Deputy Minister for Finance, Hon. John Kumah said the unceasing attacks launched by former President John Dramani Mahama on the economy under President Nana Akufo-Addo defy logic; hence provided some facts and figures to aid the understanding and appreciation of John Mahama on the excellent work President Nana Addo has done to correct the mess he (Mahama) left behind.
He also noted President Akufo-Addo is indeed, pursuing his quest to build the country forward better post-COVID-19 pandemic.
In a statement he issued, John Kumah educated Mr. Mahama on how the government strives to weather the devastating effects of COVID-19.
He said the government has continued with the much-needed flagship programmes expected to aid the Country’s economic transformation, including the recently introduced GhanaCARES programme.
“However, equally crucial to Ghana’s economic rebound is the maintenance of the Country’s security given the volatile security situation of the sub-region. Indeed, the government has provided the required resources to guarantee that the territorial integrity of Ghana is maintained. Also, the massive roll-out of COVID-19 jabs is facilitating the quicker rebound of the economy.”
Below is the full statement:
MAHAMA’S ATTACK OF THE ECONOMY DEFIES LOGIC
My attention has been drawn to Mr. John Dramani Mahama’s recent address dubbed “thankGhana.” In the address, Mr. Mahama made commentary on different facets of Ghana, including political governance, economic development, and job creation. I, however, would not spend time exposing the hypocrisy of Mr. Mahama on all the issues he raised but on the economy.
As a Deputy Minister of Finance, I feel compelled to provide some facts and figures to aid the understanding and appreciation of the former President on the excellent work President Nana Addo has done to correct the mess he left and the quest to build forward better post-COVID-19 pandemic.
Perhaps it is important for me to elucidate to Mr. Mahama the governments strive to weather the devastating effects of COVID-19. Thanks to the “people first” policy of Nana Addo when COVID first came to our Country, lives were saved, businesses were protected, and the economic cost of the pandemic largely attenuated. As a result, Ghana is currently seeing a rebound in growth, inflation is on a downward trend albeit the recent blips, the Cedi’s depreciation is at an all-time low, and international reserve is at an all-time high of 6 months of import cover.
The government has continued with the much-needed flagship programmes expected to aid the Country’s economic transformation, including the recently introduced GhanaCARES programme. However, equally crucial to Ghana’s economic rebound is the maintenance of the Country’s security given the volatile security situation of the sub-region. Indeed, the government has provided the required resources to guarantee that the territorial integrity of Ghana is maintained. Also, the massive roll-out of COVID-19 jabs is facilitating the quicker rebound of the economy.
The former President repeatedly intimated that Ghana’s economy is in a dire state and require IMF support. Indeed, the former President said that the NPP Government has refused to accept and acknowledge the Country’s economic predicaments. The ex-President’s statement is surprising, especially when Nana Addo’s government has been honest with Ghanaians on the economic situation he inherited and the measures to turn around the fortunes of the Country. Maybe, a bit of macroeconomic statistics will enable the former President to appreciate the excellent work of Nana Addo’s Government.
By the end of 2016, when Mr. Mahama was the President, real Gross Domestic Product moniker GDP was 3.4 percent. End year inflation was at a high of 15.4 percent and a currency depreciation of 9.6 percent. Central government Fiscal deficit for 2016 was 6.5 percent. Indeed, if one look at the deficit front general government where all contingent liabilities are included, the deficit could be much higher. Primary balance, which indicates the Country’s ability to service its debt, was negative at 1.4 percent. Government’s short time securities were selling at an all-time high, with 91-day bills at 16.9 percent. Current account was in the negative at 6.6 percent of GDP. Trade balance was also negative, and Ghana’s international reserves could cover only 3.5 months of imports.
Since the NPP government assumed office, real GDP has been growing with a 8.1 percent in 2017, 6.3 percent in 2018, 6.5 percent in 2019. Even with COVID-19, where the global economy plunged into recession, Ghana still recorded positive growth of 0.4 percent. According to the World Bank, the pandemic upended over a decade of growth witnessed in Sub-Sahara Africa, with an estimated negative growth of 2.4 percent in 2020. The negative growth was Africa’s first economic contraction in a generation and the deepest recession since the 1960s. Fitch Ratings acknowledged that Ghana’s 0.4 percent growth in 2020 was one of the few sovereigns globally to record positive growth, and they project a growth rebound of 5 percent in 2021.
