The country’s economy remains strong despite a setback suffered by the local currency which has got both investors and consumers worried, Vice-President Dr. Mahamudu Bawumia has assured.
Dr. Bawumia told a gathering attended by business owners, civil society organisations, academia and journalists among others that government’s plan is to continue the path of fiscal consolidation achieved under the IMF, while pushing for expansion of the economy.
“To underpin fiscal discipline going forward, Ghana has for the first time in our history passed into law a Fiscal Responsibility Act that limits the fiscal deficit in any year to a maximum of five percent of GDP, and it requires a positive primary balance.
“In addition, a fiscal council has been established to provide oversight and advice on implementing the fiscal policy,” he stated.
The Fiscal Responsibility Act empowers Parliament to sanction the state officials in charge of the country’s finances if the fiscal deficit of five percent of GDP is exceeded.
Government will exit the IMF programme this month, and the Vice-President argued that measures put in place, such as the fiscal responsibility act, are a demonstration of government’s commitment to sustaining gains made under the IMF programme.
On the cedi which gave government sleepless nights, the Vice-President said the sharp decline has corrected itself – arguing that a lot of the local currency’s depreciation was due to investor uncertainty surrounding the soon-to-end IMF bailout programme.
“Contrary to some speculation, the Bank of Ghana did not spend any reserves to revive the cedi following the initial depreciation.
“To meet the IMF programme prior action, the Bank of Ghana had to rather build up reserves in a period of extreme demand pressures by some US$800million, and had no room to intervene in the foreign exchange market in line with approved intervention policy.
“Some people have misunderstood the requirement by the IMF for Bank of Ghana to build up its reserves by some US$800million to mean that the bank of Ghana used that money to reverse the cedi-depreciation,” the Vice-President stated.
He argued that investor sentiments have since improved, and that can be seen in the oversubscription of government’s US$3billion Eurobond issued last month.
The Vice-President also cited growth in private sector credit as indicated by the central bank; he argued that the 21.1 percent growth recorded in February 2019 compared to 2.4 percent same period in January shows that businesses are getting credit to expand their operations – which should translate into more jobs.
Dr. Bawumia further said, for importers, government has taken an initiative that will see an about 30 percent reduction in import duties to ease the burden placed on the importers via usually high import duties.
The Vice-President is hopeful that the reduction in duties will go some way to make the Tema Port competitive once more, after he asserted that the port in neighbouring Togo is attracting more freight.