Ken Ofori-Atta
The International Monetary Fund (IMF) has said Ghana’s economy, supported by a strong policy response, is rebounding after the impacts of the COVID-19 pandemic, which affected the real GDP growth.
In a statement issued and signed by its Press Officer, Lucie Mboto Fouda after preliminary findings of staff at the end of an official visit to Ghana, the IMF lauded President Akufo-Addo and his economic management team for the effective management of the COVID-19 outbreak in the country.
“Ghana has managed very effectively the COVID-19 outbreak in the country, and thus succeeded in protecting lives. Almost 93,000 cases have been confirmed, and unfortunately 780 people have died as of today. The launch of mass vaccine rollout has been a breakthrough, with the administration of approximately a million doses as of end-May,” the statement indicated.
The IMF mission, led by Carlo Sdralevich, held consultations under the Article IV during April 28 – May 12, 2021 through virtual meetings with Vice President Dr. Mahamudu Bawumia, Finance Minister Ofori-Atta, Governor Dr. Ernest Addison of the Bank of Ghana, other senior government officials, Finance Committee of Parliament, private sector representatives, and civil society organisations.
It said “The impact of the pandemic on the economy has been severe. Real GDP growth slowed to 0.4 per cent in 2020 from 6.5 per cent in 2019, due to lower activity in the extractive industries and a collapse in hospitality and retail services, including the informal sector that especially employs female workers.”
The statement noted that inflation spiked to double digit because of food price pressures, before falling to 8.5 per cent in April 2021, pointing out that “policy interventions in 2020 were also critical to safeguard livelihoods and paved the way for a faster rebound of economic activity.”
The IMF mission stated that the real GDP growth was projected at 4.8 per cent in 2021, driven by a rebound in mining and services, and that “inflation is expected to remain around the central bank’s target of 8 per cent by end-2021.”
It said the Akufo-Addo administration’s ambitious CARES programme has “the potential to be transformative and inclusive for the Ghanaian economy, buttressed by its emphasis on SMEs and digitalisation as well as leveraging the AfCFTA.”
“Government interventions in 2020 also exacerbated pre-existing fiscal rigidities and public debt vulnerabilities. The government deficit, including energy and financial sector costs, reached 15.5 per cent of GDP, while annual gross financing needs exceeded 20 per cent of GDP,” it added.
The IMF asserted that the public debt rose to 78 per cent of GDP in 2020, from 64.4 per cent in 2019, including ESLA of GH¢7.63 billion in 2020.
“The 2021 budget’s recent policy pivot towards fiscal consolidation is an important step in the right direction and a difficult one in a pandemic,” it indicated further and continued that the fiscal consolidation should be deepened and anchored around debt and debt service reduction to create space for social, health, and development spending.
“Given the social and equity implications, fiscal consolidation should rely more on progressive revenue and spending measures, while guaranteeing fiscal support to the most vulnerable and social safety nets.”
“Despite progress in rationalising power generation, the financial viability of the energy sector affects people’s daily life and will remain a drag on productivity and a driver of public debt, if not addressed decisively,” the IMF argued, and continued that improving efficiency and collections remains a priority to achieve substantial savings.
“The planned audits of COVID-19 emergency spending and of arrears accumulated in 2020 – in addition to routine budgetary reporting practices – are welcome as they will help account for the increase of spending and its effectiveness, and provide lessons to improve the robustness of Public Financial Management systems,” it added.
It said the team had collaborative and constructive discussions with Vice President Bawumia, Finance Minister Ofori-Atta, Governor Addison of the Bank of Ghana, other senior government officials, Finance Committee of Parliament, private sector representatives, and civil society organisations.
By Ernest Kofi Adu