Government urged to remove economic constraints

02.03.2006 LISTEN

Accra, Feb. 28, GNA - Dr Maxwell Opoku-Afari, a Researcher at the Bank of Ghana, on Tuesday urged the Government to identify and remove binding economic constraints inhibiting accelerated growth. "Given our achievement of macroeconomic stability and general transparent governance, the next step for Ghana to achieve growth acceleration, which is key to poverty alleviation, is to identify the binding constraints and engineer policies aimed at removing them," Dr Opoku-Afari stated at a roundtable organised by the Institute for Democratic Governance (IDEG) in collaboration with the African Capacity Building Foundation.

The conference formed part of civil society policy dialogue and advocacy programme for 2006 to debate Ghana's economic growth and assess the past trends that had hovered around or below five per cent for about two decades.

The conference was attended by Government officials, Members of Parliament, representatives of the private sector, civil society operators and Media Practitioners. It was aimed at creating a forum for dialogue, consensus building and collective action and to raise public awareness about the importance of the eight per cent target and the need to contribute to its attainment.

Speaking on: "Identifying Binding Constraints to Growth in Ghana," Dr Opoku-Afari identified high cost of capital and low social returns to investment as some broad binding constraints effecting growth. He said the achievement of macro-stability was a necessary condition for growth, but "we need to move towards a strategy which focuses on particular constraints that prevent an economy from growing faster".

Dr Opoku-Afari explained that all successful countries - in terms of accelerated growth - had in one form or another, provided effective property rights protection for businesses and institutionalised contract enforcement mechanism.

These had also maintained macroeconomic stability, integrated the domestic economy into the world system, created enabling environment for private enterprises and private investment growth and established effective prudential regulation of the financial sector. He defined growth acceleration as an increase in a country's growth rate at least by two percentage points per annum sustained for about a decade.

Dr Opoku-Afari said the rate at which countries grew was substantially determined by its ability to integrate with the global economy through trade and investment, having the capacity to maintain sustainable Government finances and sound monetary regime and ability to put in place an institutional environment in which contracts could be enforced and property rights established.

Speaking on: "Re-positioning Agriculture to Drive Eight Per Cent Growth: Prospects and Challenges," Mr Edward Osei Nsenkyire, Chief Director of the Ministry of Environment and Science, said consideration of irrigation schemes and creation of favourable sustainable land tenure system would lead to the attainment of the growth rate. Mr Nsenkyire who is also the 2005 National Best Farmer said the establishment of land banks to encourage large scale farming, favourable interest rates on agriculture-related borrowing, investment in research and development, accessing research findings and application of modern agricultural practices would also led to the attainment of the growth rate.

Economists, who attended the forum, noted that the Ghanaian economy began to experience a gradual increase in Gross Domestic Product (GDP) growth in the late 1980s although with some fluctuations after the initiation of the Economic Recovery Programme in 1983. However, in recent years (2002-2005), according to the experts, Ghana had enjoyed an average economic growth rate of 5.3 per cent, but this was not exceptional by international standards. It is still below the seven per cent threshold required by the Millennium Development Goals (MDGs) to reduce by half, between 2000 and 2015, the proportion of people whose income is less than one dollar a day.

According to the experts a recent United Nations report on the MDGs indicated that on current trends, Africa would not be able to meet most of the targets set under the MDGs. They, therefore, called for integrated approach to economic development issues and the creation of enabling environment for healthy partnership between private sector operators and public institutions. 28 Feb. 06

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