Accra, Ghana//-The Member of Parliament for Bolgatanga Central in the Upper East Region, Isaac Adongo has revealed that Ghana’s economic challenges pre-date the deadly Covid-19 pandemic.
According to him, by the end of 2019, Ghana’s economy had become an economy with weak absorbers to withstand headwinds.
Mr Adongo made this known when he delivered a lecture organized by the Coalition For Restoration (CFR) and telecast live on Metro TV, Original TV and Original FM and many other channels across the country.
“Weak revenue generation coupled with rising public debt and associated unsustainable levels of debt service from tax revenue left the country without buffers and susceptible to the slightest shock”.
Debt to GDP crossed the dreaded 70% level and exposed the economy with serious challenges, Mr Adongo who is also a leading financial analyst, said.
“Rising levels of fiscal deficits, low revenue generation and high levels of debt service resulted in rising primary balance deficits, implying the country has been borrowing to pay interest costs”.
Mr Adongo who spoke eloquently on the topic-‘Ghana’s Economy: A Victim of Covid-19 or pre-existing conditions?’, stated that the current economic predicaments the country is facing as a country are due to conditions that pre-existed even before the outbreak of COVID-19.
“Like doctors and researchers will tell you about COVID-19 itself, it is not the virus itself that kills; it is its ability to act on the defects of pre-existing conditions that kills its patients. Ghana’s economy was already in a precarious situation, thanks to the reckless decisions and actions of a group of people fight for their families and their future and COVID-19 only intensified those ills”.
As stated by the IMF in its recent Article IV review report on Ghana, Covid-19 exacerbated Pre-existing challenges of the economy.
SUMMARY OF PERFORMANCE OF MACROECONOMIC INDICATORS FROM 2016
| INDICATOR | 2016 | 2019 | 2021 | 2024 |
| Capex/GDP | 3.6% | 1.8% | 2.9% | 2% |
| Total Rev/GDP | 17,9% | 15.2% | 16.8% | |
| Dom Tax/GDP | 17% | 14.8 | 16.6% | |
| Tax Rev/GDP | 13.8% | 12% | 13.2% | |
| Non-Oil Tax/GDP | 12.7% | 11.3% | 12.6% | |
| Y/Y Rev Growth | 14.5% | 13.3% | 13.3% | 11.9% |
| Debt Service/Tax Rev | 66.4% | 72.5% | 91.6% | 77.6% |
| Fiscal Deficit | 6.9% | 7.3% | 12.6% | 9.1% |
| Debt/GDP | 56% | 62.4% | 70% | 86% |
Ghana default rate outlook for foreign currency debts has now been degraded by Fitch to negative and affirmed at B.
“The only reason Ghana is still affirmed B is because we are yet to face a major market access for credit but the time is ticketing for Ghana”.
Fitch in downgrading Ghana makes a profound basis for still affirming as at ‘B’ because we borrowed $3 billion this year and the Government has approval to borrow a further $1 billion enough to cover $3.3 billion in principal and interest payment due this year external creditors.
This means that because Ghana has been able to add more poison to the economy without defaulting, “we can still hang in there for another day and wait for what awaits us next year when our debt services would have consumed all our tax revenue, needing as to borrow to finance the entire budget”.
Clearly, Ghana’s biggest challenge in the medium term is how to avert looming market access complications on the international capital markets as investors begin to protect their monies from potential default.
Ghana’s net international reserve position is under threat as volatility from excessive foreign debts, high non-resident holding of domestic bonds and possible portfolio reversals threaten to collapse the cedi as Ghana face an imminent forex liquidity crisis.
Unfortunately, the medium-term trajectory in terms of the fiscal path in terms of revenue mobilisation, expenditure containment, debt-service and debt to GDP show a deterioration in fiscal space, elevated levels of risks of debt distress and excessive external volatility.
Mr Adongo therefore concluded that the government must act fast and prudently to save the situation.
African Eye Report
