Fiscal Discipline Is the Key to Economic Stability

By Akufo-Addo, Nana | New African, November 2018 | Go to article overview

Fiscal Discipline Is the Key to Economic Stability


Akufo-Addo, Nana, New African


President Nana Akufo-Addo (right) seems to have acquired a fan club across Africa for his pronouncements. He inherited an economy in the doldrums that appears to have taken a turn for the better following an IMF programme as well as a rise in the price of commodities such as cocoa and oil.

He is accused by his critics at home of having a bloated government, which he says he needs to get things done.

Nana Akufo-Addo, it would appear, was always destined to become the head of state of his country. He comes from a prominent Ghanaian royal and political family, his father Edward Akufo-Addo being the President of Ghana in the 1970s.

Nevertheless, it took him three attempts before he was able to win the Presidential elections. According to people close to him, this has made him humble and more in tune with common sentiments and people's hopes and expectations.

New African sat down with him while he was on a visit to London recently.

You have been very vocal about the necessity for Africa to take its destiny in its own hands and not depend on outsiders, but your Finance Minister Ken Ofori-Atta made a point of thanking the IMF when he spoke at the African Banker Awards (as winner of the African Finance Minister award). Is there a contradiction of attitudes here?

I'm not sure if you are suggesting there's a contradiction between the Finance Minister's position and mine, but if so it's not intended.

The IMF came to Ghana--as it has done elsewhere--at a time when the Ghanaian economy was going through very challenging times; when many of our macroeconomic indices were going wrong; they came in on a rescue mission.

It was an emergency, stop-gap three-year stabilisation programme. The programme is due to come to an end at the end of this year; in fact it actually came to an end in April technically, but has continued because of the way the budget process was intertwined with it.

I believe the Finance Minister thanked them because, yes, they came, they provided nearly a billion dollars of relief for our economy and they tried as much as possible to hold the country to some important fundamentals.

The 9.3% deficit that we inherited was cut down to 5.9% in the first year of our government, and we're looking to bring it down further, to 4.5% this year. We want to pass a law setting a 5% ceiling for the deficit so that every government is held to managing the finances in such a way that we don't get more than a 5% deficit in any one year.

At the end of the day, what all of us are saying in Ghana is that we don't want to go back into another IMF plan, we want to be able to manage our own economy in such a way that there will be no need to have recourse to the IMF again.

That is the basic learning: fiscal discipline, making sure that your economy is in balance and in equilibrium--and yes, we don't need the IMF to be able to do those things. These are fiscally economically responsible initiatives that we can take on ourselves.

The big question concerns Chinese debt. The Western press in particular says it is less transparent and that such debt is being offered to create an economic world order in the image of China. Would you say these are fair comments?

Looking at the Ghanaian situation, we had no particular reason to fear the Chinese entanglement. Yes, it's true today that China is our biggest trade partner and the balance of accounts is more in their favour because they have more things to sell to us then we have to them.

But, with the assistance that we are getting from China, the $2bn swap agreement that I went to sign with the Chinese leader for instance essentially involves a barter arrangement. They are providing us with money to enable us to deal with some very fundamental issues of our infrastructure, such as roads.

We are going to use the period of repayments [for the $2bn sum] to develop an integrated bauxite industry in Ghana, which would allow us to export back to China finished aluminium products as our payback for it. …

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