Vice President Dr Mahamudu Bawumia on Thursday said although the Covid-19 had impacted the strong foundation of the economy, the country’s growth statistics remained stronger.
Speaking on the state of the economy at the TESCON national conference at Kasoa, in the Awutu Senya District, Dr Bawumia said the country’s path of inflation has been similar to those of other countries following the pandemic.
The Vice President said inflation had declined from an average of 17.5% in 2016 to an average of 7.2% in 2020 and since Covid-19, inflation increased to an average of 10% in 2021.
“As of February 2022, inflation rose further to 15.7% as a result of global conditions, including a rise in crude oil and other commodity prices and the Russian-Ukraine conflict”, he stated.
Dr Bawumia said it was important to note that between 2013 and 2016 inflation averaged 15.9 and between 2017 and 2021, however, inflation has averaged 10.4%, “notwithstanding the impact of COVID-19.”
Before COVID-19, Dr Bawumia said the steady disinflation process provided scope for significant monetary policy easing. “The Bank of Ghana’s Monetary Policy Rate (MPR) was cut by a cumulative 11% between January 2017 and January 2021.”
That, he indicated, translated into a reduction in short term interest rates, with the interest rate on the 91-day Treasury bill declining from an average of 21.2% between 2013 and 2016 to an average of 13.8% between 2017 and 2021.
Lending rates, Dr Bawumia explained had also fallen from an average of 28% between 2013 and 2016 to an average of 23% between 2017 and 2021.
But in response to the recent increase in inflation, the Vice President said the Bank of Ghana had increased the policy rate by 2.5% from 14.5% to 17.0%.
Bawumia said the robust fiscal discipline under the Akufo-Addo led administration, had been a contributing factor to the country’s strong economic fundamentals.
“The developments in the fiscal balance show a remarkable and sharp dichotomy between the fiscal deficits (i.e. the 23 differences between government revenue and government expenditure), before the COVID-19 and after COVID-19.”
Dr Bawumia stated that the fiscal deficit between 2013 and 2016 averaged 7% of GDP, while between 2017 and 2019 (before COVID-19), the fiscal deficit declined to an average of 4.5%.
For the first time in a decade, Vice President Bawumia said Ghana recorded primary balance surpluses (for three years in a row).
To sustain the path of fiscal discipline, he said parliament passed into law a Fiscal Responsibility Act that limited the fiscal deficit in any year to a maximum of 5% of GDP and required a positive primary balance (that tax revenues should exceed all government spending, excluding debt service payments).
He added that Ghana’s external sector performance was the strongest as compared to the trade deficit of US$1.7 billion recorded from 2013 to 2016.
“Ghana’s external payments position strengthened in the 2017-2021 period relative to the 2013-2016 years. For the first time in over 30 years, the trade balance (the difference between what we export and what we import) recorded a surplus for five successive years,” he said.
The trade balance was in the deficit between 2013 and 2016, Dr Bawumia indicated but moved from a deficit of US$1.7 billion in 2016 to a surplus of US$1.1 billion in 2017, a larger surplus of $1.8 billion in 2018, and an even larger surplus of US$2.2 billion in 2019.
The Vice President, however, said the impact of COVID-19 has seen a reduction of the surplus to US$2.04 billion in 2020 and a further reduction to US$1.1 billion in 2021.
“…Nevertheless, this is still a much stronger performance than the trade deficit of US$1.7 billion recorded in 2016 (which was one of the stronger performances in the 2013-2016 period.”
Dr Bawumia said the government was focused on undertaking major structural economic reforms by shifting from the production of raw materials to value addition in other to diversify the economic fundamentals.
That, Vice President Bawumia stated, was to address the structure of the country’s economy and make it responsive to the realities of the times, especially as the world moved into the Fourth Industrial Revolution.
Dr Bawumia emphasised that “virtually every government in our history has noted the need for Ghana to change the structure of the economy through diversification” and that was a key pillar of the Ghana Beyond Aid agenda.
He explained that to accomplish that, the government had implemented several programmes, which continued to yield significant results. Some of the programmes include Planting for Food and Jobs, which had increased agricultural output for agro-processing and food sufficiency.
The Tono dam and the Left and Right banks of the Kpong dam have been rehabilitated to provide 13,190 hectares of additional irrigable land for rice and vegetable cultivation. As well, 80 warehouses have been constructed with a combined storage capacity of 80,000 MT to provide storage and reduce post-harvest losses.
“Reforms in the cocoa sector including hand pollination have resulted in the highest ever cocoa production (1,047,385 tonnes) recorded in Ghana during the 2020/2021 cocoa season.
The Vice President said 106 factories have been completed and operational, and 148 factories are under construction under the 1 District, 1 District Factory initiative.
That, according to Dr Bawumia, represented the largest number of factories established under a government programme since independence.
“The facilitation of the growth of an Automotive Industry is on course. Volkswagen, Suzuki, Sino Truck, Peugeot, Toyota, and recently Nissan have all established assembly plants in Ghana. KIA, Hyundai and Renault are also on course to start production in Ghana this year. Kantanka automobile was also benefiting from the same incentives that have attracted these giants onto our shores,” he said.
True to its commitment to diversifying the economy and value addition, the government has started the process of building the integrated bauxite and aluminium industry, the Vice President pointed out.
The partner for the project (Rocksure International), a wholly-owned Ghanaian company, has been selected and has already started work to develop the Nyinahin-Mpassaso hills.
Dr Bawumia said changing the structure of the economy through diversification and value addition, would not happen overnight. However, it remained a major preoccupation of the government to reduce import dependency, expand the economy, create jobs, increase exports, and support the value of the currency.
Rex Mainoo Yeboah, ISD