Ghana’s economy not in crisis – Deputy finance minister slams Mahama

Mahama descends on Akufo-Addo's government

Mahama accuses Akufo-Addo of running Ghana’s economy into crisis

Mahama lied about Ghana’s economy, says John Kumah

Deputy Minister for Finance, Dr John Kumah has lashed out at former President John Dramani Mahama over his recent diagnosis of the Ghanaian economy.

Mr Mahama in a statement dated Monday, February 7,

Read full article2022, described the Ghanaian economy as having been run into crisis under the current leadership of his successor, President Nana Addo Dankwa Akufo-Addo.

However, in a rejoinder to former President Mahama’s statement, the deputy minister described the claims made by the former president as being politically motivated and drawn from figments of his imagination.

He further disputed that Mr Mahama’s claims on the economy are not backed by facts and data.

“The ex-President's opinion, as expressed in this article, are not: Based on fact and data; It is primarily based on his figment of imagination; and politically motivated.

“His countenance visibly expressed in the article is one desperate to fabricate and spur propaganda to gain the trust of Ghanaians. Clearly, as a former President, one expects a lot of decorum, precision in analysis and also making submissions based on verifiable evidence. The Ghanaian economy is not in crisis!” the deputy minister disputed.


Mr Mahama in his release on Monday alluded that markings of the economic crisis currently being experienced under the current government exists in “huge budget deficits, an unsustainable public debt, rising inflation, a rapidly depreciating currency, ever-rising cost of living and a loss of confidence by both domestic and international investor communities.”


Mr Mahama further emphasized among other things that the current administration ended up running the economy down through excessive and reckless spending during the 2020 electioneering year.

But in his response to the former president, John Ampontuah Kumah who also doubles as the Member of Parliament for Ejisu said Mr Mahama trumpeted lies about the economy.



Read the full rejoinder by the deputy minister for finance below:

RE: TIME IS TICKING FOR CRISIS-RIDDEN GHANAIAN ECONOMY

1. The ex-President's opinion, as expressed in this article, are not:
a. Based on fact and data;
b. It is primarily based on his figment of imagination; and
c. Politically motivated.

2. His countenance visibly expressed in the article is one desperate to fabricate and spur propaganda to gain the trust of Ghanaians.

3. Clearly, as a former President, one expects a lot of decorum, precision in analysis and also making submissions based on verifiable evidence. The Ghanaian economy is not in crisis!

4. JM alluded to the fact that the major macroeconomic indicates are headed south. This is absolutely FALSE.

5. Here i provide some evidence to prove that Ex-President lied about the economy.

a. Budget Deficit –
- It is important to emphasise that the NPP government enacted the Fiscal Responsibility Act (FRA), which by law cupped deficit at 5% of GDP and required the Government to maintain a positive Primary Balance at all times.
- Indeed, the government went ahead to sign an MOU with the Bank of Ghana, which prohibited funding from the Central Bank.

- Until COVID-19 hit our shores, Government had maintained;
o Deficit under 5%;
o Positive primary balance (which measures our ability to service debt); and
o Maintained zero financing from the central bank.

- Even in the face of COVID-19, Government has drawn a credible plan to return to the fiscal deficit threshold by 2024. Already, we forecast to post a positive primary balance in 2022. Apart from the GHS10.0billion Asset Purchase Programme in 2020, Government has maintained zero financing with the Bank of Ghana.

- Therefore, the fiscal framework has been calibrated to reflect recent macro-fiscal measures for 2022. As a result, the overall budget deficit is projected to moderate downwards from 7.4% in 2022 to 5.5%,4.5 and 4.2% in 2023,2024, and 2025 respectively.

- The GDP growth of 6.6% recorded in the 3rd quarter of 2021, and the projection of end year GDP growth of 5.3% gives us confidence that we may consolidate much quicker than anticipated.

b. Unstainable Public Debt
- Here, it is important to highlight the debt trajectory before COVID.

