Constance Bedzo

Many academic scholars have described Ghana’s economy as one suffering from grave distress, and that economic policies have lost credibility.

To them “we are no longer seen as creditworthy. Our policies are no longer seen as credible in the face of the investor community”.

The managers of the economy at one point asserted that Ghana’s access to the international market to borrow has been restricted, stressing that our access to the international market is being curtailed to a certain degree.

There have been monumental policy failures in Ghana over the years in national governance. Over the years, the Auditor General’s Report contained many cases of Financial Irregularities and breaches in procurement laws.

A total of seven commercial banks, hundreds of savings and loans and microfinance companies collapse in Ghana in 2017 and 2018. The executives and boards of the financial institutions were acting in their self-interests. There are still a few of them that are on life support.

In the case of the banking sector failure, even the regulator and the external auditors did not live up to expectations.

Protests hit the capital, Accra over rising inflation. Ghanaians protested as a result of the economic pressures. Food prices were up by 30% in annual terms in May 2022.

Ghana has been struggling to service its debts that have reached 78% of GDP—up from 63% in 2019. Ghana faced a balance-of-payments deficit of $934.5 million in the first quarter of 2022, compared with $429.9 million in the same period last year.

Inflation in the country rose to a record 27.6% in May 2022 amid a hike in fuel prices and a near 21% loss in the value of its currency, the cedi, against the dollar. The central bank last raised its interest rate by 200 basis points to 19%—the second major increase this year.

Some Ghanaians have lost hope in the decision-makers. In the view of the politicians themselves, over the years, governments promised the youth Hope but gave them Hopelesseness.

Many actors in the Ghanaian economy, including ordinary citizens are talking. Obviously, Ghana needs to define its purpose. This purpose defines the quality of our collective determination to do or achieve something, living with a plan, living to achieve a goal, and working towards achieving such a plan. It does appear Ghana is living without a goal.

Ghana’s economic growth

Ghana recorded GDP growth rate of 7% between 2017 and 2019. This, however, was halted by the COVID19 pandemic; the March 2020 lockdown, and a sharp decline in commodity exports with an overall GDP as low as 0.4%.

 Imports, however, expanded faster than exports in early 2021, while external demand for commodities remained subdued. This was fueled by the seeming domestic recovery. As a result, current account deficit was estimated to narrow to 2.4% of GDP compared to 2.3% in 2020.

The economic slowdown had a considerable impact on households. The poverty rate was estimated to have slightly increased from 25% in 2019 to 25.5% in 2020. Ghana’s economy effectively rebounded from the COVID-19-induced slowdown.

Growth was estimated to have reached 4.1% in 2021, and expected to be broad-based in 2022. The economy was projected to remain relatively strong over the medium term, supported by higher prices for key exports and strong domestic demand. Growth was projected to reach 5.5% in 2022 and average 5.3% over 2022. This was expected to be broad-based led by agriculture and services, and relatively stronger industry sector.

Fiscal deficit

The overall fiscal deficit doubled to 15.2% in 2020 and public debt increased to 81.1% of GDP in 2020, placing Ghana at significant risk of debt distress.

Government resorted to some fiscal consolidation measures in 2021, with the deficit declining to 11.3%. It does appear more significant effort was required to alter the debt dynamics meaningfully.

Fiscal data for the first half of 2021 suggested that the authorities cut spending to make up for revenue shortfalls. The overall fiscal deficit was 5.1% of GDP.

Inflation

Headline inflation averaged 7.8% in the first half of 2021 and ended at 10% as full-year average.

This was due to exchange rate, food and non-food price hikes, and continued in the first quarter of 2022.

As of month end, February 2022, inflation reached 15.7%, the highest level since December 2016. In May 2022, we were at 27.6%.

Revenue mobilization

The 2022 Budget set forth an ambitious consolidation plan as it aims to raise revenue from 16% in 2021 to 20% in 2022.

Fiscal measures were expected to reduce the deficit from 12% in 2021 to 4.5% by 2024. However, the main revenue measure (an e-levy estimated at 1.4% of GDP in 2022) has faced opposition, and has by far failed to produce the expected revenue, while targets for other revenue measures appear too be optimistic.

