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15 April 2014 | Paul Snell
The Ghanaian government must admit the economy is in crisis to win public support for austerity measures including procurement reform, says economist Mahamudu Bawumia.
The academic and two-time former vice presidential candidate urged the government to “cut its coat according to its size” and restore fiscal discipline including improving procurement and cutting spending.
In a speech at Central University College in Accra on restoring the value of Ghanaian currency, the cedi, Bawumia said: “I do not use the term 'crisis' lightly. This is not some short-term blip that will just pass over if we can just muddle through. The problem we have is that there appears to be an unwillingness to face the truth and admit that we are in a crisis. In fact, we appear to be in a state of denial.”
High among Bawumia’s recommendations to enhance revenue and reduce spend was for the government to “ensure value for money in the award of government contracts through a transparent and competitive procurement process that minimises sole sourcing.”
He urged the government to tackle corruption and “formalise” the economy, through issuing biometric ID cards and implementing a working street address system.
Bawumia said import duties on goods and services were too high, discouraging production and investment. “The philosophy of taxing everything to raise revenue must be re-examined. Sometimes you can actually make more revenue by reducing taxes to stimulate production,” he added.
“I would like to repeat without exaggeration that the Ghanaian economy is in a crisis. It is time for serious action,” he concluded. “If government does not take the right decisions and soon, then Ghana would likely have to approach the IMF for a bailout before the end of the year. At the end of the day, the obvious lesson is that, we cannot run away from fiscal and monetary discipline no matter how hard we try.”
He responded to claims that “dwarves, spirits juju men, high rise buildings and the end of the world” were to blame for depreciation of the currency.
“I do not want to delve much further into these explanations except to say that they have provided comic relief, even though this is not a laughing matter,” he said. “Where were the dwarves when the cedi was stable? It looks like they go into hiding whenever there is disciplined and sound economic management.”