Senior Lecturer in Public Accounting at the Ghana Institute of Management and Public Administration (GIMPA), Dr Raziel Obeng-Okon says achieving stability rather than growth is what is needed for Ghana’s economy.
According to him, the high debt level is still very worrying and must be contained to ensure stability.
“Stability is expected to give birth to growth but currently our monetary policy tools have not generated any significant sign of stability. Government needs to continue with its fiscal consolidation but needs to take a second look at its monetary policy in the area of interest rates, forex stability and inflation,” he said in an interview with the Business Finder.
The country’s total public debt as at March this year stood at GH¢88.2 billion.
Managers of the economy will have to engage themselves feverishly in efforts to achieve stability by the end of 2015 since growth is unlikely to be strong due to the numerous challenges that have bedeviled the Ghanaian economy.
“In 2015, growth is expected to be very modest due to the instability in the energy sector, depreciation of the currency, high inflation, high cost of doing business in Ghana and the loss of business confidence,” he observed.
External sector vulnerabilities, relatively high interest rates, decline in credit growth to the private sector have all stalled growth of the economy, he noted.
Government has recently indicated that the economy is on the path to recovery, citing expected high growth numbers.
“Growth is expected to pick up over the medium-term to 9.2 per cent in 2017, inflation will be reduced to 8.2 per cent and the fiscal and current account deficits will be reduced to 3.7 per cent and 4.9 per cent respectively,” Finance Minister Seth Terkper said.
This, the Minister noted should result in a build-up of reserves to cover 4.2 months of import cover.
The economy, according to Mr Terkper had very bright medium-term prospects, supported by an expanded services sector, the discovery of oil and gas fields and the coming on stream of the country’s own gas processing plant.
But Dr Obeng-Okon maintains that stability will give birth to growth in the medium term.
“The medium to long term prospects remain bright only if we manage the short term imbalances well by stabilizing the economy in 2015. In the medium term, lower inflation and lower interest rates, combined with a more stable exchange rate, would be needed to help support private sector activity for growth,” he explained.
Increased oil exports and lower oil imports on the back of domestic gas production should help improve the current account and support reserves over the medium term, he pointed out, adding that Growth prospects in the medium term may also be positive, especially with the coming on stream of the Tweneboa, Enyernra and Ntomme (TEN) project which is expected to deliver first oil in 2016, with a plateau production rate of 80,000 barrels of oil per day when crude prices would have improved.
According to Dr Obeng-Okon, Ghana’s development agenda must ensure that there is a proper equilibrium between the fiscal policy (goods market) and the monetary policy (money market) because the two policies must be aligned for stability and growth.
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