By Iddi Yire
Accra, Aug 19, GNA – Ghana’s economy has been impacted by globalization and external shocks, Dr Angela Lusigi, the United Nations Development Programme (UNDP) Resident Representative in Ghana, has said.
She noted that for instance, the COVID-19 pandemic took a toll on the economy, resulting in an unplanned expenditure of GH¢14 billion (or 3.6 per cent of GDP) and a revenue shortfall of GH¢11.9 billion (or 3 per cent of GDP) in 2020.
She said similarly, the on-going Russia-Ukraine war had led to rising inflation and depreciating cedi, mainly driven by increasing petroleum, and food prices as well as shortages in the supply of fertilizers.
“This food, fuel and financing shocks have negatively impacted Ghana’s economic trajectory and slowed recovery from the COVID-19 pandemic,” Dr Lusigi said in her presentation at a meeting of the Ghana Association of Former International Civil Servants (GAFICS) in Accra.
“These barriers to Ghana’s development progress are presented as signals and negative drivers that are the underlying causes of the symptoms that are the topic of much discourse, including high unemployment, devaluing cedi, rising interest and inflation rates, to mention a few,” she added.
The event, which took place at the Ghana Institute of Management and Public Administration on the theme “The Economic Governance, Peace and Security Nexus”, was attended by members of the association.
In attendance also were Professor Samuel Kwaku Bonsu, Rector, GIMPA, Dr Augustina Akonnor, Dean of Students, GIMPA and Prof Kingsley S. Agomor, Head, Department of Governance and Leadership, School of Public Service and Governance, GIMPA.
Speaking on the topic “Unlocking the Economy, Governance and Peace Nexus in Ghana; A road less travelled”, Dr Lusigi said it would be useful to reflect on the linkages between these drivers to inform strategies that work in the context of limited fiscal space and within available capacities.
Touching on multiple barriers to development progress, Dr Lusigi said Ghana’s positive economic growth trajectory is slowing, the current forecast of 3.7 per cent was well below the average growth of 7 per cent between 2017 and 2019 before COVID 19.
She said the growth and a robust economic outlook based on exports of primary commodities helped position Ghana as a lower middle-income country with access to private capital.
“However, limited economic diversification and low productivity, over the years, have hampered the creation of decent jobs to absorb the increasing skilled and unskilled population,” she said.
She said Ghana’s service sector had emerged as a critical driver of economic growth but had not produced the expected number of jobs.
She noted that this puts Ghana at risk of getting stuck in what is termed the “Middle Income Trap”, where middle-income countries were unable to transition into a high-income economy.
According to the Bank of Ghana, the country’s debt stock in terms of GDP was 78.3 per cent as of end-June 2022, up from 76.6 per cent in December 2021.
Dr Lusigi said this, coupled with low domestic revenue mobilization, has put Ghana in a tight fiscal situation with the deficit hitting 12.1 per cent of GDP at the end of 2021.
She said these fiscal imbalances had led to Ghana’s falling credit rating, which was recently revised by the S&P Global Ratings from B-/B to CCC+/C, putting the country’s credit worthiness in a disadvantaged position.
She said with as much as 48 per cent of the total public debt held by external investors, Ghana’s external liquidity situation was extremely vulnerable to external private investor confidence and behaviour.
“Low investors’ confidence in Ghana’s sovereign bonds and the economy as a whole is leading to capital outflows, loss of external market access, and rising domestic borrowing costs according to the IMF report on Ghana economic outlook in July.”
Mr Kwaku Osei Bonsu, President of GAFICS, said the Association constitutes a pool of Ghanaians who served with the United Nations (UN) and its specialized agencies, the World Bank, the International Monetary Fund (IMF), the African Development Bank, as well as other reputable international organisations.
He noted that one of the primary aims of the GAFICS was to give back to society.
GNA