Right Economic Policies Can Earn Ghana Middle Income Status
Ghana has the potential to become a middle income country if the government pursues bold and right economic policies, says Arnold Harberger, Professor of Economics at the University of California, Los Angeles (UCLA) and Chief Economic Advisor to the U.S. Agency for International Development (USAID).
He said countries such as Mexico and Honduras had gone through the difficulties that engulfed most developing countries such as Ghana but were able to overcome with prudent economic policies.
Prof Harberger speaking at a media roundtable held at the United States Embassy in Accra on Tuesday, said he was impressed with the calibre of expertise at the Ministry of Finance and Economic Planning and the Bank of Ghana (BoG) and believed they could turn the economy round.
He had met with government officials, technical experts from the Central Bank and academics to gain an insight into current macro-economic trends and offer his perspective on policy reforms.
Prof Harberger said countries with good economic policies have the potential to attract foreign investment needed for speedy economic development.
“Countries that have bad economic policies, insecure property rights, and a general level of uncertainty will be less attractive to investors,” he said.
He said matters such as inflation control and real exchange rate management were critical in the successful solution of macroeconomic problems in a wide range of developing countries.
Asked whether using interest rates as a tool for fighting inflation was the only option available to governments, he said “another option available to governments is the use of Open Market Operations (OMO) to control inflation”.
Prof Harberger said using interest rates as a measure of controlling inflation was not a bad idea but the BoG has the opportunity of blending the use of interest rates and OMO as inflation targeting tools.
“Under-inflation OMO targets a specific short term interest rate in the debt markets. This target is changed periodically to achieve and maintain an inflation rate within a target range,” he said.
The central bank has been criticised by a section of the public for using interest rate as a tool for controlling inflation, as it is stifling businesses, and called on the BoG to find innovative ways of fighting inflation.
In the course of his long career, Professor Harberger has made path-breaking contributions to the field of economics on the now widely accepted theory and methodology for measuring the gains or losses of a proposed policy change.
Nearly every working economist utilises “Harberger Triangles” either formally or tacitly to measure the effects of economic change.
Professor Harberger received his Ph.D. at the University of Chicago. Afterwards, he spent 38 years with the Faculty of Economics there.
He has been Professor of Economics at UCLA since 1984. Other academic positions included visiting professorships at Harvard, Princeton, and the University of Paris, as well as the MIT Centre for International Studies in New Delhi and the Institute for the Economy in Transition in Moscow, among others.