Economic crisis: Don’t blame the carpenter if a tornado blows away your roof – Bawumia

Ghana goes into economic crisis

Ghana runs to IMF for support

Bawumia shifts blame from government

It is a settled fact that Ghana is currently going through an economic crisis; one that has led to significant rises in fuel and food prices, as well as in the general cost of living.

So critical has

Read full articleGhana’s situation become that the current government, against its own words, has approached the International Monetary Fund for a financial support programme.

Between the current government and some critics, there is an unending argument about the actual cause of the economic crisis and the extent to which the current administration can be blamed.

In his capacity as the Vice President of Ghana and the head of government’s Economic Management Team, Dr. Mahamudu Bawumia, on Thursday, July 14, 2022, delivered the key remarks at an event at the Accra Business School.

As part of his address, the Vice President diagnosed Ghana’s economic situation, the causes and the next line of action. He also spoke about the decision to go to the IMF and the reasons that justified it.

Deflecting blame from the Akufo-Addo-led administration, the Vice President attributed the economic situation in Ghana to what he described as a “quadruple whammy.”

He stated that the situation in the country is a resulting effect of four events; energy sector excess capacity payments, a banking sector cleanup, the COVID-19 pandemic and the Russia-Ukraine war.

He outlined that, out of the four events, two are external events that impacted Ghana while the remaining, albeit internal, are the results of policies by the previous administration of former President, John Dramani Mahama.

“If you take out the fiscal impact of this quadruple whammy, Ghana will not be going to the IMF for support because our fiscal, debt and balance of payments outlook would be sustainable. Of the four factors, two (COVID-19 and the Russia-Ukraine war) were external and the other two (the banking sector clean up and the excess capacity payments) were the result of policies of the previous government.

“Today, all over the world, fuel prices are rising in virtually every country, food prices are rising, inflation is at a high for many years, currencies are falling in value, fiscal deficits are increasing, debt levels are increasing, etc. This tells us that what we are dealing with is a global phenomenon,” he said.

Using an analogy to clear his government of the blames, the Vice President alluded to a carpenter who is contracted to roof a house.

According to Dr. Bawumia, while a carpenter will be blamed if the roof of a house he worked on suddenly comes off without the force of a wind or a rainfall impacting it, the house owner will have no recourse to blame the carpenter if the roof collapses as a result of natural disaster.

“Let me give you an analogy to make my point. If you ask a carpenter to roof your house and suddenly the roof collapses without any wind or rainfall, will you not blame the carpenter who did the roofing?

“But if a carpenter roofs your house and the roof collapses because of a tornado and a storm which has also blown away the roofs, windows and walls of many houses, will you blame the carpenter?” Dr. Bawumia questioned.

In proffering solutions for Ghana’s current situation, Dr. Bawumia, among other things, highlighted the need to restore fiscal and debt sustainability through revenue and expenditure measures and structural reforms.

“Non-concessional borrowing should be curtailed to enhance debt sustainability.

“Indeed, the reliance on international capital markets to fill the financing gap of about $3 billion annually exposed the vulnerability of the economy once the capital markets shutdown to emerging economies. This has heightened the need for Ghana to build foreign exchange reserve buffers to cater for unanticipated shocks like COVID-19 and the Russia-Ukraine war,” the Vice President stated among other solutions.

GA/WA