Former Finance Minister Dr Kwabena Duffuor has called on the government to take urgent measures to bring Ghana out of the current economic hole in order to prevent the country from defaulting on its current looming debt levels.
He debunked the assertion that Ghana’s economic difficulties and alarmingly depreciating currency are due to the Covid-19 pandemic and the Russia-Ukraine war.
“Fifteen African countries have registered single-digit inflation during this same period including Togo, Ivory Coast, Morocco, Kenya, Uganda and so on. These countries didn’t jump over Covid-19 or the Russia – Ukraine war. We are doing something wrong in Ghana, it is a leadership problem’’.
Dr. Kwabena Duffuor who was speaking on Upfront, a Joy News TV show on Wednesday also attributed the pressure on the Ghanaian currency to a lack of US dollars in the system as a result of excessive government borrowing as well as structural defects in our mineral and oil export arrangements to balance our payments.
“Less than 20% of our total export earning impacts on Bank of Ghana’s cash flow, according to data from the Ministry of Finance itself. That is a big problem’’. He continued, ‘’ take for example oil exports for 2021. Ghana exported 3.9b USD worth of oil but Ghana actually earned only 513m USD out of the total export while 3.4b USD went to the owners of the oil companies’’.
He added, “at the same time Ghana spent 2.7b USD to import petroleum products for our own local consumption and this is where we have the structural difficulties with our balance of payment’’.
The former Bank of Ghana governor asserted that our mineral industry is not different from the oil industry. ‘’Only about 20% of our mineral exports impacts on our cash flow because out of 14.7b worth of mineral exports in 2021, not more than 4b impacted on our cash flow so only cocoa remains our backbone while oil and minerals belongs to foreigners’’.
Dr. Kwabena Duffuor blamed this foreign currency cash flow issue on the concessionary model used by governments in the distribution of mineral and oil revenues between government and foreign companies and called for its replacement with the participatory model to ensure maximum benefit to the Ghanaian people ‘’otherwise, our gold and our oil is not for us’’ he stated.
Dr. Kwabena Duffuor said Ghana’s economy faced similar challenges of inflation during his time as finance minister under President John Evans Atta Mills but working with ideas from the Economic Advisory Council set up by President Mills and whose members included the World Bank economist Dr. Gobind Nankani, Professor Kwesi Botwe, Togbe Afede XIV, and others, they formulated prudent monetary policies to stabilize the cedi.
‘’We cut down government expenditure drastically especially when there is a revenue shortfall and you cannot borrow anymore. This government must do the same. Government must also desist from destroying institutions such as the judiciary and the banking sector because it leads to too much uncertainty in the system. Who wants to invest in an uncertain environment?’’ he asked.
He suggested as a solution that Bank of Ghana buy all the gold from all gold exporters (Ghanaians and foreigners) even if at a premium price and leverage on the gold to stabilize the Ghanaian currency.
‘’If BOG organizes all the gold exporters, buy off all their gold and also gather the projected data from the gold exporters, there are two things the government can do with it to stabilize our currency’’, the former governor explained. ‘’Government can sell the gold forward with instruments to bring more dollars into the system. Secondly, the government can use the projected data from the gold exporters for swap arrangements for more dollars to pay off some of our debts and import goods and services and take pressure off the Ghana cedi. This can be done and this is my suggestion’’.
He said with the swap arrangement, we are not selling the gold but only swapping it for foreign currency in the meantime to take off the pressure on our local currency and the BOG can always have the gold back when they have enough dollars in the system.
The former finance minister said government must do some of these things urgently because the country is sinking and cannot afford to wait for the IMF. ‘’We’re the most indebted country in the world after El Salvador and that’s why the rating agencies are focusing on us. It is a structural problem but it is also a leadership problem.’’