Fiscal Prudence

The results of the new measures introduced by the government have begun to show that a faithful and determined government, with the support of an understanding people, can deliver on its promises and provide better living conditions for its people, even in the immediate short term.

‘So far, so good’, would be how one would describe the results of the first five months of the NDC Government’s economic resuscitation measures.

By the end of May, this year, there was ample evidence to prove that the government’s fiscal stabilisation programmes were on course and yielding fruitful results.

The budget deficit, as at May, GH¢608.9million - equivalent to 2.8 per cent of GDP.

The Government aims at bringing the overall budget deficit down from some 15 per cent in 2008 to not less than nine per cent of GDP at year’s end in December.

There are also other very interesting and heart-warming economic news as well.

Foreign investment into our economy has increased by as much as 45.1 per cent in the first quarter of this year: a really interesting development.

Normally, foreign investors would have waited for at least a year in order to see what economic direction a new government would take before making critical decisions to invest.

Yet, within the first quarter of this term, figures from the Ghana Investments Centre (GIC) show new foreign investments of US$ 372.32million, reflecting an increase of 45.1 per cent over the total new investments for the corresponding period of 2008.

This is an amazing, complete and total vote of confidence by the international business community in the new Government’s ability to handle the economy.

Other economic indices fully support this vote of confidence.

For instance, total revenue and grants received by the government over the first five months of this year (January to May), amounted to GH¢2.4billion, reflecting a 13.6 per cent increase over and above those of 2008, domestic revenue accrued some GH¢2,000,000,000, also outperforming that of 2008, and tax revenue went up by 17.8 per cent higher than the corresponding figure for last year.

Of much importance and interest to our business community must be two economic indicators: the Exchange Rate of the Cedi as against those of the country’s major trading partners, and Inflation.

They are the twin evils of the businessman and the economy and the means by which they measure, most often, the success or failure of any economic measures put in place by any government.

It must be most heart warming for our businessmen and women that both the exchange rate of the Cedi and Inflation had been fairly well tamed, as at the end of May, this year, and brought under effective control.

During 2008 alone, the Cedi lost over a quarter of its value (a depreciation of over 25.3 per cent), even though the then government intervened in the foreign exchange market by pumping a whopping US$1,337,540,000 into the foreign exchange market in a vain attempt to shore up the Cedi.

The announced inflation figure for June understandably went up a bit above the quoted May figure, but that is because of the 30 per cent increment in petroleum prices recently, which also affected transport and other prices. The situation is expected to stabilise thereafter.

Despite these significant achievements within the past five months, the economy still faces enormous risks such as “inadequate delivery of basic public services like electricity, water and sanitation, which tend to increase the cost of doing business, limit access to markets and reduce efficiency, and undermine opportunities for growth” of the economy with all the consequences for unemployment, and drop in national revenue.

The Government’s determination and commitment to meeting these challenges head-on, is demonstrated by the contracting of over US$400million to fund water and sanitation projects across the country and the newly announced US$535million for :

1. Budgetary support and poverty reduction.
2. Support for the transportation sector.
3. Natural resource and environmental management.

Ghana has everything it needs to succeed economically.

A fairly well educated populace providing the needed human resource, natural resources that are more than adequate (oil has just been found in commercial quantities), a manageable population of about 23 million people, and of late a stable political culture based on a vibrant multi-party democracy.

We, therefore, have no excuses for our present economic predicament which must be temporary indeed.

Strict vigilance to ensure that our governments do not veer off the path of fiscal prudence and responsibility and fall into ostentatious and grandiose expenditures, thereby driving the economy into undesired risks, is what would make it happen for all of us, individually and as a nation.