Director of the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Professor Peter Quartey has said although the $ 3 billion deal that was approved by the International Monetary Fund (IMF) for Ghana was good in ensuring an interim economic stability, the government would need to diversify the economy for long term gains.
He wants value addition to be prioritized by the managers of the local economy as part of moves to ensure long-term sustainability.
Professor Quartey indicated that if the government does not diversify the economy,the local currency will continue to struggle against the major trading ones, especially the Dollar.
“The long-term solution will be to diversify our economy. We cannot continue to rely on primary commodity exports because that will not give us the needed forex as we move forward.
“If we don’t diversify and we rely on just one or two commodities, manufacturing doesn’t add much value, we export products in their raw form then we will not get enough forex and the exchange rate will continue to depreciate and we will be back to the IMF again. So yes, IMF is a temporary short-term measure to stabilize but we need to put in a system that will ensure long-term sustainability,” he told TV3 in an interview.
Asked whether Ghana will achieve a single-digit exchange and inflation rates this year, he answered “Not this year. I don’t foresee us hitting a single digit this year. We are already in July and I don’t think inflation will drop drastically from the current 42 percent to single digits. Perhaps, if we do our things well we are likely to see that in 2024.”
Fitch has also warned Ghana against the rising interest cost on domestic debt despite securing the $3billion deal from the Fund.
According to Fitch, rising interest cost on domestic debt does not help with the overall debt sustainability in the medium term.
Speaking at a webinar on Africa Sovereigns Amid Financing Crunch, Senior Director for Emerging Markets, Toby Iles, cautioned Ghana and other African governments against the rising interest costs on domestic markets.
“As I mentioned right at the beginning, there has been more development in the domestic debt market and so it’s become more important. When we look at things in terms of interest cost of the government; break them down by domestic debt interest cost and compare them with external interest cost, the share of interest cost on domestic debt has been going up. So domestic debt becomes more of a question mark,” he said.
Toby Iles added that the terms of the debt restructuring might not help in the overall debt sustainability.
“Terms of the actual restructuring: it definitely helps in terms of liquidity but it doesn’t help in the overall debt sustainability over the medium term. It presupposes there will also be other fundamental improvements in fiscal consolidation,” he added.
Regarding the economic challenges, Finance Minister Ken Ofori-Atta recently admitted there is a lot of work to do to resolve them despite the signs of improvement following the approval of the deal by the Fund.
He called on all Ghanaians to remain focused and support the government in dealing with the challenges.
Speaking to journalists on the sidelines of an event to mark the 147th Independence Day anniversary of the United States of America (USA) in Accra on Tuesday, July 4, Mr Ofori-Atta said “We recognize that it has been quite a dramatic change to where we are, during that period in which we did the double take to go to the Fund, we got the Staff Level Agreement (SLA) in record time, we got the Fund approval in record time, we got three times our quota which is unprecedented, we also were able to front load it so that we may get $1.2bn this year, which is good, within three days of the approval also it was disbursed to us. Inflation has tapered down from 54 % to where we are.
“I think the currency is a lot more stable, Treasury Bill rates have moved from 35 to 20 something percent.
“The domestic Debt exchange programme was very difficult for us as a country but I think the need to do it and improve it. So you can see some stability and we are grateful for that. There is a lot of work ahead and really we need to remain focused as Ghanaians and move ahead.”