Posted on: www.dailyguideghana.com
By William Yaw Owusu
Thursday, October 06, 2016
An International Monetary Fund (IMF) data
has revealed that Ghana’s economic growth in 2016 will slow down to the lowest
rate recorded in more than 20 years.
The data has disclosed that there is
going to be a full-blown financial crisis in Ghana if the government does not
take aggressive measures to check the country’s rising debts.
Contradiction
This revelation sharply contradicts
President John Mahama’s claim that his National Democratic Congress (NDC) government
has set Ghana on a path of economic progress, as he campaigns vigorously for a re-election.
At the commencement of the second leg of
his Brong-Ahafo Regional tour, President Mahama said in Yeji in the Pru-East Constituency
on Tuesday that the NDC government had done all it needs to sustain the economy
and “because of that a lot of investors have reposed confidence in our economy.
The Cedi has also been stabilized.”
Addressing the chiefs at the Yeji chief’s
palace, he cited the decreasing inflationary rates and the recent Moody’s
ratings of Ghana as proof of the strides his government had made in the last
four years since the Supreme Court declared that he was validly elected.
“Apart from this, Moody’s rating some two
weeks ago also showed that our economy is robust. They said we have moved from
a negative rank to a stable one,” the president declared.
Moody’s Rating
In its recent economic report on Ghana, Moody
defined the country’s economic outlook as positive, affirming the rating at B3.
The report cited significant fiscal
deficit reduction and success in implementing structural reforms over the past
year, as well as reduction in government liquidity risk on the external side.
The agency pointed out that the proceeds
of the $750 million Eurobond earmarked for debt repayments is part of the key
drivers for the stabilization of the rating.
Other reasons cited for the revision were
improved balance of payments dynamics, including improved foreign direct
investments (FDI) inflows and continued development of oil and gas resources.
Interestingly, it was the same President
Mahama-led government that mismanaged the economy between 2012 till date to
attract the previous negative rating by Moody.
“The president had inherited an economy
that was growing at about 14% in 2011 but the high level of incompetence
displayed by economic managers has seen the growth rate plummeting to about 3%
in the past years,” said an economic expert, who preferred not to be mentioned.
IMF Projections
While President Mahama was touting
Moody’s ratings, an IMF staff report sent to its Executive Board to pass
Ghana’s performance under the third review of the programme is expressing fears
based on some tight financing conditions facing the government as a result of
challenges with revenue mobilization.
According to the 121-page report, the development
could result in some ‘overruns’ in the coming weeks, as the December elections
approach.
“In the context of a much higher public
debt level, a replay of the past spending splurges in election years would
greatly heighten the risk of a full-blown economic and financial crisis and
undermine Ghana’s development progress," according to the report.
Debt Sustainability Analysis
IMF maintained that Ghana’s risk of debt
distress remained high under the updated Debt Sustainability Analysis (DSA),
with two relevant debt indicators breaching the thresholds under the baseline.
It said, however, that end-2015
debt-to-GDP ratio turned out to be smaller than envisaged in the previous DSA
due to larger fiscal consolidation, higher nominal GDP and exchange rate
stabilization.
The report said it would be essential for
the government to sustain fiscal transparency and be ready to tighten policies
aggressively as the situation warrants, especially when there is an impending
general election when there is “heightened risk aversion and investor
uncertainty.”
It said with continued fiscal efforts,
prudent debt management and careful selection of projects to be financed by
non-concessional loans, the debt trajectory is now projected to show a more
favourable path than before.
Discrepancies With Fiscal Data
The staff, in its report on Ghana, were
of the view that the inconsistencies in fiscal reporting at the end of 2015,
and first half of 2016 was more of timing issues and not indicative of
worsening financial position of government.
The report said to keep track with fiscal
consolidation plan will require enhanced revenue collection and continued
strict expenditure control, in particular the wage bill while containing
discretionary spending and there must also be strong vigilance and efforts to
achieve the revised 2016 budget objective.
Bloomberg’s Angle
A leading global provider of 24-hour
financial news and information Bloomberg is even quoting Joel Toujas-Bernate,
the IMF’s mission head in Ghana, as confirming the slowing of economic growth in
that uncertainty over the resumption of oil and gas output at a key field
weighs on the country’s prospects for 2017.
The news outlet said the IMF issued its
forecasts for Ghana after the country’s Gross Domestic Product (GDP) expanded
at 2.5 percent in the three months through June, as defects on the FPSO Kwame
Nkrumah, the vessel used for production, storage and offloading crude at the
Jubilee oil field adversely affected oil and gas output.
Bloomberg said the Mahama-led NDC government
had said in July that growth will accelerate to between 4.1 percent and 4.3
percent this year.
IMF statement
It quoted the IMF in a statement as
saying that “the outlook remains difficult and the balance of risks is tilted
to the downside,” adding, “Uncertainty regarding repair operations at the
Jubilee oil field poses a significant risk.”
“The
recent re-emergence of power shortages due to disruption in gas supply is
adding to downside risks,” Bloomberg quoted the IMF as saying.
Oil Revenue Shortfalls
Bloomberg quoted Mr. Toujas-Bernate as
telling reporters on a video conference call from Washington on Tuesday that the
IMF revised Ghana’s budget deficit forecast for 2016 to 5.2 percent of GDP from
4.8 percent in May due to oil-revenue shortfalls.
Inflation will slow to 13.5 percent by
the end of the year from 16.9 percent in August.
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