Ghana’s economy not yet on a recovery path – Prof. Mensah insists

Financial Economist, Professor Lord Mensah is of the view that Ghana’s economy has not yet recovered from the challenges bedeviling the country.

Prof. Mensah maintained that a careful observation of government’s macro-economic targets show that the country has not recovered.

He made the statements in response to arguments that the Ghanaian economy can now be said to have recovered after the economy posted a 3.2 percent slow growth in quarter two of 2023. 

“What we are seeing now is that government’s spending is driving this expansion, for the second quarter of this year and not real economic activities undertaking by businesses,” Prof. Mensah said on PM Express Business Edition on September 21, 2023 with host George Wiafe on the Topic: “Ghana’s IMF Programme Review and impact on the economy”.

Ghana’s Second Quarter GDP Estimates

Data released by the Ghana Statistical Service covering the second quarter economic activities of 2023 showed that the economy recorded a growth of 3.2 percent.

The Ghana Statistical Service revised the quarter one Economic Data from 4.2 percent to 3.3 percent. 

For some economic observers, the slow growth recorded indicate that Ghana’s economy is on an economic recovery path.

However, Prof. Mensah disputes the suggestion arguing that the growth shows government spending rather than growth by businesses.

“A lot more needs to be done. Government’s spending is driving this expansion, and not real economic activities undertaking by business”, he stressed.

Prof. Mensah pointed out that real growth would have positively impacted on government’s revenue.

Ghana’s first IMF programme review

The IMF is expected to embark on Ghana’s first review for the Fund Programme.

The IMF Mission will be led by its Chief Stephane Roudet   to carry out the assessment.

This will cover qualitative and quantitative targets set under the IMF programme, using the June 2023 data.

There have been concerns whether government will “sail through the test”.

Prof. Mensah is hopeful Ghana will definitely pass this first IMF programme review and go ahead to receive the second tranche funding of 600 million dollars.

This, he said will help restore confidence in Ghana’s economy.

The IMF Staff are expected to send their report to the IMF board after the programme review. A successful review will pave the way for Ghana to receive the funds by November 2023.

Speaking on the same programme , Chief Executive of the Association of Ghana Industries (AGI) Seth Twum Akwaboah said there is the need for the programme to be adjusted to represent the interest of the industry sector.

Programme review and Ghana‘s Economic Recovery

Passing this IMF programme review, could trigger additional Financial Support from the World Bank, African Development Bank and other donor partners.

The World Bank has indicated that Ghana could get more than 300 million dollars before the end of the year to support the Budget as well as Ghana Financial Stability Fund.

Prof. Mensah advised government to use the additional funding to influence interest curve to cover interest rates in the country, especially for short term papers.

“Because of these funds that are coming in, government can reduce its borrowing from the treasury bills market and that could help change the dynamics”.

“Reducing the Treasury Bills Rate, could help change the interest rates dynamics going forward”, he said.

He suggested that government can drive down the rates by issuing new bills and offering new set of rates.

Prof. Mensah said if government reduced its borrowings on the short term market, commercial banks may be compelled to lend to businesses.

Domestic Debt Exchange Programme

Government has announced that it is re-opening the Domestic debt Exchange Programme to allow investors who didn’t participate when it was closed in February 2023 to do so.

Prof. Mensah is however worried this action may not help investor confidence and create uncertainty in the economy. 

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