I am here today to announce to you measures to address the economic difficulties we are facing due mainly to recent global and domestic events. These difficulties have manifested in:
- rising fuel prices;
- rising inflation and cost of living;
- exchange rate depreciation;
- rising interest rates; and
- revenue mobilization challenges.
Cabinet had its first regular quarterly retreat for 2022 from 18th to 20th March at Peduase, concluding in Accra on Monday, March 21. During the retreat, Cabinet deliberated extensively on a number of issues and approved a number of measures to support current efforts to address the challenges we are facing. Also on Monday, March 21, 2022, the Bank of Ghana announced a number of complementary, monetary measures to address the rising cost of goods and services on the market and the worrying performance of the cedi against major currencies such as the Pound Sterling, Euro and Dollar.
Ladies and Gentlemen, it is important to stress, right from the onset, that the difficulties we are facing in Ghana are not peculiar to Ghana.
It should also be stressed that several governments in both developed and developing countries are busily coming out with various prescriptions to bring their economies back on track, after the devastating impact of COVID-19 which distorted global supply chains, and the ongoing Russia-Ukraine war.
A: GLOBAL AND DOMESTIC ECONOMIC DEVELOPMENTS
If we look at the world today, there are two clear forces shaping global events: the impact of the novel coronavirus pandemic and the crisis in Ukraine. With the virus, the records show that our decision to focus first on protecting lives and then livelihoods has paid off. By February, globally some 7.03% of those infected by Covid-19 had died. For Africa the figure was 4.03% (251,444 people). In comparison, less than 0.89% (1,445 people) of infected people died in Ghana.
Against all odds, but due to firm leadership, bold initiatives and responsive citizens, Ghana has so far “collectively” managed the virus remarkably well. But, we knew that Ghana, like most countries in the world, had a tall list of coronavirus-induced bills to pay from 2020 and 2021 and came out with plans and policies to boost investor confidence and job prospects for 2022 and beyond. As you recall, we lost Ghs13.1 billion of revenue and had to increase our expenditure by GHS14.2 billion with combined fiscal impact of GHS26 billion (6.8% of GDP).
For government, 2022 was now the time to go full steam ahead in healing the economy to create jobs, especially for our young generation. This was evidenced by our growth figures, averaging 5.2% in 2021 up from 0.4% in 2020 and a startling 6.6% growth in the 3rd quarter of 2021. We outlined our comprehensive recovery programme, the GhanaCARES ‘Obaatanpa’ programme to focus on the real sector to do just that. Our GHS10 billion YouStart programme will be the most historic intervention for youth employment in our country.
However, three (3) things that we did not (and could not) predict hit us:
(1) that Parliament would approve Government’s 2022 Budget Statement and its expenditure plans and then turn around to vote against one of the key revenue generation measures that was being introduced, the e-levy.
(2) That the unyielding stance of the Minority in Parliament against the E- levy would gravely affect investor confidence in our capacity to implement our programmes and settle our debts, triggering a downgrading by credit rating agencies, and now leaving the cedi vulnerable as we could not access the International Capital Market.
Ladies and gentlemen, the third hit was the launch of the attack on Ukraine by Russia on February 24, 2022. The war in Ukraine could not have come at a worse time for the global economy. Already global efforts toward economic recovery from the devastation wreaked by the Coronavirus pandemic were being disturbed by supply chain disruptions, surging inflation, and uncertainties in the financial markets, with anticipated hikes in interest rates.
After February 24 we saw a sharp hike in global oil prices, food price shocks (especially wheat), oil and gas price hikes, capital risk aversion/flight to safety, affecting private capital flows to emerging markets as a whole, and all with serious macro-economic implications. For example, crude oil prices (per barrel) increased by 75.3% from US$74.17 in Dec 2021, when the 2022 Budget was passed to US$130 on 7th March 2022, before ‘moderating’ to US$115 as today 24th March 2022. Crude oil prices crossed the US$100 mark for the first time since September 2014. We recall that prior to the pandemic, we had built resilience through the implementation of bold and prudent economic measures.