The Vice President, Kwesi Bekoe Amissah-Arthur, has called for a dispassionate national debate on whether government should tap into the heritage fund to cushion the national economy.
He was speaking to a cross section of the Ghanaian community in Houston, Texas, where he recently attended an international conference on oil and gas.
Vice President Amissah-Arthur’s call came in the wake of criticisms against the suggestion by the General Secretary of the ruling National Democratic Congress (NDC), Johnson Asiedu-Nketia that government should tap into the national heritage fund to bail out the economy instead of borrowing from the capital market to deal with the economic crisis.
Some have even called on the government to approach the International Monetary Fund (IMF) for an economic bail out. Finance Minister Seth Terkper had also said IMF’s economic bail-out could be an option. Answering questions from the Ghanaian community in Houston, Texas, Vice President Amissah-Arthur said there was the need to put the issue on the national agenda for thorough discussion.
He, however, assured Ghanaians that government would not take any unilateral decision on the fund without recourse to the good people of Ghana.
Commenting on the current economic challenge, Vice President Amissah-Arthur conceded that there was a problem. He blamed the situation on the long-standing structure of the economy, which is basically characterised by low export and high import, explaining that while improvement in GDP had led to substantial improved standards of living, our industrial growth had declined and demand for imported commodities had soared.
He announced that for the past four years, Ghana had recorded trade imbalance of $ 4 billion annually.
Vice President Kwesi Amissah-Arthur noted that the situation was worsened by increase in wages and salaries of about 30-40% from 2008/2009 without corresponding increase in government revenues, resulting in government borrowing at high interest rates.
This, he said, shot up the fiscal deficit to high levels. He was hopeful that the pragmatic strategies being adopted by the government to address the situation would yield positive results in the medium term.
He mentioned the maintenance of stability in the macro-economic environment, diversifying the economy away from raw materials which would lead to restoring balance in payment from the trade imbalances and reducing inflations figures.
He said government is determined to manage the oil and gas resource well to provide cheap electricity for domestic consumption and to re-energise the industry.
Touching on the depreciation, Vice President Amissah-Arthur explained that “depreciation is not always as bad as some people may want us to believe.” He said the structure of the economy was such that the cedi must depreciate for the economy to remain competitive.
For export sector to be sustained, domestic currency must depreciate against other currencies. Stable cedi will make exports cheaper than imports but the fall must not be too fast,” the Vice President noted.
Vice President Kwesi Amissah-Arthur dismissed claims that the recent Bank of Ghana directives on foreign exchange would undermine the economy. He said the Central Bank’s actions were intended to create confidence in the economy by improving on reserves to buffer exogenous shocks.
According to him, the current import bill had increased from $ 11-17 billion, which had reduced the country’s reserves from three months import cover to 2.7 months. He said new Bank of Ghana rules would also stop the excessive dollarisation of the economy and check forex bureaus to fight money laundering.