call for a clear statement from the Government on whether or not there will be a restructuring of domestic debt.”
It stated that government must own the problem, adopt a warlike posture; and bring people around the table because the silence is not helping, and “we stand the risk of a mini run based on rumours of debt restructuring. The run on the cedi recently has shown a devasting effect, and greater clarity on prudent ways of restoring debt sustainability to secure a deal from the IMF would ease market pressures, given that negative news exerts greater volatility on the market than positive news of the same magnitude.”
Read statement below:
OCCUPYGHANA PRESS STATEMENT
Accra, 28 October 2022
GHANA’S CURRENT ECONOMIC SITUATION – OUR THOUGHTS AND PROPOSALS
We propose that to address the current economic situation, the Government, in addition to all that it plans to do, must:
(1) Own the problem;
(2) Adopt a warlike posture; and
(3) Bring people around the table.
(1) OWN THE PROBLEM
History establishes that economies experience negative shocks. The experiences of Covid-19, the Russia-Ukraine war, the OPEC oil embargo of the 1970s, etc are examples of some of the vicissitudes that economies go through. However, history also shows a consistent result: well-managed economies absorb shocks much better than poorly-managed ones.
Our overall economic model is not sustainable. We are still exporting primary products at prices we do not control. Internally, we are still incapable of generating the needed revenue from taxes for the kind of development that we would want to see. Governments have failed to even make a dent on these matters.
Clearly, this Government has had a risky economic strategy, which involved borrowing very heavily from the Eurobond market to (1) finance current/capital expenditure, (2) pay off maturing debt, (3) bring in dollars to support the cedi, and (4) control the effect of the depreciation of the cedi on inflation (although this might have been an unintended objective).
A nation that chooses this strategy will have to rely on a mix of good fortune and extremely astute economic management. However, the luck aspect was built on sand, and could not survive the storms of external shocks. But astute economic management requires taking the above objectives into account, being aware that good debt management is very crucial to the consistent achievement of these goals. Such a debt strategy is effective if the borrowed funds were invested in the productive sectors underpinned by an efficient public investment process to enhance the cash flow generation capacity of the economy, and also devising fiscally responsible funding alternatives to bridge the huge infrastructural deficit.
If this risky strategy had succeeded, the managers of our economy would have been touted and hailed around the world as miracle workers. However, current events show, unfortunately, that our debt was not well managed. Evidence (IMF-World Bank debt sustainability report in 2019) clearly shows that our debt was unsustainable before Covid-19 and the Ukraine-Russia war hit. The country’s debt classification status assumed in 2014 as a high-risk debt distress country, was preserved in the 2019 report and in the 2021 article IV consultations.
This underscores the intricate link between sovereign debt and a country’s macroeconomic and financial policy framework. Managing public debt effectively influences the soundness and solvency of the overall public sector balance sheet, which preserves the financial sector and guarantees private sector leadership. Such macro-fiscal pressures, if not remedied in a timely manner, could broaden to the microeconomy and households as the current debt-induced macroeconomic instability with fiscal policy to blame is playing out.
That is why we believe that the first step should be the Government being upfront with Ghanaians and publicly admit its failings and the pain that those failings have caused to Ghanaian pockets, savings and households.
(2) ADOPT A WARLIKE POSTURE
The next step would be to put the economy on a war footing. We cannot sink lower than this. Whatever factors are within our control, we need to harness. OccupyGhana have already advocated for a drastic reduction in the size of the Government. The Government must listen and act.
In addition, we must get serious about reducing the fiscal waste and mismanagement that are exposed every year in Auditor-General’s reports. Every cedi/dollar counts. However, both the Government and its choice Auditor-General have turned blind eyes and deaf ears to our constant cry for law on disallowances and surcharges to be enforced. The recurrent joke of the Auditor-General’s Report being sent to Parliament where next to nothing is done, has to end forthwith.
