Dr Kwabena Duffuor, a former finance minister, has urged Ghana’s leadership to act quickly to get the nation out of its current economic rut and avoid a default on the nation’s upcoming debt obligations.
He refuted the claim that the Covid-19 pandemic and the Russia-Ukraine war are to blame for Ghana’s economic problems and worrying currency depreciation.
“During the same time period, single-digit inflation was recorded in 15 African nations, including Togo, Ivory Coast, Morocco, Kenya, Uganda, and so on. These nations didn’t skip past COVID-19 or the conflict between Russia and Ukraine. Ghana is doing something incorrectly; the issue is with the leadership.
Dr. Kwabena Duffuor also attributed the pressure on the Ghanaian cedi to structural flaws in our mineral and oil export arrangements to balance our payments, as well as a lack of US dollars in the system as a result of excessive government borrowing, in an appearance on Joy News TV’s Upfront on Wednesday.
“According to figures from the Ministry of Finance itself, less than 20% of our overall export earnings have an impact on the cash flow of Bank of Ghana. That is a significant issue. Consider the oil exports for 2021, he continued. Although Ghana sold 3.9 billion dollars worth of oil, it only made 513 million of those dollars, with the remaining 3.4 billion going to the owners of the oil corporations.
According to the former governor of the Bank of Ghana, the mining sector in our country is very similar to the oil sector. “Only approximately 20% of our mineral exports influence on our cash flow because out of 14.7 billion worth of mineral exports in 2021, not more than 4 billion impacted our cash flow thus only cocoa remains our backbone while oil and minerals belong to foreigners,” says the statement.
In order to ensure that the Ghanaian people receive the greatest possible benefit, Dr Kwabena Duffuor blamed the government’s use of the concessionary model in the distribution of mineral and oil revenues between the government and foreign companies. “Otherwise, our gold and our oil are not for us,” he said.
The World Bank economist Dr Gobind Nankani, Professor Kwesi Botwe, Togbe Afede XIV, and others were members of the Economic Advisory Council, which was established by President John Evans Atta Mills. Dr Kwabena Duffuor claimed that when he served as finance minister under President Mills, Ghana’s economy faced similar problems with inflation. However, working with their recommendations, they developed responsible monetary policies to stabilize the cedi.
“We dramatically reduced government spending, especially when there was a revenue gap and you could no longer borrow.” The same is required of this government. Additionally, the government must stop dismantling institutions like the court and the financial industry since doing so creates an excessive amount of uncertainty in the system. Who wants to invest in a situation that is uncertain? he posed.
In order to stabilize the Ghanaian currency, he proposed that the Bank of Ghana purchase all the gold from all gold exporters (both Ghanaians and foreigners), even if at a premium price.
The former governor stated, “There are two things the government can do with it to stabilize our currency.” “If BOG organizes all the gold exporters, buys off all their gold and also gathers the projected data from the gold exporters,” he continued. The government can use instruments to sell gold in the future in order to inject additional money into the economy. Second, the government can utilize the anticipated information from the gold exporters to negotiate swap deals for additional dollars to pay off some of our obligations, import products and services, and relieve pressure away from the Ghana cedi. This is my recommendation, and it can be done.
To relieve the strain on our local currency, he claimed that we are not selling the gold under the swap agreement; rather, we are simply exchanging it for foreign money in the interim. The BOG can always buy the gold back once they have enough dollars in the system.
According to the former finance minister, the administration must take some of these actions immediately because the nation is in financial trouble and cannot wait for the IMF. We are El Salvador’s second-highest debtor nation, therefore the rating agencies are paying close attention to us. It is a leadership issue as well as a structural issue.
Source: Oyerepafmonline.com
