Dr. Ernest Addison, Governor-Bank of Ghana, has stated that fiscal and monetary stabilisation measures put in place following recent years of economic shocks that exposed the country’s structural vulnerabilities are yielding positive results.
The recovery comes amid broader efforts in sub-Saharan Africa to stabilise after a period of turbulence. The region faced significant challenges, particularly over the past four years, in which multiple shocks impacted fiscal stability.
For us in Ghana, a combination of pre-existing debt vulnerabilities and external shocks led to a series of crises – including a downgrade of the country’s sovereign credit rating and loss of international market access.
Consequently, government opted to seek assistance from the International Monetary Fund (IMF), embarking on a Fund-supported programme aimed at restoring macroeconomic stability.
One of the key areas of focus has been on monetary policy. The Bank of Ghana (BoG) took swift action to address rising inflation by tightening its monetary policy early in the crisis, the Governor noted in his address at the WAIFEM/IMF Regional Course on Financial Programming and Policies.
The approach has been instrumental in reinforcing the disinflation process, with BoG “mopping up excess liquidity within the banking sector” and avoiding monetary financing of the budget.
The Bank also prioritised maintaining exchange rate flexibility, a move that has contributed to a build-up of reserves and enhanced the country’s resilience to external shocks.
Coupled with the above, BoG established the Ghana Financial Sector Fund (GFSF) with support from the World Bank and Ghanaian government to provide further stability for the financial sector.
These measures are beginning to show positive results. Real GDP growth in the first quarter of 2024 came in at 4.7 percent, with the industrial sector leading the way at a 6.8 percent growth rate.
Furthermore, inflation – which peaked at 54.1 percent in December 2023 – dropped to 20.4 percent by August 2024, signalling a faster-than-expected deceleration. Meanwhile, the banking sector which had suffered from adverse effects of the Domestic Debt Exchange Programme (DDEP) is now more stable, liquid and profitable.
However, in spite of this encouraging development recovery remains fragile and ongoing risks could threaten the gains made so far. Despite these risks, the overall outlook for Ghana’s economy is one of cautious optimism.