A more conservative projection suggests that the fiscal deficit could be closer to 7.5% in the medium-term (2022-2024), compared to the government’s target of 5.8%.

Risks and challenges

Ghana’s economy continues to suffer the impacts of the pandemic as growth is yet to get back to pre-pandemic levels, and this situation is compounded by the war in Ukraine.

The developments have raised global prices for several key commodities, including food, fuels, fertilizers, and metals used in manufacturing, adding to prior inflationary pressures in Ghana.

Protests hit the capital, Accra over rising inflation. Some Ghanaians protested as a result of the economic pressures felt in their households. Hundreds took to the streets of Accra for two days to demonstrate against spiraling costs.

Adding to the pinch felt by Ghanaians, food prices were up by 30% in annual terms in May 2022. Ghana has been struggling to service its debts that have reached 78% of GDP—up from 63% in 2019.

Ghana faced a balance-of-payments deficit of $934.5 million in the first quarter of 2022, compared with $429.9 million in the same period last year. Inflation in the country rose to a record 27.6% in May 2022 amid a hike in fuel prices and a near 21% loss in the value of its currency, the cedi, against the dollar.

In an attempt to curb state spending, the government approved a set of emergency measures, including a 50% cut to subsidized fuel for all ministers and heads of government institutions in April 2022. Ministers’ salaries were temporarily cut by 30%.

The central bank last raised its interest rate by 200 basis points to 19%—the second major increase this year.

Other policies to generate public revenue through taxation have proven politically unpopular, such as e-levy, which targeted mobile money transactions. The 1.5% tax on all electronic payments above ¢100 came into force in May 2022.

Like much of the world, the continent is seeing demonstrations against the high cost of living. In Sierra Leone, public transport workers went on strike over the high cost of fuel. In May, striking nurses at Zimbabwe’s public hospitals demanded better pay.

Many academic scholars have described Ghana’s economy as one suffering grave distress, and that Ghana’s economic policies have lost credibility.

Governance issues in Ghana

In view of the happenings in Ghana, regarding corporate failures and the current state of our ailing national economy, the question on our minds has to do with whether the state institutions and companies in Ghana have good corporate governance practices.

Many actors in the Ghanaian economy, including ordinary citizens are talking. Obviously, Ghana needs to define its purpose. This purpose defines the quality of our collective determination to do or achieve something, living with a plan, living to achieve a goal, and working towards achieving such a plan.

It does appear Ghana is living without a goal. Many industrialists have opined that the time has come for Ghanaians to own the local economy to ensure national development and prosperity for every citizen, and since independence 65 years ago, Ghana had done little to make its citizenry take an appreciable stake in its resources, with expatriates dominating essential sectors of the economy.

Many Ghanaian have blamed the culture and attitude of Ghanaians as part of the reasons for the stagnant growth and economic development of the country. They are of the view that the attitude of nepotism and the Ghanaian culture accounts for the country’s underdevelopment. Many have bemoaned the desire of some government officials to amass wealth immediately after they assume office has also contributed to the country’s economic crisis.

I am inclined to agree with the President of the Republic of Ghana, Nana Akufo-Addo, when he said ‘cost of poor governance can be enormous’.

According to him, everyone should be concerned about governance infractions as and when they arise, the exact enormous costs that affect the entire society.

This is evident in 2017 when Ghana had a deficient financial infrastructure and ended up spending over ¢21 billion to remedy the consequences of bad corporate governance in the financial sector and a further ¢4.5 billion to protect investors in failed asset management companies.

Indeed, “Poor corporate governance across public enterprises has also had a significant adverse impact on our fiscals, state-owned enterprises reporting significant and persistent operating losses”, the President said.

By the end of 2019, a cumulative total of ¢16.37 billion in outstanding on-lend loans stood against state-owned enterprises.

Similarly, in 2020 and amidst the Covid-19 pandemic, government had to transfer over ¢166 million as government support to a number of state-owned entities. These resources could have been used to expand social welfare programmes to mitigate the impact of the pandemic on the average Ghanaian, amongst others.

We cannot over-emphasise the importance of Good Corporate Governance in Ghana.