In fulfilment of Article 67 of the Constitution, Ghanaian President Nana Akufo-Addo presented his maiden State of the Nation address to parliament on 21stFebruary, 2017. The president painted a gloomy picture of the economy inherited from the erstwhile National Democratic Congress (NDC) government: characterised by estimated real GDP growth of only 3.6% per annum in 2016 – the lowest in 23 years; high fiscal and current account deficits, ballooning public debt, double digit inflation and elevated interest rates.
Since the restoration of multiparty democracy, election year overspend has been a signature feature of the political cycle with few exceptions. Nevertheless, 2016 slippages stand out on two fronts at least: their quantum and timing.
However, the government has begun negotiations for the extension of the IMF programme from its scheduled April 2018 deadline to December 2018. Between this and the strained fiscal context on the one hand, and the above pledges of government largesse on the other, there may be some tension.
Finance Minister Ken Ofori Atta is expected in parliament on March 2 to present the budget and economic policy.
One key area addressed by Akufo-Addo was the energy sector. As it stands, Ghana has an installed capacity of 3,644MW of which 3,275MW is classed as ‘reliable’. dumsor has been reduced in recent months and output is expected to be boosted over the next 12-18 months by (a) the TEN oil and gas field ramping up to full production and (b) the Sankofa field producing its first gas in 2018.
Nevertheless, in his address Akufo-Addo bemoaned the debt-addled nature of the industry and put the net debt at US$2.4 billion, of which US$800 million is owed to local banks putting additional strain on the domestic banking industry. Incoming olicy prescriptions signalled by the president include:
Agriculture remains a significant source of employment but has seen its share of GDP fall dramatically since the 1990s. In outlining his plans for the transformation of the sector, Akufo-Addo revealed that a CA$125 million (US$95 m) agreement has been signed with the government of Canada to launch a project dubbed “Planting for Food and Jobs.”
The project aims to provide investment focusing on irrigation, extension services, fertilisers and e-agriculture. Akufo-Addo had earlier stated that agriculture provides the best opportunity to use modern methods to change the lives of many within the shortest possible time.” Agriculture Minister Dr Owusu Afriyie Akoto, later added that the initiative will directly affect 200,000 farmers in each of the 216 administrative districts of the country and has the potential to provide up to 750,000 jobs.
The introduction of modern methods is an effort to both appeal to potential young farmers and move the country away from subsistence farming and towards planned, large-scale industrial agricultural production.
Ghana scored 48 out of 100 in Transparency International’s 2014 corruption perceptions index (CPI). In 2015, it was 47 and in 2016, 43. This deterioration has coincided with anaemic macroeconomic indicators touched on above and a steady feed of corruption scandals. Among them: contracts awarded to party members/sympathisers without going through the appropriate procurement process; inflated contracts; large scale corruption in the judicial service and continued contract abrogation leading to judgement debts.
Unsurprisingly therefore, governance was a key issue on the campaign trails of all political parties ahead of the December 2016 elections. The NPP, which eventually won the presidency and control of parliament, pledged to create a Special Prosecutor office “independent of the Executive, to investigate and prosecute certain categories of cases and allegations of corruption and other criminal wrongdoing, including those involving alleged violations of the Public Procurement Act and cases implicating political officeholders and politicians”. Principal concerns surround those plans:
Akufo-Addo’s maiden state of the nation address clearly labels the economic challenges of the moment. A large, above expectation, fiscal deficit; elevated public debt; weak economic growth and job creation; sticky inflation and current account imbalance. However, there is a potential contradiction between those constraints and some of the expansionary policy responses flagged in the 2017 State of the Nation. The budget is scheduled for 2 March. Sorely anticipated detail therein will shed light on how the government intends to resolve those difficulties. Scheduling will be key. As will the degree of private sector participation and measures to ensure transparency.
The creation of Office of the Special Prosecutor gets the government around having to separate the Minister of Justice and Attorney General functions – a promise of NPP and NDC alike when out of government; quickly forgotten once the levers of power change hands. But the independence of the function, and the appearance of independence, are crucial details. Appointment by the president, of a business partner of the president, to that role could undermine both potentially.
Written by Songhai Analysts Kobi Annan (Accra) and Emmanuel Amoah-Darkwah (Accra) with inputs from Managing Partner Nana Adu Ampofo
*Image Source: TKO GH
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