Former Finance Minister Dr Kwabena Duffuor has said he was able to assist the late Professor John Evans Atta Mills to reduce unemployment rate from the time Prof Mills became President in 2009 to 2012.
But, he said, the rate started increasing from 2013 to 2015, the period that Former President John Dramani Mahama was in office.
Delivering a public lecture in Accra on Monday November 29, he said “High and rising inflation increases the cost of living at a fast pace, thereby eroding people’s real incomes and savings. By fueling wage pressures and raising the cost of other production inputs, it also increases the cost of doing business. Furthermore, rising inflation forces up interest and lending rates, since savers—whose surplus funds are lent to borrowers—naturally demand a higher reward for deferring consumption to the future. Higher lending rates then lead to the cancellation of otherwise viable investments, with negative effects on economic growth and employment generation.
“Historically, Ghana has experienced these effects of inflation in their most destructive forms, as the country’s post-independence economic history is marked by many episodes of runaway inflation, including prolonged periods of hyperinflation in the 1970s and 80s.
“Because Ghana relies heavily on imports to meet its consumption needs, a rapidly depreciating exchange rate is a major source of inflation. In addition, given the country’s rapid build-up of foreign debt, which accounts for about half of total public debt, a sharply weakening exchange rate significantly increases the size of the foreign debt and the cost of servicing it in domestic currency terms. In fact, research conducted by the Institute for Fiscal Studies has shown that exchange rate depreciation is a significant driver of Ghana’s public debt dynamics, as it accounted for almost 30% of the growth of public debt between 2006 and 2019.
“These problems call for the effective management of inflation and the exchange rate to ensure their stability to protect living standards and support rapid economic growth and development. To achieve this requires, from the macroeconomic perspective, disciplined fiscal and monetary policies.
“Mr. Chairman, this has been done before. In 2009–2012 under the Mills NDC administration, our success in lowering the fiscal deficit from 14.5% of GDP in 2008 to 4% of GDP by 2011, as well as our success in slowing the rate of monetary growth, facilitated a fall in inflation from 18.1% in December 2008 to single digits for 31 consecutive months starting from June 2010 to December 2012. This remains to date the longest period of single-digit inflation in Ghana since independence. The exchange rate also achieved a measure of stability during the period, as it depreciated by 10.1% per annum on average in 2009–2012, which is one of the lowest rates of average depreciation during the Fourth Republic. The World Bank indicated in their 2011 report that in 2011, Ghana was the fastest growing economy in the World with GDP of 14.5% and a decline in interest rates to the lowest level in four decades.
“In his 1999 speech at ‘President Ball and Fundraising dinner’ at the Tema Rotary Club, Dr. J.L.S Abbey lauded the 1998 Macro-Economic Performance of Ghana, saying ‘Last year, most of the financial targets of Government were met: monetary growth over the period was less than 18 percent: the exchange rate depreciated by less than 5% and the rate of inflation declined. These targets were achieved by the strong enforcement of laws relating to banking and use of foreign currency, by prudent use of repurchase agreements in monetary management, and by placing a limit on excessive budgetary spending by government’. We have done this before. Mr. Chairman, I have personally been part of doing this before, so I know it can be done and that it must be done.
“As concerns mount about rising inflation in recent months, the government should take a second look at its fiscal and monetary policies, especially the former, and ensure that they are sustainable and conducive to the effective control of inflation and the maintenance of a stable exchange rate.
“Besides firm fiscal and monetary policies, good real sector policies that lead to strong economic growth play a critical role in ensuring price and exchange rate stability. The stellar performance of real GDP growth in 2009–2012 was therefore a significant factor that led to the stable macroeconomic environment during the period. From 2009–2012, overall real GDP grew at an average rate of 9%, which is the highest rate under any administration in Ghana’s history. Even the non-oil real GDP growth rate, which stood at an average of 7.4% during the period, is the highest under any administration in the country’s history. Effective real sector policies should therefore be pursued to achieve high economic growth and employment creation, as it happened between 2009–2012, and thereby helped to maintain a stable macroeconomic environment.
“Again, through effective real sector policies, unemployment was tamed under the Mills NDC Administration and I was the Minister of Finance and Economic Planning. The total unemployment rate which stood at 10.4% in the year 2000 witnessed a declining trend to 5.3% by the end of 2010 and further declined to 2.2% by the end of 2013. However, after 2013, total unemployment rate saw another upward swing, increasing sharply to 6.8% by the end of 2015.
“It is therefore clear that the stellar performance of real GDP growth in 2009–2012 was a significant factor that led to lower unemployment level and which further led to job creation during 2009–2012 period.”