Accra, Ghana//-Renowned Ghanaian Economist, Professor John Gatsi is of the strongest belief that the ongoing Russia-Ukraine war, which is having disastrous impact on the global economy, provides a portfolio of lessons needed to reform and revive Ghana’s agriculture and agribusiness policy.
According to him, over the years, the country has not demonstrated in its policy making behaviour that it appreciates that agricultural and agribusiness policies should be deliberately formulated to speak to issues relating to currency management (import-export relation), inflation and food sufficiency.
For instance, Prof Gatsi noted that the current government’s flagship agriculture programme dubbed Planting for Food and Jobs (PFJ) is not structured to accommodate import-export volatility of basic agricultural produce.
Speaking on the theme: ‘Transforming Ghana’s Economy – Scapegoats, Root Causes & Hard Choices’ at the recent 11th Leadership Dialogue Series (LDS 11) organised by the Ghana-based Centre for Social Justice (CSJ), he observed that the country’s commitment to agriculture and agribusiness sector is not the best.
Prof Gatsi who is also the Dean of the University of Cape Coast School of Business used the occasion to correct the erroneous impression that Ghana’s current economic woes are caused by the war.
In his words: “The Russia-Ukraine war is not the cause of the fiscal and economic crises of Ghana but contribute to the
already existing disturbing macro fiscal development before Covid-19 and Russia-Ukraine war.
This is because we have not put in place robust agricultural policy to ensure efficient production and perhaps export of the same”.
Root causes
Generally, he noted that delayed leadership action, lack of appreciation of a national inclusive plan, poor policy choices, mismanagement, blame game would result in economic crises.
The government has outlined factors such as Russia-Ukraine crisis, Covid-19, financial sector clean-up cost, credit rating downgrade as key drivers of macro fiscal crises.
There is the need to appreciate that the Ghanaian economy during good and bad times is influenced one way or the other by external factors, the economist and barrister said.
External factors are in different forms, it could be geo-political development among major economies, appreciation of the US dollar, drastic increase or decrees in commodities prices-gold, cocoa bauxite, oil, and gas.
The extent to which these global developments negatively affect the Ghanaian economy, according to Prof Gatsi, would depend on its policies relating to business development, trade, agriculture, ICT, and industrialization.
Growth and debts
Long term debts such as Eurobonds are meant to finance long-term strategic programs and projects to support growth and generate revenue.
Real growth and real cost of debts
Over the years, real cost of debt on average has been higher than real growth rate hence the pronounced dependence on higher borrowing, the professor stated.
“In any fiscal management that the interest cost on debt is greater than real GDP growth, continuous borrowing to an unsustainable path will be pronounced. On page 207 of the 2020 budget, the growth projection showed a fast decline from 2018 to 2023 but with higher interest costs for our borrowing”.
Prof Gatsi revealed that domestic interest payment grew from GHS773.5 million in 2009 to GHS26,422 million in 2021 accounting for 3,316% growth.
While external interest payment grew from GHS 258.8Million in 2009 to GHS7,100.6 in 2021 accounting for a 2,643% increase.
Total interest payment increased from GHS1032.3 million to GHS 33,522,6 million in 2021 amounting to 3,147%, according to him.
To this end, he said: “Value for debt and repayment should be evaluated to ensure that we develop Article 35 (7) of the Constitution to limit the engagement in projects not national in character, limit the phenomenon of project discontinuation because there is change in government”.
The effects of discontinuation of projects because of poor planning is for the nation to pay interest on loans without enjoying benefits from the projects, Prof Gatsi who shared the podium with Isaac Adongo, the Member of Parliament for Bolgatanga Central in the Upper East Region, and a Deputy Minister of Finance, Dr John Kumah, added.
Ghana’s economy is distressed
He stated that the country’s economy is distressed due to high unsustainable public debt, low revenue performance, undulating macroeconomic environment, fiscal dominance, neglect of the potential of modernised agriculture and inefficient spending, and high interest payment which dwarfs financial commitment to other sectors.
Government is consistent
However, Dr Kumah insisted that the government is consistent with its belief that advancement in the enterprise economy is the pillar for economic progress.
“We are clear in our minds the vision we have for this country. We are clear about the energy required to achieve that. We understand the root causes and are proffering solutions. We have made the hard choices”, he added.
Dr Kumah admitted: “The past has taught us that we are at our BEST when the State works with the private sector to promote enterprise, social justice, and economic dynamism. We have sown the seed for comprehensive programs which will transform our Economy and Change our story”.
