Professor Godfred Bopkin, an economist, has issued a warning that it may take six years for the Ghanaian economy to fully recover.
He claims that the existing Fitch Ratings rating has made it challenging for economic managers to scale up the economy, which is currently looking for an IMF bailout program.
“When you reach this level of trash status, it will probably take you at least five to six years to recover since scaling up is quite difficult.
I hope the nation does well.
“Now beyond the economic programme to be presented to the Fund, I think government will also have to look at some governance reforms and productivity reform that should be pursued concurrently with an IMF programme which also will entail some kind of revision to our constitution. Certainly, we couldn’t get to this level without the support of the constitution.”
Professor Bokpin who is an Associate Professor at the University of Ghana Business School made this known in an interview with Joy Business.
Sharing his view on how to address the severe economic situation, Prof. Bokpin reiterated the downsizing of government’s machinery which he believes will send a positive signal to investors.
“Again, we also have to look at the size of the government. It is not good news going into any negotiation table with that size of government. We have said that right from the beginning of the year.”
He continued, “It is not as though downsizing the government will save huge billions of dollars, but the signal and the confidence that it will generate. When it happens that way, whatever you put on the table, it will be harder for people to infer genuine commitment and that you yourself will appreciate the situation; and you are taking steps to internalize the austerity before you ask others to come on board.”
IMF bailout
Government has routinely explained that recent economic headwinds are attributable largely to the ravages of the COVID-19 pandemic, the ongoing Russia-Ukraine war and the banking sector clean-up.
The rippling effect has been an increase in the cost of living, record high inflation rates and downgrades of the economy by rating agencies such as S&P and Fitch – a situation which has dealt a heavy blow to government’s ability to access the international capital market.
The Cedi has also been on a free fall compelling the Bank of Ghana to resort to hiking its monetary policy rate to deal with the situation.
The worsening economic situation compelled the government in July to initiate contact with International Monetary Fund for an economic support programme.
Ghana is targeting an amount of US$3 billion over three years from the Fund once an agreement on a programme is reached.
Government hopes to complete negotiations by end of this year in order to receive the funds in the first quarter of 2023.