Relying heavily on development partners for continuous support cannot deliver long-term benefits to the nation’s economy. This therefore renews calls for the country to create and execute a strong domestic national development programme.
Professor Alexander Bilson Darku – a Senior Fellow at the Institute for Economic Affairs (IEA) – believes government “must implement complete structural reforms to make the economy resilient to both internal and external shocks”.
These reforms must be based on a broad-based national development plan that ensures sectoral realignments and interconnectivity, to improve productivity and increase government revenue, he notes.
Professor Bilson Darku made the observation at an economic policy forum titled ‘The 17 Steps to Navigate Financial Crises in Ghana: Lessons for the Future’, and said this will reduce budget deficits and borrowing; and eliminate chaotic development and implementation of industrialisation programmes.
The strategy, he added, should address the issue of import dependency and aim to increase the complexity of value-added exports to earn more foreign exchange.
To promote macroeconomic stability, Prof. Darku recommends the adoption of fiscal and monetary rules as anchors for policy conduct.
These rules include enforcing the Fiscal Responsibility Act, 2018, which limits the fiscal deficit to five percent of the previous year’s gross domestic product; and an amendment to the Bank of Ghana Act 2002 (Act. 612), which restricts total loans to government at not exceeding five percent of the previous fiscal year’s total revenue.
However, Prof. Darku cautioned against the potential spill-over of the current debt crisis into a banking crisis through the Domestic Debt Exchange Programme (DDEP). He also cautioned against excessive reliance on short-term borrowing, since such borrowing is heavily influenced by market sentiment swings.
He also proposed the establishment of a special fund for savings from boom periods and tax collections, as well as the avoidance of unsustainable debt that could lead to rating downgrades.
The economist proposed establishing a special fund for savings from boom periods and tax collections, as well as avoiding unsustainable debt that could lead to rating downgrades.
To cap it all, he called for an industrialisation strategy that focuses on natural resources and agricultural transformation. It is of utmost importance to realise that previous programmes and financial bailouts from the International Monetary Fund (IMF) have failed to deliver long-term benefits to the nation’s economy.