We wryly note that it was not until 3 October 2022, that the President directed heads of institutions to send him the names of persons cited in the Auditor-General’s Reports as having committed infractions. For what? The law says what should happen to such persons, and names being written (from existing reports) and being submitted to the President is not one of those options. They must be surcharged. Both the Auditor-General (under article 187(7) of the Constitution) and the Finance Minister (under section 97 of the Public Financial Management Act) have the power to surcharge. They failed or refused to exercise the power. We concede that under the Constitution, the President cannot instruct the independent Auditor-General to surcharge. But the Finance Minister has no such independence from the President. The failure or neglect of the Finance Minister, and the failure or neglect of the President to instruct him, to exercise this power are unpardonable.
And what is worse, the names the President is asking for are found in the Reports, making all of it an exercise in superfluity. We did not have to encounter this level of economic distress before the President would do what he can to ensure that the Constitution, the Supreme Court decision in OCCUPYGHANA v ATTORNEY-GENERAL and the provisions of the Public Financial Management Act were upheld. Even the candid admission by the Attorney-General that both his office and the office of the Auditor-General had been ‘significantly tardy’ in applying the surcharge law, did not move the President, until his directive for a report on reports on 3 October 2022. This is not the attitude of a government that wants to put recovery from this economic disaster on a war footing.
This fight to rescue the economy demands good economic management, which in turn requires a good understanding of the current vulnerability of our economy. Some of the comments and optics, with the wisdom of hindsight, have not been helpful. The ‘fights’ with the credit agencies, arguments over the counting of our debt stock, and the ‘economics of pride’ that delayed our self-imposed and what we have called ‘the crying shame’ return to the IMF, have not helped. We believe that some of these did not let us focus our energies on debt sustainability, spot vulnerabilities very early (especially when we are implementing programs like Free SHS), seek help from the IMF and maintain our access to capital markets as we are having to deal with ‘Ghana Beyond Eurobonds’ in a couple of years.
We believe that these would have avoided a long debt-sustainability analysis and negotiation and would not have involved fears of restructuring of domestic debt (and its adverse effect on the cedi). We therefore call for a clear statement from the Government on whether or not there will be a restructuring of domestic debt. The silence is not helping, and we stand the risk of a mini run based on rumours of debt restructuring. The run on the cedi recently has shown a devasting effect, and greater clarity on prudent ways of restoring debt sustainability to secure a deal from the IMF would ease market pressures, given that negative news exerts greater volatility on the market than positive news of the same magnitude.
All of these and more, will be required to engage in this fight to rescue our economy.
(3) BRING PEOPLE AROUND THE TABLE
We do not believe that any non-Ghanaian has answers to our economic questions that are better than what Ghanaians have. We believe that after 60 years of independence, we have and may have trained sufficient economists and other experts with enough learning and experience to help get out of this mess. While we do not expect all to agree on every matter, even our disagreements provide options to select from and exploit. Therefore, the Government must immediately adopt a posture that brings in all shades of opinions to help rescue the nation from being dragged under some more.
The Government could start by putting out a macroeconomic model of how the depreciation of the cedi affects prices/inflation in our import-dependent economy. Also, how do increases in crude oil prices affect prices/inflation? We are certain that the Bank of Ghana has this model. Please share that with Ghanaians as the starting point of the debate on where this economy is headed.
In addition, the Government must be bold to disclose the extent to which local vulnerabilities are contributing to the current challenges relative to external shocks and what immediate options, both fiscal and monetary, are available to salvage the situation while we wait for an IMF-Supported Program. A regular update to the market is fundamental to correcting market distortions including savings from the Government’s expenditure cuts, including our request to reduce significantly the size of the Government (lean and mean Government) and other expenditure rationalisation, and what those savings have been used for.
CONCLUDING COMMENTS
Ultimately, this economy desperately requires ‘root-and-stem’ reforms. The ‘Guggisberg Economy’ that we are still operating is not sustainable and will always bottom out. We need to debate and implement bold economic measures that will break us out from where we are and to put us to where we want to and should be. To help achieve this, Ghana is desperately crying for that bold leadership that is just and respects the future of its citizens. We should move away from successive leadership which looks only to the next election, which wavers and waffles under GUTA’s threats when the tax authorities are simply doing their honest job in enforcing existing taxes, and which handles an issue like Galamsey in such a shambolic way.
‘In the end, it is important to remember that we cannot become what we need to be, by remaining what we are,’ it is said.
