Economic independence is a worthwhile national objective by itself because it is economic independence that expresses our national sovereignty.

The six (6) pillars of economic independence are fiscal responsibility, currency stability, infrastructure, governance, growth, and social services.

This article aims to establish how critically important fiscal responsibility is to achieving economic independence as a national objective.

We will explore H.E. Dr. Mahamudu Bawumia’s proposals on fiscal responsibility to show they move us closer to achieving our economic independence.

(All references to the government in this article are generic, not specific, referring to all governments we have had in Ghana, not any specific government in particular. The challenge of economic independence has persisted since Ghana’s independence; it is systemic and non-partisan.)

Fiscal responsibility refers to the government’s practices and policies for ensuring sustainable budgeting and spending.

It involves managing government revenues and expenditures without compromising a country’s economic stability.

Fiscal responsibility is critical to achieving economic independence.

Ghana is currently debt-distressed and in an International Monetary Fund (IMF) program designed to help us achieve debt sustainability.

To pay off our debt, we need to reduce our expenditures and significantly increase our revenue.

This is currently the most important need of the nation, and any political program that does not speak directly to this should not be acceptable.

This is our seventeenth (17th) IMF program in sixty-seven years of Ghana’s independence. On average, we seek financial assistance from the IMF every four (4) years. We must make this our last.

We also need to find a way to ensure we do not return to debt distress. We should expect political programs to address this issue and propose mechanisms to enable us to stay solvent and to ensure and protect economic independence.

Fiscal responsibility often emphasizes the importance of government living within its means, where government expenditures match revenues because this minimizes the need for the government to borrow excessively.

Responsible public debt management ensures that government borrowing does not adversely affect the country’s financial stability or lead to unsustainable debt levels.

This approach helps to avoid excessive national debt. Excessive government borrowing is harmful in several ways.

Firstly, when the government borrows excessively, it has to offer successively higher interest rates to give a suitable return for what lenders see as increasing risk.

This increase in government interest rates has the effect of increasing general interest rates. This is because government debt is widely considered as safer than private debt.

Interest on private sector debt is generally calculated as the government interest rate plus a certain margin for the perceived higher risk of private sector lending.

This means that excessive government borrowing, by raising interest rates, makes borrowing expensive and often unaffordable to the private sector.

Secondly, excessive government borrowing has the effect of ‘crowding out’ the private sector from the credit market.

Given the finite amount of credit in the banking system, if the government borrows excessively, much less credit is available for the private sector.

This becomes a constraint on private sector investment, employment, and growth.

To the extent that the ‘private sector is the engine of growth’ in Ghana, excessive government borrowing stifles the engine and, therefore, growth.

Thirdly, excessive government borrowing is often inflationary, especially when spent on infrastructure and social services.

This means that private sector funds can no longer buy as much as they used to.

This effectively shrinks the purchasing power of private capital, reducing the private sector’s ability to invest to create jobs and growth.

Fourthly, after suffering the disadvantage of being unable to afford credit, being crowded out of the credit market, and suffering a diminution of private capital’s purchasing power, the private sector is eventually taxed to pay for the government borrowing, which caused the suffering in the first place.

It is important to note that government debt is repaid by the public, not the government, through tax revenue.

Excessive debt, therefore, often leads to excessive taxes. Excessive government borrowing is, therefore, a ‘quadruple whammy’ to the private sector.

Fiscal responsibility is not just about avoiding negative outcomes; it’s also about creating a positive environment for economic growth, stability, and the provision of public goods and services that improve the quality of life.

This approach helps ensure that current and future generations of Ghanaians enjoy a stable and prosperous economic environment.

Fiscal responsibility is, therefore, a necessary condition for economic independence.

H.E. Dr. Mahamudu Bawumia proposes to sustainably reduce the budget deficit and interest rates, enhancing fiscal discipline through an independent fiscal responsibility council enshrined in the Fiscal Responsibility Act, 2018 (Act 982).

He proposes amending the Fiscal Responsibility Act to add a fiscal rule that requires that budgeted expenditure in any year does not exceed 105% of the previous year’s tax revenue thereby capping the budget deficit more effectively.

Furthermore, Dr. Bawumia has proposed reducing public expenditures in furtherance of fiscal responsibility.

Apart from reducing the size of government to not more than fifty (50) ministers and deputies, he proposes outsourcing government projects such as roads, schools, hostels, and houses for the government to rent or ‘lease to own.’

Furthermore, the government will lease rather than purchase equipment, vehicles, etc., and resort to Public Private Partnership (PPP) road concession arrangements.

This will reduce government expenditure by 3% of GDP or approximately two (2) billion US dollars annually.

By reducing government expenditure, these practical measures would sharply reduce the government’s need to borrow to finance public expenditures.