- Nominal increases in public debt stock post covid arise from:
o Crystallisation of contingent liabilities (Financial sector clean up, IPPs, Support to selected SOEs) which the NDC created.
o Exchange rate effect on external debt stock.
o Disbursements from old loans from previous Gov'ts.
o Exchange rate depreciation
o Financing the budget & Covid-19 pandemic

- Our debt sustainability indicators are on the right path as indicated below: Green indicates no risk, Yellow indicates moderate risk, and red shows high risk.

- We do not face any liquidity challenge that will compromise debt service for 2022 and beyond.
In addition, we have reduced debt maturing under one year through our active liability management programme.
c. Rising inflation –

- 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
o 15.4 percent in 2016 to 11.8 percent in 2017, 9.4 percent in 2018, and 7.9 percent in 2019.
o By 2020, with COVID-19, inflation increased to 10.4 percent but was lower than Mr Mahama's 2016 record.
- Inflation rate for December 2021 was 12.6%.
- Inflationary pressures are expected to stabilise and return within the 8±2 percent target band in the medium term (2022 – 2025) in line with expected recovery from the pandemic and related induced challenges.
- Prior to the pandemic, inflation was in single-digit 7.9% in 2019.
- Clearly, we have moved from the high inflation recorded under JM which in 2016 was 17.5%.

d. Depreciating currency
- 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 3.9 percent in 2020.

- 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 remained stable in 2021 underpinned by the Central Bank's proactive support and close monitoring of the domestic and external markets.
- The Cedi depreciation against the US dollar in 2021 was 4.09%. It is among the lowest depreciation seen in recent times.
Under NDC, the cedi suffered the most. 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.

e. Loss of confidence by domestic and international investors –
- There is no evidence to point to a loss of confidence in the Ghanaian economy.
- We acknowledge that there have been some blips occasioned by the delay in passing the e-levy bill and general negative sentiment propagated by our friends in the NDC.
- However, the markets have rallied back, and the spreads in our bonds have started narrowing, on the back of the Finance Minister's recently announced 20% cut in expenditure and the recently held investor engagements.

f. No Plan for Post Covid revitalisation –
- We are scandalised that JM does not know about the much-touted GHS10.0 billion COVID-19 Alleviation and Revitalisation of Enterprise Supports (GhanaCARES) programme Obaatan Pa programmes.
- The Obaatanpa Programme is a clear strategy to stabilise, revitalise, and return the economy to its pre-Covid growth and fiscal deficit path by 2024. It is funded through a GHS3.0 billion public sector contribution and GHS7.0 billion Private sector contribution.



- GhanaCARES has Two (2) Phases:
o Stabilisation Phase (July to Dec. 2020) to provide relief & support to Ghanaians, ensure food security, protect businesses and workers, strengthen the health system, and attract private investments to support Ghanaian businesses, and
o Medium-term Revitalisation & Transformation Phase (2021-2023) aimed at accelerating the Ghana Beyond Aid economic transformation agenda.
- The key components of the Phase 1 are;
o Responsive monetary policy stance & regulatory regimes
o Launching of Emergency Preparedness & Response Plan II
o Establishment of Guarantee Schemes for Businesses
o Ramp up local production and supply of PPEs
o Roll out of National Infection Prevention and Control Programme
o Funding will be extended under CAPBuSS to cover more MSMEs
o Expand health infrastructure - Agenda 111
- For Phase 2, the components are;
o Improve the private sector environment and provide support to Ghanaian enterprises in targeted sectors
o Optimise the implementation of Government economic flagships and key programmes
o Agricultural modernisation by complementing the Planting for Food and Jobs and the Rearing for Food and Jobs (PFJ/RFJ) initiatives
o Leveraging the Africa Continental Free Trade Area (AfCFTA) to promote Ghana as a regional hub for financial services by establishing an International Financial Services Centre
o Accelerate implementation of policy interventions across Housing,
Digitalization and Local production.

g. Election Spending
- We note that JM’s assertion on election spending are not backed by the evidence. 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:
o 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.
o 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.
o 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.