Vice President, Dr. Mahamudu Bawumia has explained why the government is seeking financial assistance from the International Monetary Fund (IMF) despite earlier claims that the economy was buoyant.
Speaking at the launch of two new high-level information technology programmes at Accra Business School at Baatson in Accra, Dr. Bawumia explained that apart from the Covid-19 pandemic, the banking sector clean-up and the energy sector excess capacity payments plunged Ghana into an alarming debt situation.
He noted that in the midst of the worsening economic challenges, the government’s options for generating enough revenue were limited, forcing the country to run to the IMF for support.
“In the midst of this global crisis, Ghana’s fiscal and debt sustainability has worsened. Some commentators have argued that the expenditures by government alone could not be the reason for the large increase in the fiscal deficit of the debt stock. In fact they are right.”
“Covid-19 expenditures alone were not the reason for the increase in Ghana’s debt stock by the end of 2021. In fact, as I stated in my April 7th lecture, in addition to COVID-19, there were two major items of expenditure that are critical to understanding the evolution of the fiscal deficit and the debt stock: the Banking Sector Clean-up (GH¢25 billion) and the Energy Sector Excess Capacity payments (GH¢ 7 billion),” he explained.
The Vice President disclosed that government intends to introduce a policy that will authorize the Bank of Ghana to purchase any amount of gold mined in Ghana to generate more revenue.
The IMF concluded its visit to Ghana on Wednesday, July 13, 2022.
The team’s discussions with the Vice President, Finance Minister; Ken Ofori-Atta, and Governor of the Bank of Ghana; Ernest Addison, focused on improving fiscal balances in a sustainable way while protecting the vulnerable and poor, among others.
At the end of the IMF team’s visit to Ghana, the Britton Woods institution noted that: “Ghana is facing a challenging economic and social situation amid an increasingly difficult global environment. The fiscal and debt situation has severely worsened following the COVID-19 pandemic. At the same time, investors’ concerns have triggered credit rating downgrades, capital outflows, loss of external market access, and rising domestic borrowing costs.”
“In addition, the global economic shock caused by the war in Ukraine is hitting Ghana at a time when the country is still recovering from the Covid-19 pandemic shock and with limited room for maneuver. These adverse developments have contributed to slowing economic growth, accumulation of unpaid bills, a large exchange rate depreciation, and a surge in inflation.”
IMF again reaffirmed its commitment to support Ghana.