With reduced government borrowing comes reduced interest rates, increased private-sector access to credit, increased private-sector investment, employment, and sustainable economic growth.

Ceding business opportunities worth approximately $ 2 billion annually will be a fillip to our private sector to kick-start the economy.

In conclusion, Dr. Bawumia’s proposals on achieving fiscal responsibility by reducing government expenditure will mean that for the first time in our economic history, we would be free from overdependence on foreign donors, foreign creditors, and foreign influence in organizing our economic affairs.

The private sector, unshackled by excessive government borrowing and its concomitant excessive taxes, would unleash its economic growth potential.

This would mean economic freedom for the private sector and economic independence for Ghana. With Dr. Bawumia Ghana’s Economic independence is indeed possible!

The writer, Mordecai Quarshie, is a seasoned Ghanaian politician with many years of experience in private life. You can reach him via mordecai.quarshie@gmail.com

OTHER ARTICLES BY MORDECAI QUASHIE:

• Mordecai Quarshie writes: “Economic independence now!”
• Economic independence now II: A day in the life of economically independent Ghana

• Mordecai Quarshie writes: Ponzi schemes, economic independence and Bawumia

It is interesting that we have had various flavours of this crisis occurring approximately every four years in 67 years of independence.

This means we have had such economic crises in democratic regimes, military regimes, and in the fourth republic, in both NDC and NPP regimes.

Obviously, since our economic challenges cut across ideologic divides, democratic dispensations, etc., the solution to this should be applicable across the same.

(All references to ‘the government’ in this article are generic, not specific, referring to all governments we have had in Ghana, not any specific government in particular. The challenge of economic independence has persisted since Ghana’s independence; it is systemic and non-partisan.)

One way or the other, we will get out of the current crisis, the important thing is how to ensure we do not end up here again.

The key issue therefore must be how to get a resilient sustainable economy. The answer unequivocally is that “We need ‘ECONOMIC INDEPENDENCE’ now!”

Economic Independence

‘Economic Independence’ is when an economy does not unduly depend on foreign capital, foreign skills, and foreign enterprise to achieve and sustain the economic aspirations and prosperity of its citizens.

The ‘Independent Economy’ has a significant national component in the ownership, management, and control of the economy.

When an economy is independent it can prioritize its own interests and take control over its future free from excessive influence from other parties.

Ghana needs ‘Economic Independence’ (Selective Evidence):

Why Economic Independence?

We will in the succeeding articles delve much deeper into the economic reasons why economic independence is so crucial, its features, benefits and some proposals on how to get there.

For now, let us focus on other reasons.

We need to achieve economic independence because it simply is the right thing to do. We should no longer endure the disgrace of being a chronically debt-distressed nation.

If Ghana were to be an actual 67-year-old human going through his 17^th financial bailout we would not at all be proud of him/her. Ghana deserves better.

Ghanaians are known all over the world to be hardworking, enterprising, honest, law-abiding people.

We cannot be comfortable with the reputation of an irresponsible nation chronically incapable of managing its finances and affairs.

Economic independence must be our primary objective.

We need to achieve economic independence now because the global environment may not continue to be as tolerant and forgiving of debt default as it currently is.

It is not inconceivable that powerful creditor countries may in the future begin to seize assets of debtor nations in repayment of defaulted debts.

We cannot continue along this path.

We need economic independence because it is what gives effect to political independence. National sovereignty is not very meaningful without the economic means to express, project, and enforce it.

It is sovereignty backed by economic independence that will allow us to pass laws to protect our values without having to fear repercussions.

When Kwame Nkrumah and the founding fathers won independence there was no doubt in their minds that they meant both political and economic independence.

We need to achieve economic independence to finish the work our founding fathers started.

Our failure to achieve economic independence could endanger our hard-won political independence.

Our fledgling democracy might not survive another debt crisis. We need to get serious about breaking out of this cycle of chronic debt distress.

Ghana is one of the most resource-endowed nations on earth and it will be a shame if we are unable to become the prosperous nation, leading the African renaissance, as we were meant to become.

We need economic independence to honour the memory of our proud ancestors who fought and died for the independence we currently enjoy and to make succeeding generations proud of us.

We must be part of the generation that transitioned Ghana into economic independence. There is no other more noble, relevant, or just objective for us as a people than economic independence.

Ghana needs economic independence, it has been established that Ghana is chronically debt-distressed and needs help.

Economic independence is the only sustainable way to get out and stay out of the current situation.

I hope this piece has ignited in you the will to seek economic independence for Ghana, together we will find a way to make it happen.

“Where there’s a will, there’s always a way”- Bob Marley.

The benefits of ‘Economic Independence”

The writer, Mordecai Quarshie, is a seasoned Ghanaian politician with many years of experience in private life. You can reach him via mordecai.quarshie@gmail.com.