Ghana’s economy encountered a major crisis by the end of 2022 due to pre-existing imbalances, and the situation was exacerbated in 2023 due to several factors, including external shocks.
The Ghanaian economy experienced a negative impact from the COVID-19 pandemic, global financial tightening, and the Russia-Ukraine conflict.
This was further worsened by significant downgrades by credit rating agencies, affecting investor confidence.
Ultimately, the government succumbed and sought assistance from the International Monetary Fund (IMF).
As 2024 unfolds with improvements in some major economic indicators like inflation, The Ghana Report examines the major financial and business issues that dominated the past year.
2023 Budget (Mid-year)
On July 31, 2023, the Minister of Finance, Mr. Ken Ofori-Atta, presented the 2023 Mid-year Budget Review to Parliament.
This set the tone for the government’s reviewed activities to achieve fiscal consolidation and pursue a growth agenda.
Ghana’s mid-year budget 2023 introduced some tax, revenue and expenditure measures, including removing selected VAT exemptions, removing discounts on benchmark values for specific items, and E-Levy reforms to close loopholes/ leakages.
Implementing the VAT E-Invoicing system to enhance compliance, increasing VAT rate from 12.5% to 15%, revising excise taxes for selected items, and revising income-based taxes were also intensified to restore macroeconomic stability and achieve debt sustainability.
Data from the Ghana Revenue Authority (GRA) revealed that the Electronic Levy (E-levy) generated GH¢246.9million in revenue, accounting for 11% of the projected GH¢2.24billion for the year.
$3 Billion IMF Loan
A successful budget implementation depended on securing a US$3 billion 36-month extended credit facility from the International Monetary Fund(IMF).
A staff-level agreement was reached in December 2022 between the Government of Ghana and the IMF, but full support was subject to concrete commitments to reduce the net present value of public debt to GDP ratio from 71.3% in 2022 to 55% by 2028.
In May 2023, the International Monetary Fund’s executive board approved a $3 billion three-year loan programme for Ghana. This allowed for an immediate disbursement of about $600 million and a potential path out of the country’s worst economic crisis in a generation.
Inflation
In January 2023, non-food inflation was 47.9%, down from 49.9% in the previous month, while food inflation stood at 61.0% – up from 59.7% in December 2022.
However, in November 2023, Ghana’s inflation rate fell to a 19-month low of 26.4% following a 35.2% gain in October 2023, helped by base-effect comparisons with last year and aggressive monetary policy tightening by the central bank.
High Food Prices
In an end-of-year review, Professor Peter Quartey described the year as difficult, stating that high food inflation was a major issue affecting households and consumer income.
He stated that, for example, data from the Ghana Statistical Service showed that consumers spent a lot of their incomes on food at high prices.
“We saw a very high inflation rate. It will surprise you that food inflation in the food-growing area was much higher than in Accra. Data from the Ghana Statistical Service showed that poverty levels were extremely high. About 23 districts had multidimensional poverty above 50%. You find most of these districts in the northern part of the country. For me, this is very challenging,” he said.
He added that the situation was compounded by a domestic debt exchange programme that resulted in investors losing a substantial part of their investments while the financial sector took a hit.
“2023 has been a challenging year. We had an IMF programme. We have had a debt exchange programme. People have lost income. The banking sector lost a lot of interest income, and we are still seeing the effect,” he said.
Cost of doing business still high – AGI
The CEO of the Association of Ghana Industries (AGI), Seth Twum-Akwaboah, lamented that the cost of doing business in Ghana was high compared to other countries in the sub-region.
“We have always made this call that the cost of finance is too high. That is not the only thing. Cost of power is also unbearably high, and this has made it difficult for Ghanaian manufacturers to be competitive”.
He appealed to the government to work with the Bank of Ghana to reduce interest rates and the cost of electricity to industry.
Bank of Ghana’s GHS60 billion loss
Bank of Ghana released its full-year 2022 audited financial statements on July 28, 2023.
The financial statements reported a total loss of GHS60 billion, which has become a matter of unfortunate politicisation.
Policy Rate
Ghana’s central bank in November 2023 held its primary interest rate steady at 30% for the second meeting in a row to keep inflation falling from its current level above 35%( October 2023 inflation rate).
Ghana is still negotiating a debt restructuring with its bilateral and commercial creditors to try to emerge from its worst economic crisis in a generation.
