The Institute for Fiscal Studies (IFS), an economic policy think tank, has said that government’s policies do not support the creation of jobs in the private sector, despite its freezing of employment in the public sector.
“Economic policies of the government do not provide concrete evidence that private businesses can expect to become profitable and grow in scale and scope required to create the jobs needed,” Prof. Newman Kusi, Executive Director of the IFS, said at a forum to discuss fiscal challenges ahead of the presentation of the 2016 budget.
According to him, “we should not overlook that the large and growing number of unemployed youth and graduates is a time bomb for the country.”
The private sector have had to contend with incessant power cuts, high cost of credit, costly utilities among other challenges which threaten expansion plans that will see more jobs created for the growing unemployed population.
The Association of Ghana Industries’ (AGI) third quarter business barometer released last week found that more than 70 percent of employers surveyed have no immediate plans of adding to their existing workforce as against 27 percent employers who are planning on increasing their workforce.
The job freeze was reaffirmed by the country’s economic stability deal with the International Monetary Fund (IMF) although the fund had stated that programme aims to “restore debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending.”
The US$918 million Extended Credit Facility agreement also supports non-replacement of departing employees in overstaffed areas as means of cutting government’s huge financial commitment in public sector compensation.
Government’s deal with the Washington-based lender was announced in April this year but economic policies deliberately targeted at fostering job creation are largely non-existent.
Commenting on the structure of the country’s economy, Prof. Kusi reiterated that the still relies heavily on agriculture, which employs about half of the country’s labor force, while manufacturing activities have been stagnating over the years.
Exports, he said, are concentrated in three key commodities, namely gold, cocoa and oil, making the economy vulnerable to terms of trade shocks.
“The characteristics of the economy point to the need for a serious transformation. Unfortunately, recent economic policies of the government are short of transformational ambition,” he stated.
The 2015 national budget, which has as its theme “Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy”, did not explain the form that the proposed transformation will take, or the details of the drivers of the transformation process and the expected outcomes.
Prof. Kusi argued that last year so-called transformational budget did not indicate how innovation and technology-led productivity growth will be pursued, how to transform the agriculture and manufacturing sectors to diversify the economy, and how to foster their inter-sectoral linkages.
“The budget did not address a number of issues and risk areas with strong policies, strategies and innovative solutions, leaving the transformation process and outcomes in the hands of good fortune,” he said.
The underlying structure of the Ghanaian economy, he maintained, is weak, and reflected in a narrow production base, over-dependence on few primary and unprocessed export commodities, weak manufacturing base and high import dependence.
“This has tended to stifle economic growth and development, and manifested in general economic and financial imbalances. The country’s foreign reserve position is weak alongside mounting public debt,” he added.