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IMF Representatives speaks about Ghana’s economic outlook

Presenation by Dr. Wayne MitchelOn Monday the 8th of November 2010, Dr. Wayne Mitchel , the IMF Resident Representative for Ghana, presented a paper titled “Sub-Saharan Africa; Resilience & Risks” as part of the Ashesi Economics Lecture Series. The purpose of the talk was to outline the IMF’s view of the recent performance of the Sub-Saharan African (SSA) region and to predict the performance and the possible risks the region will face going forward. The presentation also discussed the different SSA countries on a country-by country basis and in particular focused on Ghana’s recent economic performance.

Dr. Mitchel’s opinion of the region was generally, bullish. On Ghana, he said “The fundamentals of the economy are strong and the in-coming oil sector will strengthen growth going forward.” Dr. Mitchell also made the point that the current government was managing the economy reasonably well because they were controlling spending in a way that was reigning in inflation. Quizzed by Stephen Armah, Assistant Professor of Economics at Ashesi whether spending was necessarily a bad thing for the economy, since low spending usually slows down the speed of economic growth and could lead to a recession in the short run.  Dr. Mitchell clarified that “the pace of spending of the previous government was too fast and that had increased inflationary pressures in the country.”

Dr. Mitchel also made the point that Ghana had largely escaped the deleterious effects of the global financial crisis because her two major export commodities: gold and cocoa were “recession proof”. In the case of gold, world demand actually goes up in uncertain financial times because gold is a trusted means of storing value. Cocoa on the other hand has inelastic income and price elasticities of demand so its demand hardly goes down when global income decreases. Dr. Mitchel noted that the resilience of Ghana’s economy in the face of the financial crisis was striking, since most of the middle and lower income countries were experiencing adverse trends in many of the macroeconomic indicators. In particular, the fiscal balance of most middle and lower income countries had turned negative as growth slowed, except for Ghana. Dr. Edwin Kay, Visiting Professor of Computer Science at Ashesi and Co-Director of the Computer Science and Business Programs at Lehigh University concurred and pointed out that Ghana’s performance was noteworthy given an apparent positive correlation between fiscal balance and GDP per capita growth for lower and middle income countries. Clearly, some African countries had suffered as growth slowed and their fiscal balance worsened, including South Africa.

Given Ghana’s differential performance, there were indications that Ghana was forming new partnerships independent of the West and was thus receiving non-Western funded aid. Kofi Dzisenu, senior at Ashesi enquired if the IFM was happy with the huge Chinese investment in Africa? Dr. Mitchel replied. “The answer is not obvious because in one direction Chinese funding serves as an alternative source of funds, thus relieving the IMF of some financial obligations. But on the other hand, because of issues of accountability and the blurred motives behind such loans, it may not be a good idea.”

In all, the seminar was well attended and the discussion was vibrant. Before departing, Dr Mitchell, the IMF country representative assured the Business Administration coordinator for Ashesi that the IMF will make available several audio tapes on various aspects of economic development to Ashesi. He expressed the wish that there will be opportunities for Ashesi and the IMF to collaborate on more projects in the future.

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