A former Minister of Finance, Seth
Terkper, has called for strategic policies to help build adequate buffers that
can insulate the economy against the effects of crisis.
Mr
Terkper has also made a case for commercial and capital-intensive projects to
be ring-fenced from the budget to help reduce the fiscal strain that such
expenditures put on government finances.
The
chartered accountant and economist said the economy had matured to the point
where it must begin to anticipate crises and prepare adequately for them.
That,
he said, was necessary to increase its resilience and response strategy to
shocks.
He
gave the advice when he addressed a dialogue virtually on current challenges
facing the economy.
Theme
The
event, on the theme: ‘Inflation, exchange rate and budget challenges: which way
out?’, was organised by the PFM Tax Africa Network, an initiative of Mr
Terkper, who was Finance Minister between 2013 and 2017.
It
allowed him to explore the challenges and proffer solutions to soaring
inflation, the unstable exchange rate and the debt and fiscal pressures.
Rainy days
Mr
Terkper said just like life, economies would usually go through good and bad
times and foresight managers must learn to use the goodies of good times to
prepare for bad times.
Using
his tenure as an example, he said following the crude oil price crash that
deepened the foreign exchange rate volatilities in 2014, his outfit set out to
build buffers against rainy days.
That,
he said, led to the building up of the Ghana Stabilisation Fund (GSF), which
was created in 2011 as a buffer fund against uncertainties, using revenue from
one oil field.
But
instead of continuing to build up the fund with more transfers from the three
oil fields that the country now had, the former Finance minister said the
government had rather depleted it.
He
said to date, the reports of the Public Interest and Accountability Committee
(PIAC) showed that about US$400 million had been drawn with little to no amount
added.
“Could
it be that if we were building the GSF, we could have been withdrawing between
US$700 to US$800 million on our own, considering that we did so much with one
oil field?
“That
is how you wean yourself off the International Monetary Fund (IMF). As it
stands, we are depleting the GSF due to fiscal pressures and we are not
preparing adequately for the next crisis. If you belittle past crisis, you will
not prepare for the next crisis,” he said.
He
said a typical example was how the COVID-19 pandemic seemed to have caught the
country off guard.
Other measures
According
to Mr Terkper, another strategy to strengthen the resilience of the economy was
for the government ensure that commercial projects paid for itself.
A
case in point, he said, was the Terminal Three at the Kotoka International
Airport (KIA) that was ring-fenced from the national debt.
He
explained that the loan that was used to construct the terminal being repaid
with the airport tax, thereby reducing its impact on the debt and the economy
in general.
“We
did not issue sovereign guarantee but one does not know whether that money is
still ring-fenced or the debt has now been put on the sovereign.
“Such
initiatives are important for repayment, which can then free resources needed
for social infrastructure such as the e-schools that we built,” he said.
Reducing deficit
Mr
Terkper noted that expenditure remained the biggest headache that needed to be
tackled to be able to reduce the deficit and the debt situation.
He
said that the country’s financing was not reflecting in the budget and that was
why the debt was rising.
Source:Graphic.com.gh