PATH TO ECONOMIC RECOVERY; PART 1

POLICY DOCUMENTS
Ghana’s economy in recent years has experienced some challenges and setbacks caused by internal and external factors. To salvage this economy form further deterioration, government has come out with a number of policy documents to bring back the economy back on track. Ghana’s economy in 2011 grew more than 14% but it is projected to grow at 3.9% this year. The big question is; what went wrong? Some of these policy documents are; Home Grown Policy developed in April, 2014, National Economic Forum popularly known as Senchi Consensus drafted in May, 2014, 2015 Budget statement, and subsequently International Monetary Fund Bailout last month. In recent times, managers of this economy have sought to bring back the economy on right track hence the adoption of these documents. In this series, I will analyse these policy documents and how to link these documents to help Ghana achieve her bright medium to long term prospects of the economy.

HOME GROWN POLICY
The Home Grown Policy was drafted against this background; The Government of Ghana has adopted a comprehensive stabilization and reform programme to correct the imbalances that have occurred in recent years and to lay the foundation for transforming the structure of the economy and safeguard its positive medium term prospects. While this policy document sets out Ghana's economic and financial policies for the medium term (2014-2017). It is important to stress that it consolidates policies that the country has outlined in the 2013 and 2014. Budgets presented to Parliament. Indeed, in several instances, most of these policies have been part of the Public Financial Management (PFM) reforms that were launched between 2009 and 2010.

Hence, the main purpose of this document is to show a consolidated form of the "homegrown" policies that the Government is implementing to correct the current imbalances in the economy with a view to securing the positive future prospects for the country. The absence of a document that is dedicated exclusively to the consolidation effort has often given the impression that Ghana was not implementing enough measures to bring the fiscal situation under control. Besides the 2013 and 2014 Budgets. The background to this document also includes the State of the Nation Address as well as the existing and impending Ghana Shared Growth and Development Agenda Phases I and II (GSGDA I & II) documents.

SENCHI CONSENSUS
The Senchi accord, which was agreed on by stakeholders in May 2014, was aimed at achieving consensus on the difficult choices facing the Ghanaians economy and to mobilize the country on the way forward. Experts from various sectors in Ghana met from May 12-15, 2014 to 'diagnose and offer prescription' to our ailing economy specifically on how to position Ghana to attain an upper middle income status. One thing that fascinates me is a general consensus that our economy is not in good health and needs a concerted effort to strengthen it.

At the end of the National Economic Forum, a 22 point communiqué was produced which when implemented has the tendency to grow our economy. The consensus is supposed to serve as a turning point in the economic management of the country to facilitate a broad participation in going forward as nation.

2015 BUDGET
The theme for the 2015 Budget was “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy’’ The finance minister in his presentation of the 2015 Budget outlined among others, measures to address the major causes of the twin Budget and Current Account deficits that occurred at the end of 2012. Moreover, after consolidating the policies and measures into the Home Grown Policy with inputs from Senchi, we presented them to the Board of the International Monetary Fund (IMF), as part of its consideration of the staff report on Ghana’s Article IV Consultations that took place in February this year.

IMF BAILOUT
The Executive Board of the International Monetary Fund (IMF) on Good Friday approved a three-year arrangement under the Extended Credit Facility (ECF) for Ghana in an amount equivalent to SDR 664.20 million (180 percent of quota or about US$918 million) in support of the authorities’ medium-term economic reform programme.

The programme aims to restore debt sustainability and macroeconomic stability to foster a return to high growth and job creation while protecting social spending. The main pillars of the program are:

1. A sizeable and front-loaded fiscal adjustment to restore debt sustainability, focusing on containing expenditures through wage restraint and limited net hiring, as well as on measures to mobilize additional revenues.

2. Structural reforms to strengthen public finances and fiscal discipline by improving budget transparency, cleaning up and controlling the payroll, right-sizing the civil service, and improving revenue collection.

3. Restoring the effectiveness of the inflation targeting framework to help bring inflation back into single digit territory.

4. Preserving financial sector stability. To alleviate the potential adverse impact of the strong fiscal adjustment on the most vulnerable in society and protect real income of the poor, which was dented by three years of high inflation, the government is committed to use part of the resulting fiscal space to safeguard social and other priority spending under the programme, including expanding the targeted social safety nets—such as the Livelihood Empowerment Against Poverty (LEAP) programme.

But to my surprise, there seems to be some level of inconsistencies in these policy documents. There are discrepancies in set targets of short term to medium term goals of our economy. Below are two tables developed in April, 2014 and November, 2014but the margins are too wide. That is not to say that, targets cannot be revised but even if there are differences, the margins must not be too wide. Policy credibility is about pursuing aggressively to achieve set targets. Managers of our economy must set realistic targets and be committed to achieving them.

2015 BUDGET

ITEM	2015 (%)	2016 (%)	2017 (%)	AVERAGE
Agriculture	2.9	3.7	4.3	3.6
Industry	5.2	11.3	17.6	11.4
Services	3.9	6.4	7.7	6.0
Overall GDP (Excluding Oil)	2.7	4.9	5.5	4.4
Overall GDP (Including Oil)	3.9	6.9	9.6	6.8

HOME GROWN POLICY

ITEM	2014 (%)	2015 (%)	2016 (%)
GDP (Including Oil)	8.0	8.2	10.0
GDP (Excluding Oil)	7.4	8.3	8.9
Inflation			9.5(-/+2)
Gross International Reserves			Not less than 4 months of import cover
Fiscal Deficit			6% of GDP
Public Debt			45% of GDP

In the subsequent Parts of this article, I will discuss these separate policy documents and advise managers of this economy on the way forward. Indeed, Ghana is in a critical economic situation that needs an economic policy that will secure our medium to long term prospects.

AMOAH-DARKWAH EMMANUEL
CHARTERED ECONOMIST
[email protected]
0245-683297