THE NEED FOR AN ECONOMIC STIMULUS FOR GHANA

President Atta Mills took office in January 2009 facing the country's biggest economic crisis since independence. Many senior economists like Dr. Paa Kwesi Nduom have suggested that Ghana needs to follow the example of President Obama and his Democratic Party by suggesting an economic stimulus package to confront the crisis in Ghana. If this package is implemented, it is projected that it will save or create over thousands of jobs and provide most Ghanaians with tax cuts. In the longer term, this plan will stimulate vital sectors of the economy such as energy and health care, making Ghanaian firms more competitive internationally.

If this stimulus plan bill is successfully presented to Parliament with a price tag of $900 million, though the total cost of the plan will likely increase as it makes its way through legislature; the package will succeed in pulling the economy from recession, economists say, the positive impact could be felt among the ordinarily people of Ghana as a result of job creation and tax cuts in the country.

The Economic Stimulus Plan
Some forms of economic stimulus seek to make investments that will pay off in the long run by making consumption cheaper for everybody. An example is investing in the Ghanaian energy grid. Theoretically, a one-time outlay could make energy costs for both individuals and businesses less expensive for decades to come. Similar arguments are made about Health care policies. Critics say an outdated and illogical health care system presents significant costs for Ghanaian businesses that could be eased through front-end investments.

President Mills needs to focus more attention to both energy and health care as sectors in which infrastructure investments could help make the economy more competitive internationally. Other countries, including the United States of America and China, have similarly focused stimulus spending on infrastructure development.

Economic or "fiscal" stimulus stands in contrast to monetary stimulus, a process through which the Bank of Ghana adjusts interest rates to encourage or discourage lending. But the Economic stimulus is another means by which a government can seek to boost its economy, either in the short term, by encouraging consumers or companies to consume goods, or in the longer term, by encouraging the growth of businesses and the creation of jobs through investments in infrastructure and research.

The Implementation of the Stimulus Plan
This plan is suggesting aims to stimulate employment, certain critical economic sectors, and government spending in Ghana. It specifies $800 million in spending on new projects; for instance government needs to transform the Ghanaian energy by pumping money into the sector to make it more efficient; to repair public housing and make it affordable for the low income earners more energy efficient; the government needs to also focus on the Science and technology sector by providing money for new scientific facilities and to improve broadband Internet access in rural areas which would create jobs for the people.

The stimulus plan again would again boast the country's Infrastructure, including the highways; modernize government buildings and other public infrastructure; the plan would also provide clean water, flood control, and other environmental investments; there would also be public transit and rail infrastructure improvement. The Education sector would not be left out from the plan, thus out of the funds allocated, local school districts would be increased to prevent educational service cutbacks and also to help modernize higher education programs. There is also the need to broaden the Nepad food feeding program, which gives need-based grants to feed school pupil.

Analysis and Implication of the Plan
Some analysts say for instance the Obama administration's spending on economic stimulus will be broader than what's included in the stimulus spending plan. "You've got to look at the whole picture," said Adam Posen of the Peterson Institute for International Economics in an interview. So Posen and several other analysts have noted that stimulus spending could come in many ways beyond what's in the plan, they believe the Obama administration, "for understandable political reasons, doesn't want to put it all under the cover of one title called stimulus, in part because these things have their individual merits, but in part because they don't want to have a bill of $1.5 trillion."

But I disagree with the above assertion on the wisdom of extensive stimulus spending, particularly in reference to Ghana. Given the current economic climate, most mainstream economists now say that the potential downsides of collapse are sufficiently grave that large stimulatory expenditures may be necessary. As the global financial and economic crisis has worsened, this viewpoint has gained international popularity. In a December a paper released by the UN Conference on Trade and Development, leading UN economists call for coordinated stimulus packages across the world's leading economies, above and beyond the money already spent to boost credit market liquidity.

Conclusion
Finally even though there is Risks of the Large Stimulus Packages won't work, or won't do enough and that the economic crisis could continue despite massive government expenditures. But Beyond that basic risk, experts say there are several contingencies under which the stimulus plan could prove problematic, even if its works in many of its goals.

Thus the stimulus spending should be Timely, to guarantee that spending affects the economy when it is needed most, and to prevent against capital injections leading to over expansion or rapid inflation. Secondly the stimulus plan should be targeted on specific project, to make sure each cedi spent creates the maximum possible bump in short-term Gross Domestic Product (GDP), and to make sure that spending benefits the people most adversely affected by the economic slowdown.

I wish my motherland Ghana economic Prosperity! Atta Mills Wisdom! The people Peace and Love!!!

Author: Paul Rex Danquah
PhD Candidate
University of East London