The nation of Ghana is charting a credible and lasting course for our collective development. We are no longer just another developing country; we are now classified as a middle-income country. To be sure, we are currently at the lower end of the middle-income spectrum, but we are working hard to consolidate this new status so that soon enough, in the foreseeable future, we can attain upper-middle-income status and, shortly thereafter, graduate into a high-income status.
We are in the midst of overcoming various challenges associated with this task. At the same time, we are striving to develop the institutions that would enable us to grow and transform our economy at this time of great volatility and uncertainty in the global economy. Three of the challenges to which I have referred have been particularly persistent. These are: rising debt levels and the associated burden of servicing them; the disproportionate amount of state revenue that goes to paying salaries and benefits to public sector workers and pensioners; and the resultant high budget deficits.
Every government that Ghana has had over the course of the last decade has had to confront these in one form or another. This implies that they are complex, structural problems that have taken years to manifest. Despite such challenges, we have managed to steer the economy to some of its highest growth rates on record. In 2013 growth was a respectable 7.1%, compared to 3% for the world economy, 4.7% for emerging economies, 4.9% for sub-Saharan Africa and 1.3% for advanced economies. In the medium to long term, we expect to raise this to an average annual growth rate that is above 8%. The 2013 growth rate of 7.1% is impressive given the current backdrop of reduced commodity prices for our major exports, gold and cocoa, and an energy crisis triggered by disruption of gas supplies from the West African gas pipeline.
As a government, we have done and will continue to do our best to deal with the aforementioned challenges. Some of the measures we adopted have imposed unintended hardships, but these are only temporary and will not last beyond the short term. The positive results are already starting to show in the form of a slowdown in the growth of the wage bill and other indicators – this against a background of relatively strong economic growth. The wage bill (excluding arrears) as a share of total tax revenue declined steadily from 65% at the end of 2012 to 57% at the end of 2013. We are, however, still a long way from achieving the 35% target spelt out in the convergence criteria for the West African Economic and Monetary Union.
In August 2013, government hosted a forum for all key stakeholders in Ho in the Volta Region to deliberate on strategies for sanitising the wage bill in order to free resources for other critical investments, such as education, health care and infrastructure. The forum concluded with a communiqué of 18 important recommendations. I am happy to announce that the committee has completed the first phase of its work and submitted its report to the economic management team, which is now reviewing it prior to its own submission to the Cabinet for further consideration.
We have also put in place a new strategy to effectively manage our debt. The goal is to bring the total debt stock and associated servicing to more manageable levels. A key element of this strategy is to separate loans that could be commercially self-financing from those that must be financed from general government revenue. The Ghana Infrastructure and Investment Fund is one of many tools we are using to accomplish this.
Another strategy is to implement effective prioritisation in the selection of activities or projects to be financed through loans or other forms of credit. Selected projects must be determined to be of prime importance to our nation’s advancement and progress.
Since 2013 we have taken several measures to restore macroeconomic stability and achieve fiscal consolidation. In the 2014 State of the Nation Address, I spoke of fundamental flaws in the structure of the economy and announced some strategies that we will implement immediately to rectify them. Since then, I have established a unit in my office to track the implementation of these measures and I fully expect to be able to report positively on them in my next State of the Nation Address to parliament.
Some challenges have defied successive governments over the past decade, regardless of political party. Every government, for example, has succeeded to some degree in attaining macroeconomic stability, but none as yet has found a way to sustain it. Indeed, almost every government leaves office with a less-than-desirable macroeconomic situation, and the government that succeeds it then spends the next one or two years bringing the economy back from the brink. It is a vicious cycle, and one that we must break.
As important as the macroeconomy is, we must also look at the bigger economic picture and devote a fair amount of time to its other side – namely the micro, or productive, sector. This is where the action is. We are especially interested in how the private sector can best play its role not just in profit-making but also in its contribution, through job creation, to overall national and human development. We need to work with the private sector as partners. Already the government has activated support to the pharmaceutical, poultry, rice and aquaculture subsectors. Preparations are also well advanced for the launch of a major campaign to promote consumption of products made in Ghana.
We cannot talk about the private sector without addressing the issue of credit, in terms of both access and affordability, and especially among SMEs. Although SMEs account for more than two-thirds of employment in our country, their further expansion and job creation remains constrained by, among other things, lack of access to affordable finance, limited markets and, of course, infrastructure bottlenecks.
Beyond credit, we must consider less-explored issues such as the logistics subsector, which is critical to our agenda of socio-economic transformation. Logistics, including transportation and storage, form a core part of supply chain development, which in turn is critical to value chain development. What we are interested in is how all of these elements come together to create a sound and efficient framework for economic growth and social development.
The days of sole proprietorships and sole director companies are over. In the first decade and a half of the 21st century, we are seeing how the playing field is being taken over by the creative and the innovative, and how it is being redefined by cross-fertilisation through joint ventures, mergers, takeovers and public listings. Now is the time for Ghana’s private sector to be bold and adventurous. We must enter into partnerships, if need be, to raise capital and acquire whatever expertise we lack in order to grow our businesses. We must be willing to take risks, and to explore options other than those with which we are familiar.
In recent times, cocoa output has amounted to only 33 kilos per Ghanaian, compared to 75 kilos per Ghanaian in 1965. Indeed, since 1984, real cocoa prices on the world market have been declining by an average of more than 1% a year. If ever there were a case for us to diversify our economy and add more value to our primary commodities, this would be it.
This does not mean we will leave farmers behind. In fact, diversification and industrialisation offer a unique opportunity for us to make optimal use of primary commodities like cocoa. Not only will this raise farmers’ incomes, it will also create jobs and, by so doing, help raise national income and thus reduce poverty. But in order to attain – and sustain – these goals, we need a road map. Through multi-stakeholder dialogue, we are moving towards the creation of such a map. The time is now for us to come together, and work together.
These are challenging times, but we have been through worse before and survived. These are also promising times, and I have every faith that together we will emerge from these challenges stronger, better and more victorious. We will attain the success we seek, we will find ways to sustain it, and through this, I believe that Ghana will become a more prosperous nation.
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