The Institute of Economic Affairs (IEA), has said Ghana’s economic performance for the first half of this year is below expectation.
It said growth continued to be sluggish and macroeconomic instability remained heightened.
A Senior Economic Fellow at IEA, Dr John Kwakye, made the assertion when presenting IEA’s review of the state of the economy of Ghana for the first half of 2015, in Accra yesterday.
He said though government performed creditably in controlling the budget deficit and shoring up revenue in the first half of the year, the other macroeconomic indicators did not perform well.
“During the period, the (cash) budget deficit was GH¢3, 639.4 million or 2.7 per cent of Gross Domestic Product (GDP), which was 37.5 per cent of the projected deficit for the year,” Dr Kwakye said.
Government has projected to reduce the budget to 7.3 per cent this year from the 8.8 per cent it recorded in the previous year.
Dr Kwakye said during the year under review, the cedi depreciated sharply against the major currencies, saying the “depreciation was heightened against the Pound at 27.0 per cent followed by the dollar at 26.1 per cent and by the euro at 19.5 per cent”.
Dr Kwakye said as at the end of June, this year, total public debt stood at GH¢94.5 billion, representing 70.9 per cent of GDP, adding that over the six months the public debt increased by GH¢15.5 billion.
According to the Senior Economic Fellow the “way to avoid this risk is to adhere strictly to the fiscal consolidation path envisaged under the IMF-sponsored programme.
Dr Kwakye said “any departure from this path will have disastrous consequences. As the IMF has warned, the 2016 elections pose the greatest risk, given the political cycle of expenditure overruns”.
He said “the outlook for the economy in the second-half of the year is clouded by uncertainties associated with a new IMF-sponsored programme and commodity price prospects”.
Dr Kwakye suggested that “strong fiscal consolidation will be critical in bringing about much-needed macroeconomic stabilisation”.
“In the long term, transforming the economy to diversify and add value to exports and through industrialisation to be able to produce a significant part of current import at home, would be necessary to address the structural financial and economic imbalances and for sustained growth,” he said.
Dr Kwakye entreated government to focus on long-term domestic borrowing with attractive interest to raise revenue to finance social and capital products, instead of the current short term (90-day) treasury bills, which had higher yields than one-year treasury bills.
A senior lecturer at the Economics Department of the University of Ghana, Legon, Dr Eric Osei-Assibey, said the current economic challenges facing the country “is self-inflicted”.
He said the unbridled borrowing by government for the past three years, which were mostly used to finance recurrent expenditure, had accounted for the challenges the economy was going through.
Dr Osei-Assibey called on government to invest in “inclusive growth sectors of the economy such as agriculture, manufacturing and industry”, to shore up the economy, saying the sectors which influenced growth in the first half of the year such as construction “is not sustainable”.
By Kingsley Asare and Benedicta Folley