Vice President Dr. Mahamudu Bawumia has presented a comprehensive account on the performance of the Ghanaian economy, which he indicated, has done better under the current government than the erstwhile National Democratic Congress (NDC) administration even in the midst historic global crises.
He said although the COVID-19 pandemic and lately the Russia-Ukraine war have shaken the strong foundation of the Ghanaian economy, the growth of the economy is fundamentally stronger than it was in the 2013-2016 period of the previous administration.
Vice President Bawumia stated these when he addressed participants at a training and orientation programme for the Tertiary Students Confederacy (TESCON) of the governing New Patriotic Party (NPP) at Kasoa in the Central Region yesterday.
The main opposition NDC has claimed Ghanaians are facing the current economic challenges as a result of poor management of the economy by the NPP government.
However, Vice President Bawumia reminded Ghanaians that although times may be hard now, the Akufo-Addo administration inherited an even more dire situation and successfully moved the country onto a path of growth until the whole world was blindsided by the COVID-19 pandemic, the Russia-Ukraine conflict and locally, the banking sector clean up.
Interest rates
Vice President Bawumia said notwithstanding COVID-19, interest rates are lower now than they were in the 2013 -2016 period.
“Before COVID-19, the steady disinflation process provided scope for significant monetary policy easing. The Bank of Ghana’s Monetary Policy Rate (MPR) was cut by a cumulative 11% between January 2017 and January 2021.
“This translated into a reduction in short term interest rates, with the interest rate on the 91-day Treasury bill declining from an average of 21.2% between 2013 and 2016 to an average of 13.8% between 2017 and 2021. Lending rates have also fallen from an average of 28% between 2013 and 2016 to an average of 23% between 2017 and 2021,” he said.
Dr. Bawumia added that in response to the recent increase in inflation, the Bank of Ghana has increased the policy rate by 2.5% from 14.5% to 17.0%.
Fiscal balance and debt
Vice President Bawumia said the robust fiscal discipline under the Akufo-Addo led administration is a contributing factor to the country’s strong economic fundamentals.
“The developments in the fiscal balance show a remarkable and sharp dichotomy between the fiscal deficit (ie. the 23 differences between government revenue and government expenditure) before the COVID-19 and after COVID-19. The fiscal deficit between 2013 and 2016 averaged 7% of GDP. Between 2017 and 2019 (before COVID-19), the fiscal deficit declined to an average of 4.5%.
“For the first time in a decade, Ghana recorded primary balance surpluses (for three years in a row). To sustain the path of fiscal discipline, parliament passed into law a Fiscal Responsibility Act that limits the fiscal deficit in any year to a maximum of 5% of GDP and requires a positive primary balance (that is our tax revenues should exceed all government spending, excluding debt service payments),” he said.
External Sector Performance
Vice President pointed out that the country’s external sector performance is the strongest as compared to the trade deficit of US$1.7 billion recorded from 2013 to 2016.
“Ghana’s external payments position strengthened in the 2017-2021 period relative to the 2013-2016 years. For the first time in over 30 years, the trade balance (the difference between what we export and what we import) recorded a surplus for five successive years.
“The trade balance was in the deficit between 2013 and 2016 but moved from a deficit of US$1.7 billion in 2016 to a surplus of US$1.1 billion in 2017, a larger surplus of $1.8 billion in 2018, and an even larger surplus of US$2.2 billion in 2019. The impact of 19 COVID-19 has seen a reduction of the surplus to US$2.04 billion in 2020 and a further reduction to US$1.1 billion in 2021.
“Nevertheless, this is still a much stronger performance than the trade deficit of US$1.7 billion recorded in 2016 (which was one of the stronger performances in the 2013-2016 period”, he added.
Have faith in NPP
Vice President Bawumia urged Ghanaians to have confidence in the Akufo-Addo administration to navigate the nation positively through the present economic storms because, fundamentally, the NPP has a track-record of doing so.
In a brutally-frank lecture on Ghana’s economy from 1990 till date, Dr Bawumia assured that despite the present difficulties, Government is working assiduously to restore the country on the path of growth and accelerated development shifted off course by the three almost concurrent challenges.
“Not long ago, we had felt similar despair. The fear of losing our lives to a pandemic and the near halt to our economy as we battled to survive each day. Some years ago also we had been confronted by very dire economic circumstances. The joblessness of our youth, years of lights out that impacted adversely on businesses and jobs, the disappointment of dealing with a collapsed national health insurance system and inability to access health care, the bane of the cash and carry system, a nearly collapsed national ambulance system, freeze on public sector employment, an almost collapsed banking sector and so on.
“The economy was on the verge of collapse and a legacy of take or pay contracts saddled our economy with annual excess capacity charges of close to $1 billion. … We were confronted with a banking crisis that starred at us with deadly stints. Not dealing decisively with the banking crisis would have meant disaster for the economy as the entire banking system would have collapsed. In addition, not keeping up with the excess capacity payments would have meant throwing the country back into a new bout of dumsor.
“The government of President Nana Addo Dankwa Akufo-Addo put in much effort to turn things around and elevate the standards of living of the Ghanaian people above what the situation used to be at the time this government was formed in 2017. Taking over from then meant we had to do our best also to make things work and better.
“Together as a country, we proceeded to fix the economy. We made great gains and the records attest to this. Prior to the Coronavirus pandemic which has impacted all economies in the world, we stabilized the economy, and achieved great strides.
“The relatively strong performance of the economy, among other things, led to Ghana becoming the destination of choice for Foreign Direct Investments (FDI) in West Africa according to the 2019 World Investment Report by UNCTAD,” he reminded Ghanaians.
Social intervention programmes
Enumerating a list of social interventions introduced by the Akufo-Addo administration to cushion Ghanaians before and in the midst of the pandemic, including lifting the freeze on employment, doubling of the Capitation Grant, expansion of the LEAP and School Feeding programmes, free water, subsidized electricity, and no public sector salary cuts or lay-offs, Dr Bawumia called on Ghanaians to work hand in hand with Government to address the present challenges.
“In the midst of the current economic challenges we face, we are putting in place the key pillars for the economic transformation of Ghana. We may not yet be where we want to be, and we may be buffeted by the winds of the pandemic and the war for yet a little while, but we have made a great start and, together, we shall finish what we started.”
Dr Bawumia had a special message for Ghanaian youth.
“We understand your desires for a bright and prosperous future. A future that would have the resilience to better withstand shocks of the nature we are currently experiencing. I am excited about the prospects of the nation we are building the brilliant minds being nurtured who are contributing towards this vision.
“We may not achieve everything we set out to achieve, but that must not stop us from trying. We must celebrate our achievements, big or small and not seek to tarnish or belittle them for the sake of politics. I look forward to all of you playing a role in making our nation great and strong.”
