I cannot recall any time in recent political history when the two leading political parties have so clearly and elegantly branded their campaigns.
Former President John Mahama promises a ‘reset’, and Dr Mahamudu Bawumia promises an ‘upgrade’.
It is a testament to Former President John Mahama’s brilliance as a communication expert that he devised the ‘reset’ to encapsulate his presidential campaign.
This word resonates with most of the electorate, particularly those under 45 and Gen Z, as it connotes electronic devices and information technology (IT) and signifies a solution when things are not working well.
Ironically, in doing this, he unwittingly gifted his opponent, Dr Bawumia, with a platform against which to define his campaign in one word, something Dr Bawumia’s campaign had been grappling with.
In contrast, Dr Bawumia’s ‘upgrade’ echoes IT and electronic devices and resonates with the same audience.
It promises a new, improved, and better performance.
‘Reset’ refers to a return to a known and preferred state of affairs in the past, especially regarding electronic devices.
The political battles are now clearly defined with the words ‘reset’ or ‘upgrade’.
This article evaluates the two competing propositions concerning the economic management of this nation to determine which is best for Ghana.
We have defined “reset” as a return to a known and preferred state in the past.
Former President John Mahama is offering to hold an economic summit within his first 120 days to explore ways to reset the economy.
Regarding Ghana’s economic management, finding such a “preferred state in the past” in our history is challenging.
According to evidence, the past management of Ghana’s economy has never been exemplary.
Ghana is chronically debt-distressed and currently in an International Monetary Fund (IMF) program, our 17th in 67 years of independence; this excludes the Highly Indebted Poor Country (HIPC) and Structural Adjustment Program (SAP) initiatives.
Every four years or so, we turn to the IMF for assistance, regardless of which party is in power or the form of governance.
This is a systemic problem that past governments have been unable to solve.
The challenge has been fiscal indiscipline.
We have never mobilized enough taxes to meet public spending; consequently, approximately $23 billion of our potential revenue annually remains outside the tax net.
Successive governments have consistently spent more than they could afford, borrowing excessively to finance their expenditure.
Governments have borrowed from the central bank externally, internally, and worse. The consequences of this borrowing have been dire.
The private sector, the engine of growth, is crowded out of the credit market, limiting their ability to invest and grow their businesses and the economy.
Governments typically spend this borrowed money on services and infrastructure, which have an inflationary effect on the economy.
This persistent inflation enriches the rich and impoverishes the poor and middle class by redistributing income away from those with fixed incomes, such as workers and retirees, and towards those with variable incomes.
It penalises savers and rewards spenders, discouraging delayed gratification and undermining society’s moral fabric.
With inflation eroding part of its purchasing power, private capital can no longer purchase what it used to.
With stifled private sector growth and less capability to invest in creating jobs and funding development, a vicious cycle of borrowing and taxing destroys the nation’s productive base, leading to debt default and distress.
This has been the recent history of Ghana’s economic management; it is not quite what one would like to reset to.
Ghana’s economy is at a crossroads, facing formidable challenges that demand a strategic and comprehensive plan for resolution.
Achieving economic independence and meeting the growth and prosperity aspirations of our citizens without excessive reliance on foreign capital and influence is a complex task.
It necessitates a well-thought-out plan to address our debt, enhance public revenue, curtail public expenditure, and stabilise the cedi.
This is the task that Dr Mahamudu Bawumia’s ‘upgrade’ proposition aims to tackle. The concept of ‘upgrade’ offers a ray of hope for Ghana’s economic future.
It promises a new, improved, and therefore better economic performance.
This concept suggests a shift towards more efficient and effective fiscal policies and practices when applied to economic management.
It holds the potential to steer Ghana’s economy towards a brighter and more prosperous future, instilling a sense of optimism and hope in our citizens and policymakers.
Dr Bawumia’s ‘upgrade’ proposes a new flat tax system and a tax amnesty to expand the tax base to cover around 90% of potential taxpayers.
This would be the first time Ghana has used such an efficient and effective tax system if implemented.
Recent advancements in digital technology, such as the national ID card, using National IDs as tax identification numbers, mobile money interoperability, financial inclusion, SIM re-registration, and the digital address system, have made this new system possible.
The anticipated increase in revenue has significant implications. It could reduce the government’s need to borrow to cover expenses and encourage the private sector to invest to stimulate growth and job creation.
This boost in revenue could help alleviate inflationary pressures and stabilise the cedi, making the country more attractive to foreign direct investment and aiding economic growth.
Furthermore, it could create fiscal space that would allow for the removal of ‘nuisance taxes’ such as e-levy, betting taxes, and emission taxes and reduce port duties to match the Lome port.
This would lead to a reduced cost of living and improved living standards.
On the expenditure side, Dr Bawumia’s ‘upgrade’ aims to reduce budget deficits and interest rates by introducing fiscal discipline measures such as an independent fiscal responsibility council and amending the Fiscal Responsibility Act to include a rule capping budgeted expenditure at 105% of the previous year’s tax revenue.
In addition, the plan involves reducing public spending by limiting the size of the government to fifty ministers and deputies, outsourcing government projects, and opting for leasing instead of purchasing equipment and vehicles.
These measures are expected to reduce government expenditure by 3% of GDP or approximately two billion US dollars annually while promoting private sector growth.
Dr Bawumia ‘upgrade’ proposes to continue the Bank of Ghana’s (BOG) ‘Gold for Reserves Policy’ to support and stabilise the Cedi long-term.
This policy is implemented through the Domestic Gold Purchase Programme (DGPP).
With the DGPP, the Bank of Ghana increases its foreign exchange reserves by purchasing locally produced gold with cedis.
Before this program, Ghana’s total gold reserves since independence were 8.7 tons. However, the BOG has purchased 80 tonnes of gold since the inception of the DGPP under its gold-for-reserves policy.
This has increased BOG’s gold reserves to more than 88 tons as of July 2024.
The BOG aims to continue growing its gold reserves, along with prudent fiscal policy, to provide long-term stability to the Cedi.
Furthermore, the DGPP includes using commodity swap arrangements, such as ‘gold for oil’ transactions, to reduce local pressure on the foreign exchange markets.
The gold-for-oil program allows the payment of oil imports with gold, thereby reducing the pressure on Ghana’s foreign exchange reserves and stabilising the exchange rate.
In contrast to the ‘reset’, the ‘upgrade’ proposition presents a compelling new vision for Ghana’s economic future.
Dr. Mahamudu Bawumia’s proposal promises improved economic performance by introducing efficient and effective fiscal policies and practices.
This approach can address challenges such as debt, public revenue enhancement, curtailing public expenditure, and stabilising the cedi. By proposing innovative solutions such as a new flat tax system and a tax amnesty aimed at expanding the tax base, the ‘upgrade’ proposition instills a sense of optimism and hope for Ghana’s economic trajectory.
It offers a viable path toward sustainable growth and economic independence, making it a favourable choice for the nation’s economic management.
The writer, Mordecai Quarshie, is a seasoned Ghanaian politician with many years of experience in private life. You can reach him at viamordecai.quarshie@gmail.com
OTHER ARTICLES BY MORDECAI QUASHIE:
- Economic independence now IV: Fiscal responsibility – a new flat tax system ‘getting some more cloth’
- Economic independence now 3: ‘cutting our coat according to our cloth’
- Mordecai Quarshie writes: “Economic independence now!”
- Economic independence now II: A day in the life of economically independent Ghana