“There is a need to keep the policy rate tighter for longer until inflation is firmly anchored on a downward trajectory towards the medium-term target,” the Bank of Ghana said in a monetary policy statement.
Cedi stabilisation
In May 2023, Fitch Solutions predicted that the Ghana cedi will end 2023 at a rate of ¢12.40 to one U.S. dollar, a significant improvement from the 38% depreciation recorded last year.
In 2022, the Ghana cedi depreciated drastically by over 50 per cent against the U.S. dollar. However, in 2023, the cedi staged an impressive turnaround, appreciating by 66 per cent between February and November.
Fitch Solutions argued that this positive trend is likely to be attributed to Ghana securing an International Monetary Fund-support programme by May 2023, which will help cushion the cedi against foreign exchange pressures.
As of Friday, December 22, 2023, the inter-bank market was trading at GH¢11.65 to one U.S. dollar while the Forex Exchange market was at GH¢12.65 to one U.S. dollar.
Treasury Bill(T-bills)
There has been an increasing interest in Ghanaian government Treasury Bills (T-bills) recently following the government’s increased demand for short-term funds to finance the fiscal deficit.
Over the years, successive governments have frequently competed with the private sector in financial markets to fund fiscal deficits by issuing government bonds, which are utilised to refinance existing or maturing debts.
Between January 2023 and September 2023, the government of Ghana issued the 182 days and 91 days Treasury Bills 51 times with a face value of over GHS98 billion.
After treasury bills (T-bills) were exempted from the Domestic Debt Exchange Programme (DDEP), investors have increasingly turned to T-bills as a primary savings option.
Lithium Deal
The Minister of Lands and Natural Resources, Samuel Abu Jinapor, signed the first-ever lease for the exploitation of lithium in the country on October 19.
The granting of the lithium mining lease to Barari DV Ltd, a subsidiary of Atlantic Lithium Ltd, cleared a major hurdle for the company to mine the green mineral.
The $250-million project at Ewoyaa in the Mfantseman Municipality in the Central Region is expected to commence production by 2025.
The concession is estimated to hold 25.6 million tonnes of probable ore grading 1.22 per cent lithium oxide (Li₂O) as of June 2023.
This followed the Cabinet’s approval of the Green Minerals Policy, which makes it mandatory for prospective holders of leases for lithium and other green minerals to establish a refinery for processing the resource.
Since the lithium mining lease was granted, some CSOs, individuals and institutions have criticised the deal, describing it as bad for the country.
There have also been calls to grant mining leases through a tender process.
2024 Budget
Ghana’s lawmakers approved the nation’s 2024 budget after a heated debate that propelled the decision into a ballot.
Parliament voted 138 in favour of the ruling party’s last budget, against the opposition’s 136 votes.
The government introduced eight tax reliefs to stimulate and sustain growth while cushioning Ghanaians against current economic hardship.
Mr Ken Ofori-Atta, Finance Minister, announced the reliefs in the 2024 “Nkunim”- (Victory) budget, presented to Parliament today, Wednesday, November 15.
This was in response to calls by individuals and private sector operators for the government to include policies and programmes that would maintain economic stability and ensure better living conditions in the 2024 budget.
Suspension of Import Restrictions Bill
On December 7, 2023, the Government of Ghana suspended the laying of the controversial Legislative Instrument seeking to restrict the importation of at least 22 items.
The L.I. (Import Restriction Bill) sought to compel importers of the 22 restricted items, including poultry, rice, sugar, diapers and animal entrails, to seek licences from a committee to be set up by the Trade Minister.
The Minority in Parliament, on three occasions, blocked the laying of the L.I. because it was not only dangerous but violated international trade practices and could give too much power to the minister, a situation which has the propensity to breed corruption.
Has Ghana’s economy turned the corner?
Finance Minister Ken Ofori-Atta, in the 2024 budget presentation in November 2023, expressed optimism, stating that the nation was gradually overcoming its economic challenges.
He said the government has established a robust foundation for the future prosperity of the Ghanaian economy.
He pointed to the consistent decline in inflation and the stability of the Ghanaian Cedi as evidence supporting his assertion.
However, economist Prof John Gatsi disagrees.
Prof. Gatsi said that all the economic indicators worthy of consideration do not support the claim that the economy has turned the corner.
He said that to demonstrate the positive economic shift, multiple indicators must align and illustrate this change.