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Ghana inherited economy with no 'financial airbag' under NPP - Finance minister

Ghana's Finance Minister Accuses Previous NPP Administration of Leaving Economy Without Financial Buffers

In a bold and pointed critique of the previous administration, Ghana's Finance Minister has lambasted the New Patriotic Party (NPP) government for handing over an economy devoid of any financial safeguards or "airbags" to cushion against shocks. This assertion came during a recent address where the minister highlighted the vulnerabilities inherited by the current National Democratic Congress (NDC) administration, painting a picture of fiscal mismanagement that has left the nation grappling with severe economic challenges. The minister's remarks underscore the ongoing political tensions in Ghana, where economic policy has become a battleground for partisan blame games, especially as the country navigates post-pandemic recovery and global inflationary pressures.

The core of the minister's argument revolves around the concept of a "financial airbag," a metaphor for economic reserves, buffers, or contingency funds that could protect the nation from unforeseen crises. According to the minister, when the NDC took over power, they discovered an economy stripped bare of such protections. This lack of fiscal resilience, he argued, stemmed from years of what he described as reckless borrowing, unchecked spending, and a failure to build sustainable revenue streams under the NPP's watch. "We inherited an economy with no financial airbag," the minister stated emphatically, emphasizing that this oversight has amplified the impacts of external shocks like the COVID-19 pandemic, the Russia-Ukraine war, and fluctuating global commodity prices.

Delving deeper into the specifics, the minister outlined several key areas where the previous administration allegedly faltered. First and foremost was the issue of debt accumulation. Under the NPP, Ghana's public debt skyrocketed, reaching unsustainable levels that now consume a significant portion of the national budget in interest payments alone. The minister pointed to figures indicating that debt-to-GDP ratios had ballooned beyond 80%, a threshold that international financial institutions like the IMF consider precarious for emerging economies. This debt burden, he claimed, was not matched by corresponding investments in productive sectors, leading to a situation where borrowed funds were used for consumption rather than long-term growth initiatives.

Moreover, the minister criticized the NPP's handling of fiscal deficits. He noted that persistent budget shortfalls were financed through high-interest loans, both domestic and international, without adequate measures to curb expenditure or enhance tax collection. "The NPP left us with a fiscal hole so deep that even basic social programs are now at risk," he remarked. This has resulted in the current government having to implement austerity measures, including spending cuts and tax reforms, to stabilize the economy. The minister also highlighted the depletion of foreign exchange reserves, which he said were critically low upon handover, making it difficult to defend the cedi against depreciation and import essential goods.

In providing historical context, the minister drew comparisons to previous transitions of power in Ghana. He recalled how the NDC, during its prior tenure, had worked to build economic buffers through initiatives like the Ghana Infrastructure Investment Fund and efforts to diversify the economy beyond oil and cocoa. In contrast, the NPP's eight years in power, from 2017 to 2024, were characterized by what he termed "populist policies" that prioritized short-term gains over long-term stability. For instance, programs like the Free Senior High School initiative, while laudable in intent, were rolled out without sufficient funding mechanisms, leading to ballooning costs that strained the national purse.

The minister did not shy away from addressing the energy sector, another area of contention. He accused the NPP of mismanaging the power sector, resulting in accumulated debts to independent power producers and inefficiencies in distribution. This, he argued, contributed to the infamous "dumsor" power outages that plagued the country and deterred foreign investment. "An economy without reliable energy is like a car without fuel; it simply cannot move forward," the minister analogized, linking this to the broader theme of lacking financial airbags.

On the revenue side, the minister lambasted the NPP for failing to broaden the tax base effectively. He pointed out that reliance on a narrow group of taxpayers, coupled with widespread exemptions and loopholes, led to chronic revenue shortfalls. Initiatives like the E-Levy, introduced by the NPP to tax electronic transactions, were criticized as poorly implemented and regressive, alienating the populace without yielding the expected fiscal benefits. The current administration, in response, has been pushing for more equitable tax reforms, including digitalization of revenue collection to plug leaks and ensure compliance.

Shifting focus to the social implications, the minister emphasized how this inherited economic fragility has exacerbated poverty and inequality in Ghana. With inflation hovering at double digits and food prices soaring, ordinary Ghanaians are bearing the brunt of these past decisions. He cited statistics from the Ghana Statistical Service showing rising unemployment rates, particularly among the youth, and a widening wealth gap. "The absence of financial buffers means that when crises hit, it's the vulnerable who suffer most," he said, calling for a collective effort to rebuild the economy on firmer foundations.

In defense of the current government's actions, the minister outlined steps being taken to rectify these issues. These include negotiations with the IMF for a bailout package, aimed at restoring macroeconomic stability and unlocking concessional financing. Domestic measures involve fiscal consolidation, such as rationalizing public sector wages and prioritizing capital expenditure on infrastructure that can generate returns. Additionally, efforts to boost local production through agriculture and manufacturing are underway to reduce import dependency and build resilience against global shocks.

However, the minister's comments have not gone unchallenged. NPP spokespersons have swiftly rebutted the claims, arguing that the previous administration inherited its own set of challenges from the NDC and made significant strides in areas like digitalization and infrastructure development. They point to projects such as the Agenda 111 hospitals and the expansion of road networks as evidence of prudent investment. "The NDC is quick to blame but slow to acknowledge the global context," an NPP official countered, referencing the unprecedented disruptions caused by the pandemic.

This exchange highlights the polarized nature of Ghanaian politics, where economic narratives are often weaponized ahead of elections. As the country approaches the next electoral cycle, such debates are likely to intensify, with voters weighing the merits of each side's economic stewardship. The minister's airbag metaphor serves as a stark reminder of the need for forward-thinking policies that prioritize sustainability over short-term populism.

Looking ahead, the Finance Minister expressed optimism about Ghana's potential for recovery. He stressed the importance of unity and sacrifice, urging all stakeholders—including the private sector, civil society, and international partners—to collaborate in rebuilding the economy. "We may have inherited a vehicle without airbags, but we are now installing them, one policy at a time," he concluded, signaling a commitment to fiscal prudence and inclusive growth.

In essence, this critique from the Finance Minister encapsulates the broader discourse on Ghana's economic trajectory. It underscores the perils of fiscal irresponsibility and the imperative for robust economic planning. As Ghana strives to emerge from its current predicaments, the lessons from this inherited vulnerability could shape policy decisions for years to come, ensuring that future administrations are better equipped to handle the inevitable bumps on the road to prosperity. The ongoing efforts to stabilize the economy, while contentious, represent a critical juncture in the nation's development narrative, one that demands transparency, accountability, and a departure from the blame cycle that has long characterized political rhetoric in the West African nation.

Read the Full Ghanaweb.com Article at:
[ https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Ghana-inherited-economy-with-no-financial-airbag-under-NPP-Finance-minister-1993141 ]