On inflation, NPP’s record is unmatched. Nana Addo’s government has implemented policies and programmes which have resulted in a reduction in inflation from high end-year inflation of 15.4 percent in 2016 to 11.8 percent in 2017, 9.4 percent in 2018, and 7.9 percent in 2019. By 2020, with COVID-19, inflation increased to 10.4 percent but was lower than Mr Mahama’s 2016 record.
Regarding the Cedi’s depreciation against the major currencies, the performance of Nana Addo is unparallel. From a high of 9.6 percent in 2016, the average exchange rate dropped to 4.9 percent in 2017, 8.4 percent in 2018, and reduce to a low of 3.5 percent in 2021. Indeed, in February 2020, the Cedi was the best performing currency in the world. This clearly indicates that the NPP government has managed the currency better than we saw in the past. The Cedi’s performance so far this year has been phenomenal, especially when compared to 2019’s end-year larger depreciation of 12.9%, 15.7%, and 11.2% to the US Dollar, Pound Sterling, and Euro respectively.
For the most part of this year (Jan.–June 2021), the Cedi appreciated to the dollar and the Euro. As at 1st June 2021, the Cedi appreciated by 0.23% and 0.35% against the dollar and the Euro, respectively. But it depreciated against the GBP by 3.26%. This performance certainly is attributable to several measures initiated by Government and the Bank of Ghana (BoG), including the novel FX Forward Auction which has reduced pressure at the FX spot market and the Country’s relatively stable sovereign credit rating.
Other factors include the credible plan of Government to build back better the economy (restore macroeconomic stability) post-COVID-19 and return to the Fiscal rule by 2024, which has given confidence to investors. Also, the relatively large reserves and the excellent performance of the managers of the economy have contributed in keeping the Cedi in check. This has been achieved despite the deleterious external headwinds, including strengthening the dollar on the back of positive economic data, risk-off sentiments, and growth in US job numbers. By the end of August 2021, the Cedi depreciated by 1.6 percent against the US Dollar.
The figure below shows the exchange development in Ghana from 2018 to September 2021.
Figure 1. : Exchange Rate Developments in Ghana (2018 – to Date)
It is important to note that developments in the exchange rate market under the NDC were much direr. Indeed, the Cedi as at the end of September 2012 had depreciated by 17.9% to the dollar, 14.1% to the GBP and 13.1% to the Euro at the interbank market. By September 2013, the Cedi gained marginally when it depreciated by 4.12% to the dollar, 9.97% to the GBP and 14.1% to the Euro. By the end of 2013, the Cedi maintained its level at 4.12% depreciation. However, the GBP further depreciated from 9.97% to 16.73% and Euro from 14.1% to 20.05%.
By September 2014, the currency saw it worse when it depreciated by a whopping 31.19% to the dollar, 29.32% to the GBP and 23.63% to the Euro. This development certainly reflected the competence or otherwise of the managers of the economy at that time. However, the situation improved slightly when the local currency depreciated by 14.8%, 12.6%, and 7.8% to the dollar, GBP, and Euro, respectively, by September 2015.
By the end 2016, the Cedi depreciated by 9.6% to the dollar, appreciated by 10% to the GBP and depreciated by 5.4% to the Euro. There is no denying that the NDC’s performance in the exchange rate market was dismal, as illustrated in figure 2 below.
Figure 2: Exchange Rate Developments- 2012-2016
On fiscal balance, the NPP’s performance is nothing short of sterling. By 2017, the deficit was reduced from a high of 6.5 percent in 2016 to 4.9 percent. Through the prudent fiscal management of NPP, by 2018, the deficit further dropped to 3.9 percent and in 2019 was at 4.8 percent. However, with the COVID-19 pandemic, the deficit increased to 11.7 in 2020. Let me reiterate that Government, through its prudent fiscal consolidation plan, is expected to return to the fiscal rule of 5 percent by 2024 or before.
The NPP government has done well on primary balance, which basically measures one’s ability to service its debt. As Mr. Mahama indicated in his presser, the primary balance is the clearest indicator of fiscal discipline. By 2016, because of Mahama’s economic mismanagement, the primary balance was negative 1.4 percent. In 2017, the situation was reversed and by 2018, primary balance was a positive 1.4 percent. In 2019, it was still positive 0.9 percent. For 2021, primary balance is projected at negative 1.4 percent even with COVID.
