Accra, Ghana, January 29, 2019//-A renowned economist and Professor at the University of Cape Coast (UCC), John Gatsi, has observed that the latest Bank of Ghana (BoG) economic data questions the government’s commitment to policy decisions bothering on rice and sugar import reduction.
According to him, the 2018 economic data which backs BoG’s decision to reduce the policy rate by 100 basis points to 16% looks interesting.
Firstly, the data shows an addition of about Ghc 50 billion to public debt stock from 2017. The high public debt level, in the data, is conveniently measured against projected GDP to reflect a relatively lower Debt-GDP ratio.
The data also reveals a distressing situation of repayment cost exceeding the needed investments in national infrastructure.
Investment in broad based national infrastructure strategically positions the economy for continuous growth and development.
“It is important, at this point, to remark that the economic cost of the high debt is not only in the repayment, but also, how the repayment entangles commitments to capital expenditure. An example is the slow pace of infrastructural investment across the country”, Prof Gatsi, said.
Secondly, on external sector developments, Ghana, in 2018, recorded total capital goods import of about $2000 million and over $2,570 million consumption imports, out of which $339 million was spent on rice importation, he added.
On the policy front, government’s flagship agric program-Planting for Foods and Jobs (PFJ) may not be impacting rice importation significantly as rice importation continues to grow, according to Prof Gatsi.
“About $123 million was also spent to import sugar, while policy decision on making the Komenda sugar factory operational remains unclear. Though export of palm oil yielded $128 million, import volume of palm oil products doubled relative to $257 million when compared with exports”.
Thirdly, Gross International Reserve, which provides an outlook for import cover and currency management, reduced from over $7,500 million in 2017 to about $6,900 million in 2018.
The net international reserve which was $3,400 million at the beginning of 2017, also reduced to $3,240 million in 2018, after increasing to $4,500 million in 2017.
This shows that the 2016 net international reserve was better than 2018. Again, it signals that the BoG over intervened in the forex market to manage the strength of the cedi, which presently settles around the Ghc 5 perimeter against the dollar.
“The cedi according to the BoG deprecated more than 8% in 2018 and greeted us with more than 2% depreciation in January 2019 with depleting reserve does not signal reduction in policy rate.
Perhaps in the first quarter the quantum of currency reserve may be at risk and the Monetary Policy Committee (MPC) rate reduction is not a reflection of the reserve and risk side realities
Prof Gatsi noted that Non Performing Loans (NPL) only reduced by 3% despite the banking sector reform and assurances of renewed confidence in the sector.
“From the present economic outlook, focus on agriculture remains paramount. Currency management as well as a progressive balance between debt repayment cost and capital expenditure have to be pursued vigorously by the economic managers”.
African Eye Report
