Former Finance Minister and economic advisor to President John Mahama, Seth Terkper, says no government can manage an economy for four straight years without facing a crisis.
He insists that the test of good economic management is not avoiding shocks, but being prepared when they strike.
“You cannot manage an economy continuously for four years without one crisis,” he stated pointedly on JoyNews’ PM Express Business Edition on Thursday night.
According to him, President Mahama has been cautioning that although things appear to be going well, Ghana must prepare for the inevitable downturns.
“President John Mahama is saying things are going well, let’s be careful,” Mr Terkper explained.
“Let’s make sure that, you know, we have reserves…Reserve, which is a sacrifice. To set reserves, as in households, as in businesses, is a sacrifice.”
Seth Terkper said building buffers must be a deliberate act, because shocks will come. He cited the COVID-19 pandemic as an example.
He argued that stability is not enough — reforms must be sustained. “It’s good to stabilise and to sustain reforms,” he added.
“But sustaining reforms means you must prepare for the downside. You don’t run a country on just good days.”
On revenue, Terkper stressed that Ghana’s tax-to-GDP ratio is too low for a middle-income economy.
“Our revenue today — and I’m talking revenue, not tax revenue — is about 15%. Tax-to-GDP is around 17–18%. But for an African middle-income country, it should not be 15%.”
He blamed part of the shortfall on temporary revenue measures being treated as permanent.
He explained how in difficult times, governments use short-term taxes to support the budget, but these must be removed once the economy recovers.
“We have had a temporary levy policy…You use them during austerity, and then you remove them,” he said. “They are similar to your counter-cyclical measures.”
He pointed to the financial sector levy introduced during COVID.
“That’s when you got your FinSec levy,” he recalled. “Because it is not the whole sector that is depressed. There’s a sector that is doing well on account of us being at home…So you put a temporary levy on it.”
He warned against failing to reverse such taxes when conditions improve.
“A time will come when COVID will be over… Yes, there’s still some stability in the use of Zoom and others, but it is not at the peak.”
Seth Terkper’s central message was one of preparation. He said it’s not enough to simply enjoy the benefits of economic stability.
“Are we preparing for the next crisis?” he asked. “Have we put some reserves, learning from COVID, so that when something else comes, we fall on those reserves to manage it?”
He was clear that managing reserves is not manipulation. “You are only managing the economy because of the upside and the downside,” he said. “That is sound economic planning.”
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