Our Self-inflicted Monumental Economic Crisis Togbe Afede XIV – December 8, 2022
About six weeks ago I was in New York, and for the first time in almost three decades, I struggled to sell the economic credentials of my country. When we were approaching the runway at Kotoka International Airport, at the end of my return journey, I looked outside from my window seat, and my joy about a safe return, as often, turned into sadness – the sharp contrast to what one sees when approaching the runway of the international airport of an average modern city was distressing. I asked myself, why?
Any hope of accelerating our development is now dimmed by our current economic crisis, the result of a monumental failure of leadership. I saw it coming when after only three months in office, the government rushed to raise USD2.25billion from a single source. I thought the interest rate, 19.75%, was punitive, and the redemption premium was protective of the term (duration) of the bond. I saw tell-tale signs of recklessness and I advised a more critical look at proposals from the Ministry of Finance.
Our economy is in a mess and the growing frustration and sense of helplessness among the youth is frightening. I am worried about the greed-inspired, divisive and acrimonious politics which is at the root of all this. What has become of all the love we shared as one people? How I wish we all are committed to building the Ghana that was the dream of our founding fathers.
I know what suffering is like, so I’m worried for my “fellow Ghanaians”. That is why, once again, I want to share my thoughts on our development challenges. Much of what I have to say, I have said before and are common knowledge. But there are certain things that can never be overemphasized, and there is often the compelling need to repeat what may seem obvious.
The COVID-19 pandemic has been a great challenge, and so has been meningitis in northern Ghana, and Ebola in some parts of Africa. These and other tragedies have exposed the vulnerability of the black race and the imperative need for our leaders to think about what we can do to further the cause of development in Africa. Here in Ghana, we seem to have missed the opportunity to strengthen our peace and unity, which are vital for development.
Our current economic challenges predate COVID and, of course, the ongoing war in Ukraine. We shall survive all of these, but we must remember always that survival is not the same as prosperity. The truth is that our people are suffering.
We are lucky, just like many other African countries, to be endowed with so much, the most important being our human resource – young and growing population. Our country, and the rest of the continent, have more than our fair share of the world’s natural resources.
About 30% of all known mineral resources are found in Africa; we have 20% of the world’s landmass and 60% of uncultivated arable land; and we have 17% of the population. Yet we account for only about 3% of global output, GDP, and a similar share of world trade. According to the International Energy Agency, Africa has 60% of the world’s best solar resources, but only 1% of solar generation capacity.
Ghana, with its fertile land, gold, diamond, bauxite, manganese, oil and gas, etc., is much better endowed than the average African country. So, the potential for development is great.
debt capital for growth and expansion. They have made the cost of capital excessive, aggravated the supply problems in the economy and increased our import-dependence.
Today, we are locked in the same, growth-stifling, demand-side approach to the inflation problem, and find ourselves in a vicious circle of high inflation and high interest rates.
The mere fact that after over 100 years of producing cocoa, we still go abroad to borrow money to finance its purchase is ample evidence of how our banking system has failed the real sectors of our economy. Bank of Ghana has been at the centre of this problem.
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