He said on the New Day show on TV3 Friday April 8 with Johnnie Hughes that the country is currently in economic hole due to the government’s own actions.
Mr Kwakye Ofosu was responding to the address delivered by the Vice President Dr Mahamudu Bawumia on the economy.
“it is your own policy decision that has put the country in this hole,” he said, adding that “it is a fact that where we are now is worst than we have ever been.”
Dr Bawumia explained what accounted for the sharp depreciation of the Cedi against the major trading currency.
Speaking at a TESCON forum on Thursday April 7, he said “We had so much stability in the exchange rate but in the first quarter of this year, 2022, we have seen the sharpest depreciation of the cedi since 2015. Data from the Bank of Ghana shows that at the end of March, the Cedi had depreciated by 15.5 per cent. So what explains this?
“Why did we see this? A number of factors can be adduced to explain what explain what happened. The financial market assessment of the 2022 budget unfortunately, generally, concluded that our projected 40 per cent increase in revenue which underpinned the 2022 budget , the Financial market assessed that it was not likely to materialized and therefore our deficit would increase. This was not helped by the chaotic battle in Parliament over the passage of the budget.
“This created uncertainties and signaled to the market that the government may not be able to get most of its programme passed in a tightly balanced Parliament. This further reinforced the lack of confidence by investors in the budget.
“Furthermore, delays in implementing major tax reforms such as the benchmark policy reversal , tax exemptions common platform property tax appeared to support the assessment of the market that the government would have difficulty in getting its programmes through Parliament
“To add to this negative market sentiment, there was a sovereign credit rating downgrade by Fitch and Moody’s, as a result of the concerns about fiscal and debt sustainability. If you are unable to pass your budget with the revenue measures in there, then your fiscal situation and debt will not get better, this was their assessment. This resulted in unwillingness of foreign investors to rollover their holdings of our domestics debt and they demanded foreign exchange to repatriate their investments.
“The lack of access to the sovereign bond market by emerging markets globally and Ghana’s announcement that it would not issue sovereign bond in 2022 also worried investors about the adequacy of our foreign exchange reserve.”
The Vice President further listed the projects that have been undertaken through the loans that the Akufo-Addo administration has contracted over the years.
He said that “The projects that we have undertaken from the loans over the years, you will see that we borrowed to build the University of Environment Science and Sustainable Development, that is part of the debt, the Pokuase Interchange is part of the debts, the Tema Mpakadan Railway is part of our debt, the Kumasi Airport Phase 2 is part of our debt , Tamale Airport is part of our debt.”
Dr Bawumia further stated what has accounted for the high public debt.
According to him, in addition to the Covid expenditure, the banking sector clean up exercise and payment of excess power in the energy sector as a result of the contracts signed by the National Democratic Congress (NDC) administration, accounted for the rising pubic debt.
Regarding the Covid spending, he stated that the government needed to save the lives of the people hence the decision to prioritise spending in the health sector in order to restore the health of the people.
Dr Bawumia noted that spending in all these areas cost the government ¢50.1billion.
But for the banking sector and the Excess Energy payment, he said the debt would be hovering around 68 per cent instead of the 81 per cent.
“Between 2019 and 2021 Ghana’s debt to GDP increased by 17.6 percentage points of GDP. It should be noted that without the 15.1 billion of the exceptional items – the financial sector and then the energy and Covid Ghana’s debt to GDP would have been about 68 per cent instead of the current 80 per cent,” he said.
The Head of the Economic Management team further attributed the current hardships in the Ghanaian economy to the ongoing geopolitical tension between Russia and Ukraine.
He stated that Russia accounts for some 30 per cent of Ghana’s imported grains , 50 per cent of flour and 39 per cent of fertilizer.
The warfare therefore affected the local economy, he said.
“The increase in commodity prices has been exacerbated by the Russia-Ukraine conflict. Russia and Ukraine together account for 30 per cent of the global wheat export. The longer the conflict the greater will be the disruptions to global food supply. The country is also likely to slow global growth.
“According to the AfDB the price of wheat has shot up by 62 per cent since the war begun. The price of fertilizer is up by 300 per cent, the price of maize is up by 36 per cent since the war begin . Here in Ghana 60 per cent of our total imports of iron ore and steel are from Ukraine.
“Russia accounts for some 30 per cent of Ghana’s imported grains, 50 per cent of flour and 39 per cent of fertilizer . So we are directly affected by the Russia-Ukraine ware. Unfortunately, we do not know when it will be over. The global increase in fuel prices is causing hardship.”
He further said he recognizes that the country is going through some challenges at the moment.
He however indicated that some measures have been introduced by the government to ameliorate the hardship the people are going through.
He said “from the man on the streets to the business mogul, the health of the economy is the foundational instrument.
“The economy is what we feel in our pockets. I acknowledge that we are going through difficult times, this is the reality. Our economy is experiencing rising prices of fuel and virtually all commodities. Prices are on the rise.”