Kwesi Botchwey speaks on Ghana’s economy
Dr. Kwesi Botchwey, Ghana’s longest serving Minister for Finance and Economic Planning has called on Ghana’s politicians to be honest about the facts of the country’s economy, and stop the blame game.
The man who managed Ghana’s economy for 13 years from 1982 to 1995 says the matters which the World Bank Country Director, Ishac Diwan had put out in the economic outlook on Ghana recently is not a secret, the issues have been known, it has been in the public domain for a long time, he said.
Dr. Kwesi Botchwey made the remarks on TV3’s Current Affairs show, Agenda, Thursday January 15, 2009 and was monitored by ghanabusinessnews.com.
He argues that “it is not entirely correct that these issues have not been in the public domain. All the facts that the World Bank is putting out now have been known.”
Dr. Botchwey was dismayed that the debate about the economy has been politicized. “Unfortunately, these debates have been politicized, and it must be depoliticized,” he urged.
“Yes, there has been growth, I think that the NPP administration must be congratulated for stabilizing the macro-economic environment, it is true that interest rates came down, it is true that inflation came down, but it is also true that over the past year, especially, there have been deterioration and that must be admitted,” Dr. Botchwey stated.
According to Dr. Botchwey, “the deficit has grown, the national currency has depreciated, it is true that there was pressure on our external accounts, and there is pressure on imports and our international reserves have gone down.”
He said any professional who looks at the economic performance record of the past year would have to admit that there has been deterioration.
He referred to a lecture at the University of Ghana recently by a former Vice President of the World Bank, Dr. Gobind Nankani in which he pointed out these same issues in even gloomier pictures. He said even though, this was published by the Daily Graphic newspaper, there was never a national debate on the issue.
He also said these issues were outcomes of discussions the IMF had with the government.
He pointed out that the government is like an individual, and a person cannot live beyond what he or she earns unless someone gives you money or you borrow, but as a government you have to borrow money or print more currency.
As a country Ghana spends much more than it earns in revenue.
And from the facts and figures available, the country’s deficit has surged in the last year and it is poised to go up in 2009.
Dr. Botchwey advised that as a nation we need to discuss this debate dispassionately and leave the World Bank and IMF out. “There is not much sense in shooting the messenger.”
“Let’s ask ourselves, is what they are saying true? Forget who is saying it. Because these things have implications for the kind of policy mix we have to adopt for the next four years,” he said.
“Indeed, this new government, together with opposition would have to work together to find the right mix of economic policies,” he added.
Reminiscing on the economic history of Ghana when he was Finance Minister, Dr. Botchwey said, “most people today have forgotten what the economy was in 1982 when we started. People queued to buy uncooked kenkey, there were bush fires, most of the banks were bankrupt and inflation was running at 120%, we had large arrears of debt, we owed Nigeria almost $600 million of oil we had bought. One million Ghanaians were deported into Ghana from Nigeria and Cote d’Ivoire at the height of the economic crisis.”
“Stabilizing the macro-economy was very important, at that time, balancing the budget and providing incentives for people to work,” he said.
He said “at that time the cedi was not convertible and we had to establish the interbank market, introducing the Forex Bureau, and capital market. We had to establish a new prudential environment for the banks to function. We also laid the foundation for liberal economic development in those years.”
In response to a recent report of the World Bank that the previous government spent more than they had earned, over 14% of GDP.
Indeed, inflation has risen to 18.1 percent as at December 2008.
Dr. Kwesi Botchwey, who once taught at Harvard Centre for International Development, now teaches at Tuft University, he teaches a course titled, Managing Economic Reform in Low Income countries.
On the recent elections which went into a run-off and created tension in the country, Dr. Botchwey said, “I have abiding faith in the good sense of Ghanaians. It was just a trifle kind of excitement, even though I worried that there would be some violence, but I’m glad we overcome the tension.”
“We can pat ourselves at the back that our institutions worked,” he added.
Dr. Botchwey who considers himself a consummate patriot said he would be keen on seeing how the country goes and he would be interested in offering advice when required, but thinks there are a lot of fresh talents and new faces around who should be given the opportunity to serve, “and we the old dogs sit in the background and offer advice,” he said.
Commenting on the global credit crunch, he disagreed with those who claim that Ghana’s economy is resilient and therefore, would not be affected.
He said Ghana would feel the effects if the downturn continues. He said remittances from Ghanaians abroad would go down, because if Ghanaians abroad lose their jobs, remittances would reduce, if there is less demand for Ghana’s exports, like gold, diamond bauxite, manganese and cocoa, that would affect the country’s export earnings.
Aid flows he said, would also be affected. He also warned that, if the recession eats deep into the industrialized world, access to loans would equally be affected, and so it is necessary to correct the macro-economic environment instead of blaming others.
On Ghana’s oil find, he said some people are behaving as if this is a huge bonanza that would solve all of the country’s problems. He said, “there have been new findings and therefore, the numbers should be revisited.”
“This”, he warned “is not a huge bonanza, in any case production is not going to start until 2010 and the reserves may be treated by 2030.”
According to him, “the estimates we have on a cumulative basis will be about $20 billion, about a billion dollars per year, which is 10 percent of the budget, and it is insignificant. It is not going to solve our problems, it might even aggravate our problems.”
The oil find, he said could be the reason for the intense political jostling the country experienced during the 2008 elections.
By Emmanuel K. Dogbevi