Hello President Mahama
Good day sir, I hope you are doing well. I am grateful for the opportunity offered me on this platform to speak directly to you and other Ghanaian leaders. Though objective criticism sounds inconceivable in our polarized political climate, I plan to pursue such in these letters. Having done everything to be objective I am aware I cannot satisfy everyone’s measure of objectivity, but I will proceed nonetheless because as President John Kenney ones said, “the highest duty of the writer is to remain true to himself and let the chips fall where they may.”
With the introduction out of the way, let me get to the subject of this letter. Mr. President, I have thought about several subjects to write about, but I could not find any that is more important than the IMF directed policy adjustments which you implemented by increasing utilities and fuel taxes or rates. Mr. President, the IMF policy adjustments are exactly the wrong policy choice for Ghana. For, there is no historical precedent to support economic regeneration through classical policy and the IMF knows. As a free market driven policy, the classical idea is inherently bad for an import based economy such as Ghana’s.
Mr. President, the direction to tighten fiscal policy will worsen or expedite the contraction of the economy. This is exactly the trouble with IMF policies; they hurt more than they help. In my view sir, government negotiators should have known to counter offer the IMF with a pro-growth policy that embraces smart public spending to stimulate economic growth.
At this rate, the situation will only get worse as the IMF will continue to dictate policies that guard its investment at the expense of Ghana’s economy. The truth Mr. President, when you took over in 2012, economic growth topped 9 percent. But, in three years of your leadership the economy shrunk by 5 percent and remain on a downward spiral. So, it is confounding that your administration would reach an agreement with the IMF knowing it would worsen the problem.
Mr. President, the government negotiators, failed in the duty to advocate an alternative policy to the IMF hence, the wrong policy recommendations. Though the IMF has economists with considerable experience and knowledge, they nevertheless, lack the intimate knowledge and appreciation for the socio-cultural undercurrents of Ghana’s economy. So, while we should criticize the IMF for the wrong policy adjustments, this administration shares equal responsibility for the failure to articulate an alternative growth policy.
The truth, Mr. President, is that the utilities and fuel rate increases are bad for the economy. Though taxing consumers would help slow inflation, there is no proven evidence that this classical IMF policy will regenerate Ghana’s contracting economy. In fact, the classical theory has not been shown to engineer economic growth. For instance, President Ronald Reagan, a great defender of classical policy himself—cut taxes a combined eleven times to grow the American economy.
So, Ghana might consider doing two things: renegotiate the policy terms with the IMF, that knows that classical policy is less likely to grow Ghana’s economy. Restore the utilities and fuel subsidies, and seek fiscal adjustments elsewhere.
Mr. President, Ghanaians elected you to make tough decisions except, the decision to increase taxes on consumers is not a typically tough decision to make. The tough decision to be made in my view is to restore the utilities and fuel rate increases in exchange for vigorous institutional reform to minimize public sector waste and corruption.
Thank you for the attention. And God bless Ghana.