The other indicators including rate of government securities, and policy rate have all been trending downward since the NPP came to office. On the cost of borrowing, the NPP government has managed to reduced interest rates on government securities drastically. Indeed, the average interest rate changed on 91-day bills in 2016 was 16.42 percent and for 182-day bills, 17.63 percent. The NPP government has been able to reduce the rates to 12.46 percent and 13.22 percent for 91 and 182 bills respectively as at August 2021. The government has been keen on getting rates down whilst ensuring government finance do not get compromised (See table 1 below).
Table 1: Interest Rates for the 91-day & 182-Day T-Bill Rates (2016-Aug.2021)
| 2016 | 2017 | 2018 | 2019 | 2020 | Aug. 2021 |
91-Day | 16.42 | 13.35 | 14.59 | 14.70 | 14.09 | 12.46 |
182-Day | 17.63 | 13.88 | 15.03 | 15.15 | 14.12 | 13.22 |
Trade balance has moved from the deficit corridor to surplus position since 2017. The worsening current account position has been improving since 2017, an indication of the prudent economic management currently under implementation. Ghana’s gross international reserve position keeps improving from a low of 3.5 months when Mr. Mahama was in power to a high of over 6 months under Nana Addo.
On debt developments, there is no denying that the nominal debt has increased. But we must understand the sources of the growth in debt. From the Fitch Rating report where Mr. Mahama quoted, the report acknowledged the legacy domestic payment arrears build-up prior to 2017 and the contingent liabilities from the energy sector also the creation of Mr. Mahama as the reason for the bumps in public debt.
One key consideration when looking at public debt is the refinancing risks. Prior to the NPP Government coming to power, the proportion of debt maturing in 1 year was the highest in the public debt portfolio. This main that refinancing and interest cost risk were elevated because Ghana was highly likely not to be able to pay its debt maturing under one year. Today, due to prudent and innovative debt management, the short-term debt as a proportion of total stock of domestic debt has reduced from 37.6% in 2016 to 13.3% in June 2021. This means, Ghana does not face any challenge in financing debt maturing in the short term.
Table 2: Domestic Debt Stock by Maturity (2016 – June 2021)
| 2016 | 2017 | 2018 | 2019 | 2020 | JUN-21 |
Short-Term Instruments | 37.6% | 18.0% | 12.7% | 15.5% | 11.3% | 13.3% |
Medium-Term Instruments | 36.9% | 55.0% | 55.7% | 56.4% | 60.3% | 61.2% |
Long-Term Instruments | 24.6% | 26.7% | 31.4% | 28.0% | 28.3% | 25.4% |
Table 3 below provides a comprehensive snapshot on all the macroeconomic indicators.
Table 3: Key macroeconomic indicator performance
On sectoral performance, for most of the NDC’s rule, Agriculture, Industry and Services grew below 5 percent. Indeed, the sub-sectors of forestry and logging, and fishing contracted by 1.5 and 23.3 percent respectively in 2014. In addition, by 2016, manufacturing, water and sewerage all contracted as indicated in table below.
Table 2: Real GDP Growth (percent) at Constant 2013 Prices
Mr. Mahama also raised an issue with government 2020 spending. The former President did indicate that government spent its way to win the 2020 elections. This assertion is unfortunate. If the former President wants to appreciate mismanagement during election years, there are classical evidence before him. Unlike 2012 when Mr. Mahama spryly spent billions of cedis in three months to win elections and subsequently led Ghana to turn to IMF, the Nana Addo government never did that. To appreciate election spending, one must know that elections-related spending is done through the budget’s Good and Service component. From fiscal data provided and published by the Ministry of Finance, we observe the follow:
- We noticed that in 2012, Good and Services increased by 37% from a budgeted amount of GH¢967.0 million to an actual expenditure of GH¢1,322.0 million.
- In 2016, which also was an election year, Good and Service saw another increase of 51.4% on revised budget. In nominal terms, good and service increased from a budgeted figure of GH¢2,127.0 million to GH¢3,221.0 million by close of the year.
- In 2020, however, the goods and service component of expenditure contracted (reduced) by 11.3% on budget and by 4.6% on revised budget. In nominal terms, the Good and Service budget reduced from budgeted figure of GH¢8,331 million to an end of year figure of GH¢7,388.0 million.
This evidence provided here does not support the former President’s claim of overspending by the NPP to win 2020 elections. Indeed, we saw mismanagement of the economy in 2012 and 2016 when the former President was desperate to win power. See the table below for details on government spending in election periods.
