CONFIDENCE IN ECONOMY BEING RESTORED (Spread) 18-04-09

Story: Kofi Yeboah
CONFIDENCE in the Ghanaian economy is being restored as the initial desire of many foreign investors to dispose of their investments in government’s short-term securities has been pulled off.
The Minister of Finance and Economic Planning, Dr Kwabena Duffuor, who made this known, said there was an increasing desire on the part of foreign investors to hold on to government securities.
“In my recent discussions with a number of offshore clients through some major banks in the UK, I am pleased to announce that confidence in the economy is being restored,” he said.
Dr Duffuor made the remark in Accra yesterday at a news conference organised by the Ministry of Information to highlight the achievements of the 100 days’ pledge made in the manifesto of the ruling National Democratic Congress (NDC).
The news conference, which served as an appendix to President Mills’s interaction with the media last Tuesday, featured six Ministers of State under whose portfolio the NDC’s 100 days’ pledge directly falls.
Apart from the Finance Minister, the others were the Attorney-General and Minister of Justice, Mrs Betty Mould-Iddrisu; the Minister of Trade and Industry, Ms Hannah Tetteh; the Minister of Energy, Dr Oteng Agyei; the Minister of Employment and Social Welfare, Mr Stephen Amoanor Kwao, and the Minister of Education, Mr Alex Tettey-Enyo.
As of December 2008, foreign investors were holding 46 per cent of the government’s three-year fixed bond and 87 per cent of its five-year fixed bond.
However, with the emergence of the global economic crisis in October 2008, many of them offloaded $145 million of their bonds to local investors, putting huge pressure on the value of the local currency. But the foreign investors are beginning to rescind their decision, thus injecting some hope into the economy.
Dr Duffuor said the Ghanaian economy had maintained strong growth in the last couple of years, although fiscal policy had been very expansionary in recent years, leading to strong excess domestic demand.
As a result of that, he said, the fiscal and external account deficits widened, while inflation rose significantly and the foreign reserve position weakened.
“Despite this, confidence in the country’s economy continues to be strong,” he maintained, pointing out that the confidence was rooted in the austerity budget being implemented by the NDC government.
Dr Duffuor said recognising that the risks associated with macroeconomic imbalances had the potential to undermine the country’s efforts at achieving a middle-income status by 2020, the government was giving top priority to the challenges getting out of the expansionary fiscal stance.
Commenting on the depreciation of the local currency, the Finance Minister attributed the situation to the introduction of the new Ghana cedi on July 1, 2007.
According to him, before the introduction of the new currency, the economic fundamentals that were necessary to support the value of the cedi at its appropriate level were all very weak.
“The broad money supply and total liquidity were all growing at very high levels, headline inflation was at two-digit level, the government’s finances were showing a negative balance, all the real sector indicators were showing a downward trend, the composite index of economic activities was showing significant negative growth, developments at the external front were equally very disturbing, the trade balance was in deficit and increasing, the overall balance of payments had deteriorated and gross foreign reserves had also declined to about two and half months,” he noted.
Dr Duffuor said between July 2007 and December 2008, the central bank spent more than $1.2 billion to prop up the Ghana cedi, yet the currency lost about 31 per cent of its value.
“Ghanaians should, therefore, know that the currency had depreciated significantly long before the advent of the NDC government,” he contended.
On the increasing rate of inflation, the Finance Minister again blamed the trend on the introduction of the new local currency without taking appropriate steps to deal with the situation.
“Since the re-denomination of the currency was done as a ploy to show false currency strength, without first successfully reducing inflation, it only added more fuel to inflationary pressures,” he said.
Taking her turn, Mrs Mould-Iddrisu announced plans by the government to establish an Economic Crime Centre to replace the Serious Fraud Office (SFO) to enable it to deal more effectively with economic crime which was gaining sophistication in recent times.
She said the 1960 Extradition Act was to be reviewed in view of the increasing rate of crime committed by foreign nationals, as well as financial and organised crime in the country.
Mrs Mould-Iddrisu said the government also intended to amend the Whistleblowers Act, in view of some inherent loopholes identified in the legislation, while the Right to Information Bill was to be subjected to further public discussion for fine-tuning.
On the separation of the Attorney-General’s office from that of the Ministry of Justice, as well as the need for some constitutional amendments, she said her office was conferring with some constitutional lawyers to address the issue.
For her part, Ms Tetteh said Cabinet was considering a proposal for the establishment of an institution known as the Ghana International Trade Commission to investigate allegations of trade distortions.
She said a Tariff Advisory Board was to be established under the ministry in line with the government’s commitment to reduce tariffs to facilitate local businesses.
Ms Tetteh said the Northern Star Tomato Factory would be re-capitalised, after which a strategic investor would be sought to manage it “because we believe that the business of government is not business”.
She said the government would consult Ghanaians on the Economic Partnership Agreements (EPAs) with the European Union before signing the final pact.
Dr Oteng Agyei said the government had fulfilled its promise of reducing taxes and levies on petroleum products but admitted that the impact had not been felt much in view of the recent upward adjustments in petroleum products.
He said compared to neighbouring countries, the current price of petroleum products was far cheaper, but he was quick to caution against smuggling of the commodity, warning that culprits would be dealt with according to law.
For his part, Mr Kwao mentioned the setting up of the National Council for the Disabled as a major achievement of the NDC’s 100-day pledge.
Beyond that, he said, the government had paid between GH¢8 and GH¢15 to about 15,000 households across the country under the Livelihood Empowerment Against Poverty (LEAP) programme.
On education, Mr Tettey-Enyo said the proposed forum to discuss a change in the duration of senior high school from four to three years would come on by June this year.
He reiterated the government’s desire to expand the School Feeding Programme and make it more transparent, efficient and beneficial.
A member of the Presidential and Waste Management Task Force, Mr A. B. Acheampong, said there had been an improvement as far as sanitation was concerned but pointed out that keeping the environment clean was a shared responsibility.