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28.02.2009 Politics

Ghana fevers with Global Economic and Financial Storm

By The Ghanaian Journal
Ghana fevers with Global Economic and Financial Storm

…Can NDC help?
The economy is spiraling down at an accelerating pace, threatening to undermine the Mills administration, which anticipate vigorous rates of growth in years to come.

There are clear indications that looking at the trends, a tough economic policy direction of the Government led by President Atta Mills, might overturn the problems foreseen.

The Ghanaian Journal.Com saw a clear sense of disconnect between the projections by the government and the grim realities of everyday life of a Ghanaian during the president sessional address. However, the President assured that a Ghanaian's life might be enhanced on Thursday, as the Minister of Finance, Kwabena Duffuor presents the economic budget.

We should agree as Ghanaians that there is the emergent need to develop and improve our infrastructure. Better infrastructure – water, transport, electricity – can increase growth rates in Ghana, raise productivity by 40 percent, and create jobs for its burgeoning youth population. Ghana, as I write is faced with growing worries on the impact on the global financial meltdown, coming so soon after the food and fuel crises.

The Finance Minister and Government will be faced with tough choices – to mobilize more domestic resources, redirect wasteful spending, invest in basic education and health, reform public utilities, reduce protectionist policies, introduce interest rate and exchange rate flexibility and encourage competition .

If we wait for the financial crisis to hit us, whiles global economies go into a tailspin, this government and its people will suffer the pinch. A careful study of Tourism earnings, remittances and export earnings has slipped drastically.

There is a human toll behind these major shifts. Infant and child mortality is bound to increase, and primary school completion rates to fall. The country is already falling short of the Millennium Development Goals, including halving poverty by 2015. This financial crisis will make attaining MDGs even harder.

The President should then understand that the global economic crisis bears the risk of becoming a full blown political and social crisis. This is a time the Mills government must engage Ghanaians in an open dialogue about the challenges ahead and the difficult options for dealing with them. Ghanaians will be part of any solution. What can and should be done?

A sound management of public finances will be key to a faster recovery after the crisis. Currently the President must avoid populist choices that would leave Ghanaians even more vulnerable in the longer run. Subsidies and safety nets should target the vulnerable populations who need them most. Extending these to people who could afford the services will only worsen the public finance situation, hindering Government's capacity to invest in areas that are critical for the poor.

During these times, well managed fiscal stimulus programs, financed with external resources, could avoid a sharp fall in growth. Investment in safety nets and infrastructure spending, notably in maintenance, will cushion the fall and position Ghana to take advantage of the rebound of the global economy when it occurs.

This is the thinking behind the recent proposal of Mr. Zoellick, President of the World Bank Group, that each developed country should pledge 0.7 percent of its stimulus package to a Vulnerability Fund to help developing countries weather the crisis.

The revolution in the telecom sector is just one example of how market principles have changed lives of citizens for the better. There should be no turning back from such market-based reforms because without growth there can be no sustainable poverty alleviation. But government must do a better job at regulating these markets effectively, creating a level playing field for all economic agents, staying abreast of financial innovations and their risks, and tapping the immense resourcefulness and creativity of their people.

This can only be achieved through a major effort at strengthening capacity of governmental institutions. Foreign investors will return after the crisis has ebbed. But they will be cautious and invest first in those countries that kept to the reforms they had initiated, demonstrating a willingness to strengthen governance, embrace the rule of law, and modernize local capital markets.

Ghana is a rich mineral resource economy; the crisis is an urgent call for us to redouble efforts to set up systems that can ensure that resources are managed transparently and that these translate into tangible benefits for the poor.

Despite the uncertainties, President Mills must maintain the momentum for a transformation that carries the promise of improvement in the day to day life of Ghanaians.