Only the blind or the foolhardy would claim that the Ghanaian economy is in good shape. Despite the government’s obsession with high GDP growth, low inflation, low interest rate etc – according to which the Ghanaian economy is doing not just reasonably well. The fault lines are now only too evident, the external fragilities, the internal imbalances, the crisis in the banking sector, lack of employment opportunities, the rising inequality and the growing insecurity of material life for the majority of Ghanaians.
Dr Bawumia can continue with his propaganda, the masses will soon prove to him that they are not weak thinkers as he and his men assume. The fault lines are now so intense that they are clearly evident in plain view. The external fragility has been simmering for a while, in the form of rising current account deficits, which are being largely financed by inflows of s o speculative hot money. Such money usually flows out quickly at any sign of trouble. So the recent declines in the cedi cannot be attributed only to current strength of the dollar or improvement in the American economy, but to the more systemic processes. Exports have performed very poorly over few years, even when the rest of the developing world including the countries Bawumia mentioned, was experiencing a slight uptick. These have made Ghana one of the more potentially vulnerable of emerging markets globally. Instead of focusing on local businesses and internal revenue generation, the new government issued bonds which were unfortunately interpreted by Dr Bawumia and his government as a sign of strength rather than potential vulnerability. So the economy is ill prepare to deal with the instabilities and uncertainties that are clearly ahead for the world economy.
The Akufo Addo government benefited and continue to benefit from high oil revenue, improved prices for our exports (cocoa, gold) on the international market, but it has not pass on any of this to the Ghanaian consumer. Instead, it increased taxes and excise duties at levels that enabled it to instead pocket the difference for its own revenue. But this fiscal advantage for the Administration (from the oil revenue and dividend) did not lead to increase public expenditure in the area that matter for citizens; infrastructure,education, the employment scheme. The administration is yet to mix a bag of cement with sand. All the revenue accrued and other benefits have mostly languished under this administration.
And on what basis did Dr Bawumia compare the currencies he mentioned. GDP is generally measured in a country’s own currency, but for comparing economies, one must convert to a common measure. The choice of conversion factor can make a huge difference in our understanding of relative size.
Explaining why the Cedi is depreciating, Dr Bawumia attributed the problem to improvement in the American economy and mentioned other depreciated currencies to support his weak argument. However, with each nation measuring GDP in its local currency, comparison can become a challenge. This is why economists generally use market exchange rate to convert GDP measured in local currency units to GDP in US dollars. Comparing economies can yield very different understanding of relative size.
Dr Bawumia mentioned Argentina- the Argentine problem did not start today. The government of Macri has not been able to lower inflation, which is the highest amongst G20 nations and the administration is failing to enact the economic reforms it promised the IMF , most of them aimed at curbing public spending. The situation in Argentina has nothing to do with the US economy- combination of spiralling inflation and public spending cuts means wages are not keeping pace with prices, making most people poorer. For Dr Bawumia use the situation in Argentina to justify happenings in the country is not only mischievous,but unfortunate. Argentina has been plagued by economic problems for years but the commodities boom of the past decades helped the country repay the money it owed the IMF. The Argentine economy began to stabilise under President Nestor Kirchner who governed from 2003 to 2007, but became more terrible under his wife and successor Cristina Fernandez de Kirchner. Can Dr Bawumia tell us the number of projects the Argentine government has implemented within the period. The President of Argentina Macri recently asked the IMF and its chief Christine for help. The argument went that with a loan from IMF, Argentina would be able to intervene in currency markets.
Dr Bawumia also mentioned Turkey..President Erdogan blamed the country’s currency plunge on the US economic war against his country. Donald Trump recently doubled tariffs on metals. The eruption of a bitter row at the start of August with Trump over a detained American evangelical pastor plunged the country into a full blown currency crisis. Mr Trump’s decision to impose sanctions in an effort to force the release of Andrew Brunson sent the Turkish lira spiralling. The situation in Turkey has nothing to do with improvement in the US economy. The Turkish government is still implementing projects in spite of the currency crisis.
The south African rand had its worst month in more than two years in June as the US and China exchanged tariffs blows at the time when the prospect of rising American rates also weighed on emerging market assets.
The crisis we going through has nothing to do with the US economy or improvement in the U.S. economy