“Stability Is Not Forever”- Seth Terkper Urges Ghana to Build Buffers for Future Shocks

Former Finance Minister and economic advisor to President John Mahama, Seth Terkper, has issued a stark reminder that Ghana‘s current economic stability is fragile and potentially short-lived.

Speaking in an interview, Terkper warned that without proactive measures, the economy could quickly unravel in the face of the next inevitable crisis.

“Stability is not forever; you cannot manage an economy continuously for four years without one crisis or the other.”Terkper said.

His caution appears to align with President Mahama‘s recent call for vigilance, despite signs of macroeconomic calm. “President John Mahama is saying things are going well, but let’s be careful. Let’s make sure that when the trend starts to reverse, we have reserves.” Terkper emphasized.

Terkper described the accumulation of reserves as a form of strategic sacrifice, comparing national economic prudence to household or business savings.

“To set reserves, as in households, as in businesses, is sacrifice, when the chips are down, we must fall on them to stabilise the situation.” He explained.

He emphasized that economic management must be future-proofed against shocks, arguing that true reform lies not just in stabilization but in sustaining that stability.

Revenue Vulnerabilities and Temporary Levies

Turning to fiscal concerns, Terkper acknowledged that Ghana’s revenue generation remains below expectations, particularly in relation to its GDP.

“Our revenue today and I’m talking revenue, not just tax is about 17-18% of GDP. But our tax-to-GDP ratio is only 15%, that’s low for a middle-income country like Ghana. Even for an African country, it should be 17%, 18%.” he noted.

He supported efforts to reform Ghana’s VAT regime, hinting at the need for technical assistance to restore its efficiency. According to him, some of Ghana’s existing levies like the repealed COVID levy, were designed as temporary, counter-cyclical tools for moments of crisis.

“When we went into COVID globally, remember that’s when Zoom, telephony, and things hit a boom. Many of these were done through the banking sector. That’s when you got your Financial Sector Levy,” he said, adding, “There’s a sector that is booming. So you put a temporary levy on it. But of course, a time will come when COVID will be over. And indeed, it is.”

In his closing remarks, Terkper dispelled any notion that fiscal caution equates to pessimism or manipulation. “This is not saying you are manipulating the matter. No. You are only managing the economy because of the upside-down. You cannot manage an economy without a crisis. The question is whether you are ready when it comes.” he said.

According to Terpker, Ghana’s stability may be real, but without long-term preparedness, it may not last.

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