Table 3: Election time Government Spending
Mr. Mahama again offered his opinion on Ghana’s recent ratings performance. He bemoaned Ghana’s current rating of B3 with a negative outlook by Moody’s, B with stable outlook by S&P, and B with a negative outlook by Fitch. He forbodes that Ghana could be downgraded to triple C if the current macroeconomic situation does not improve. It is important to offer some information on Ghana’s ratings history to Mr. Mahama to enable him to appreciate where Ghana has come from and his dismal rating performance when he was in charge of the Country.
Ghana commenced her first ever credit ratings in 2003. Currently, Ghana is rated by all three (3) key international rating agencies – Fitch Ratings, Standard & Poor’s (S&P), and Moody’s Investor Services. The rating ratings performance has been largely mixed since 2003. After improving in the scores up to 2008, Ghana suffered several downgrades till 2016. Starting 2017 until 2019, Ghana achieved significant credit rating upgrades from all the 3 rating agencies as exhibited in Figure 3. The emergence of Covid-19, however, led to several sovereigns being downgraded, including Ghana.
Figure 3: Ghana’s Credit Ratings (2003 to date)
S&P – For S&P, between 2010 to 2012, Ghana was downgraded from B+ with a negative outlook to B stable. Although, the rating was maintained at B between 2013 to 2014 the outlook deteriorated from stable to negative. The situation further worsened when the rating plummeted to B- with stable outlook between 2015 to March 2017. The situation was however, reversed when Ghana was upgraded to B with positive outlook between 2018 to 2019 until COVID-19 strike (See Table below).
Table 4. Historical S&P Ratings on Ghana, 2009 -2019
Fitch – Ghana’s rating story with Fitch is not different from that of S&P. Indeed, between 2009 to March 2013, Fitch maintained Ghana’s rating at B+, but the outlook improved from negative to stable then to negative. Ghana was downgraded to B from B+ between September 2013 to March 2019 with mixed outlook. Within the period, the outlook moved from stable to negative and then back to stable as shown in Table 4.
Table 5. Historical Fitch Ratings on Ghana, 2009 -2019
Moody’s – Moody’s maiden rating of the sovereign in 2012 was B1 with stable outlook. Between March 2012 to September 2013, Moody’s maintained Ghana’s rating at B1 with stable outlook. However, between March 2014 to September 2015, the rating moved downward from B1 to B2 and the outlook revised from stable to negative. By 2016, the rating was further downgraded to B3 with negative outlook.
The situation improved slightly between 2017 to September 2018 when the outlook was revised from negative to stable. Ghana again saw another improvement when Moody’s revised its outlook from stable to positive between Mach 2019 to April 2020. However, with COVID-19, the outlook was revised from positive to negative.
Table 6. Historical Moody’s rating on Ghana, 2009-2019
The ratings performance shows clearly the NPP as better managers of the economy and will continue to have access to the international capital market despite the gloomy picture Mr. Mahama wants Ghanaians to believe.
On economic governance, the NPP government stand tall. The government has undertaken reforms which are addressing the structural imbalances and opaqueness in the economy. These reforms are aimed at social inclusion and the restoration of the dignity of the Ghanaian. Key among the reforms includes i.) Establishment of Special Prosecutor Office– the Special Prosecutor’s office is a specialised independent, preventive, investigating prosecutorial and asset recovery anti-corruption agency; ii.) Fiscal Responsibility Act, 2018 (Act 982) – this law provides for fiscal responsibility rules to ensure macroeconomic stability and debt sustainability. By so doing, it caps the Fiscal Deficit at 5% of GDP and a positive Primary Balance; and iii.) Public Financial Management Regulations, 2019 (L.I. 2378) – this L.I provides regulations in consultation with the Public Procurement Authority for the effective implementation of the Public Financial Management Act 2016, (Act 921).
The rest are iv.) State Interest and Governance Authority Act (2019) – this Act provides a centralise framework for the governance of State-Owned Enterprise (SOEs), Joint Venture Companies (JVCs) and other state entities. It also seeks to protect the interest of the State in these parastatals; v.) Public Investment Management Regulations, 2020 (L.I. 2411) – this L.I. provides for the preparation, evaluation, and execution of investment projects; standard framework for project identification and planning, implementation, and reporting; enhance transparency, accountability, and prudent use of public resources and vi.) Public Private Partnership Act, 2020 (Act 1039) – the Act provides for the development, implementation, and regulation of public private partnership arrangements between contracting authorities and private parties for the provision of infrastructure and services among others. These reforms have enhanced fiscal operations of Government.
