Economic setback dents projected growth pattern
- Peprah
Accra (Greater Accra) 05 July 2000
Finance Minister Kwame Peprah said on Wednesday that the current economic crisis facing the country has resulted in a severe setback in the goals outlined in "Vision 2020" and delayed achievement of an eight per cent to 10 per cent growth in the national economy.
This, according to the government and industry operators, falls far below expectations, especially as outlined in not only the medium-term development plan but also in the national budget.
Mr Peprah was speaking to the International Herald Tribune on his views about the state of economy, its economic future and the government’s policies.
He said the situation demands that Ghana must redouble her efforts and attain even higher rates of growth when the current crisis is over.
The Government, exercising fiscal prudence, says it is working effortlessly in order not to create a difficult economic situation for the next political administration.
But the opposition and other economic think-tanks are already describing the situation as difficult and unbearable.
Mr Peprah expressed surprise at the turn of events, saying: "although we knew cocoa prices could fluctuate due to a number of factors, we did not expect a decline from 1,600 dollars per tonne in 1998 to the current level of 800 dollars".
He said gold has not seen any major rally on the world market after hitting historic low levels in the past year, adding that receipts from major export earnings had declined with the outlay of oil tripled.
"It is not only our balance of payment situation that has deteriorated. Cocoa is a major source of tax revenue and the decline in the price has created a problem for us on the fiscal front," he added.
He said the external shocks had caused a steep depreciation of the cedi, rise in inflation and a steep increase in prices of imported products.
Mr Peprah said "the fiscal tightening as a result of the shock has also resulted in the reduction of government programmed expenditures in some critical areas such as health and education.
"But considering the programmes and policies we have been implementing over the past year, we are confident that we will put the crisis behind us much sooner than later".
Inflation is currently fixed at about 17.5 per cent. The government outlined some short-term emergency measures last April aimed at arresting the decline in the fall of the cedi and reduce the importation of what it termed "non-essential imports".
The Finance minister admitted the vulnerability of the Ghanaian economy and explained that it was because cocoa and gold, which most often fall to the dynamics on the world market, are still the mainstay of the economy.
"But we have achieved an appreciable level of diversification of the economy in the past two decades. Cocoa used to provide 75 per cent of our foreign exchange earnings. This figure has been reduced to 30 per cent before the crisis".
He said two decades ago, the tourism sector existed only in name but added that "today, it is the third sector in terms of foreign exchange inflows".
"We have also raised inflows from the non-traditional sector by more than 200-fold since the ERP."
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