Governance is all about the welfare and well-being of the citizenry. Governments both past and present have boasted of having improved macroeconomic fundamentals. Of course, these fundamentals are supposed to impact positively or negatively on the economy. Ordinarily, when these fundamentals are well managed, they enhance standard of living of the people and conversely when they are badly managed, cost of living is increased resulting in general suffering. This is basic economics. It cannot be the case that inflation is genuinely low, policy rate has been considerably reduced, T-bill rates have gone down, the GDP has grown substantially and so on and yet cost of living is high. Improved standard of living, it must be mentioned, is inextricably linked with improved economic fundamentals and the reverse is true.
To put the issues in perspective, the current government has always touted its competent management of the economy. The government claims it has managed the economy very competently adding that most of the economic fundamentals are positive. On the face value, this is true. Inflation has reduced dramatically from 15.4 per cent in December 2016 to a single digit of 9 per cent in January 2019. This rate only rose marginally to 9.2 per cent in February 2019. As per the statistics, the government deserves a pat on its back. Then, policy rate has reduced from 25.50 per cent in November 2016 to 16 per cent in January 2019. Again, on the face of it, the government has done well. Similarly, the 91- day treasury bill rate has gone down from 16.4 per cent in 2016 to 13.4 per cent in March 2018. This is yet another commendable action by the government. On top of it all, the government, in fulfilment of its campaign promise, scrapped as many as 11 taxes it considered nuisance ones. The object of this move was to give some relief to the taxpayer and to improve the well-being of the people. The combined effect of these interventions, ordinarily, should see a humongous turnaround of the economy thereby resulting in better living conditions of the people.
Paradoxically and laughably, the average Ghanaian has been slapped with high cost of living. Prices of goods and services are skyrocketing and businesses are shrinking because business people cannot break even let alone make any profit. Import duties are astronomically high and importers pass on this cost to the end user so as to be able to stay in business. There is general level of unprecedented suffering in the country but we are being told that the fundamentals of the economy are positive. This gloomy picture amply exposes a deficit in the economy thereby rendering these so-called positive economic indicators cosmetic. For instance, it cannot be normal that policy rate has gone down and yet banks’ lending rates averaged between 31.7 per cent and 29.3 per cent as of March, 2018. What explains this discrepancy? Reduced policy rate should automatically and naturally accompany reduced lending rates. It is curious to note that it had to take the President of the Republic to charge banks to reduce lending rates in line with reduced policy rate. On Wednesday March 7, 2018 during the sod-cutting ceremony of the 60 million dollar new head office project of Ecobank in Accra, President Akufo-Addo had cause to appeal to banks to reduce lending rates in consonance with reduced policy rate. Clearly, there is something fundamentally wrong with the management of the economy. There is a serious missing link.
We cannot help but to refer to the Vice President, Dr. Mahamudu Bawumia, then vice presidential candidate, when he made a very profound statement about the power of the exchange rate relative to economic management. Dr. Bawumia on May 2, 2012 during the 5th Ferdinand Memorial Lectures on the topic, “The State of the Economy,” made a very powerful statement regarding the management of an economy with propaganda. The renowned economist at the program received thunderous applause by the audience when he said, “In fact, you can engage in all the propaganda but if the macroeconomic fundamentals are weak, the exchange rate will expose you.” This is a veritable truth. Truly, the exchange rate has exposed the Nana Addo/Bawumia government. The cedi has seriously depreciated against the dollar and other major currencies under the watch of Vice President Bawumia. It is clear from Vice President Bawumia’s own statement that the macroeconomic fundamentals as we have them now are weak and that despite all the propaganda about the competent management of the economy, the Almighty exchange rate has exposed their ineptitude at managing the economy. Someone should tell Vice President Bawumia and Ken Ofori Atta that pumping money into the economy to salvage the cedi is a lazy man’s approach as Ghanaians were recently told by the Finance Minister that in two weeks’ time, the cedi was going to stabilize just because some 900 million dollar COCOBOD money and some 3 billion dollar euro bond cash were expected in the country. Before this, we were told that the Bank of Ghana had pumped in some 800 million dollars into the economy with the view to stabilizing the cedi.
Another area of concern is the 3 per cent VAT flat rate that was introduced by the current government. Many business people including the Kumasi Business Owners’ Association have complained bitterly about the way this tax is collapsing their businesses. It is part of the reason prices of goods and services are astronomically high leading to general suffering in the country.
To conclude, the time has come for politicians to depoliticize and demystify the management of the economy and be honest and candid to Ghanaians for once so that together we can all chart a sustainable path towards addressing some of these nagging and recurrent economic issues. Like Dr. Bawumia once said which I fully associate myself with, if you play propaganda with the management of the economy, the exchange rate plus other realities will give you away. Of what benefit is it to a low inflation rate or a low policy rate if it does not reduce the price of a ball of kenkey or the price of a tin of milk? At the heart of governance is bread and butter issue. Figures in themselves are not food to be eaten. It behoves duty bearers and managers of the economy to take decisions that will enhance the general well-being of the citizenry.
(Financial and Management Consultant)
phone contact: 0545460561