By Kumi OWUSU-ANSAH
I’m guessing that a lot of political pundits who feared Dr. Mamoud Bwumia was going to win the 2024 election were tempted to start their first post-election article by echoing Gerald Ford, the 38th U.S. President’s 1974 speech after Richard Nixon resigned: “Our long national nightmare is over…” Except now it isn’t.
For Ghana’s democracy, this election has been like going to the doctor for a routine physical, only to be shown an X-ray revealing a sinister dark mass over the heart. Whether the mass proves to be inoperable or curable has yet to be determined. Either way, there’s going to be some suffering.
It has left them staggering with joy and fear. Joy that their fellow Ghanaians chose to embrace “change” and “reset” over greed and blustering irrationality. Stronger than joy was their fear about our country’s immediate future. Fear that the country will regress into violent unrest as voters were prepared to take to the street had the previous administration chose to hang on to power. Fear that our educational system is being reduced to a propaganda machine pumping out nonthinking clones. Fear that our environment, already teetering, is further being destroyed by illegal mining and reality deniers.
Fear that our country has seen a fundamental shift in our democracy and its core values, like the feel-good myth portrayed in the 1957 movie A Face in the Crowd. The story is about drifter Larry Rhodes (Andy Griffith), who rises to fame and political influence through his folksy everyman charm on radio and then TV, but who’s a self-serving monster in real life. “POWER! He loved it!” screamed the ad poster for the movie. But Rhode, who berated his audience as idiots over a hot mic, saw his popularity plummeted, leaving him a broken man. That’s what the 2024 election taught me.
But lections are a judgement about the past and a choice about the future. And to govern is to choose. No judgement about the past can possibly be fair without reference to the decline our economy has suffered in the last eight years. The defining mission of President Mahama’s second act is to “reset” the country. The 2024 general elections fell at an inflection point to the Ghanaian economy. The stakes were high, and we must be honest about the situation confronting his government. The country’s finance is in a real mess.
Our growth performance was one major target the previous administration failed to meet. Before the election, the fiscal deficit was projected to be 4.2 per cent while the government plans to broadens the tax base and improve compliance over the medium term. If Ato Forson, the new finance minister, and his department should get this right, the OECD Development Centre, which supports Ghana’s growth and development, predicts that our primary balance should show a slight surplus of 0.5 per cent of GDP in 2025. At the same time, it forecasts a rise in revenue due to stronger tax collection and higher customs revenues while spending continue to be rationalised.
According to the IMF data, Ghana’s net debt forecast for 2025 is projected to be around -3.73 of GDP based on the “net lending/borrowing” metric, indicating a slight net borrowing position for the country. The underlying debt, excluding the Bank of Ghana, is forecast to rise in every year of the forecast.
Yet again, a Ghanaian government has tweaked its fiscal rules. Ato Forson has now proposed to achieve a balance on the current budget and for net financial liabilities to be falling, both initially in four years. The shift to the latter measure allows it to include financial assets recognised in the national accounts. The change itself is defensible. It also allows for more borrowing. The question is whether Ghana will get away with this, given its heavy reliance on foreign lending.
In the meantime, government investment and consumption will be higher and private consumption and business investment lower – given the ‘freebies’ announced in the educational budget. It is also unlikely that unemployment will be reduced in the short-run, as higher taxation of employment, higher minimum wages and tighter regulation of labour markets bite together. The government may claim not to be taxing workers, but this is challenging for me to comprehend. The incidence of taxes does not fall on those who seem to pay them. Employment taxes are a cost of doing business.
While the above outlook seem moderate, given our current situation, it should come as a surprise that sacrifices the Ghanaian public has made in taxes has not paid much in dividend to our growth performance. In the last eight years, Ghanaians have paid more in taxes than they received, thanks to Ken Ofori Atta (who’s now seen as ‘the bogeyman’ of our current economic crisis) and his punitive budgets. Instead of confronting the challenges, Mr. Ofori Atta and the previous NPP’s economic team offered a wish list of unfunded promises and gimmicks. Policies were introduced without plans to fund them, leaving a massive black hole in the public finances.
There’s no doubt the new administration has inherited an unacceptable situation in the public finances. The crisis is so acute precisely because the previous administration failed to fix the roof when the sun was shining. According President Mahama, “there’s been a criminal handling of our economy”, and that “Ghana is now a crime scene.” Much of that may be correct, however, if the NPP members complain. But you cannot, for a minute, underestimate the import of the situation we find ourselves in. This is not a moment to worry about hyperbole. This is a moment where you have to try to silent the voice in your head that is saying, ‘this is bloody serious.’ The country is facing a damaged economy on a scale that is impossible to compute.
Now Ato Forson has made his choice and the direction he intends to take. His decision in the budget can be defended as what the public chose in the election. But voters also hoped for faster economic growth and better public services. It is on these outcomes that the government will ultimately be judged. At present, scepticism is the sensible attitude. This decision might work. But it might not work.
He shouldn’t pretend he can turn things around overnight. Of course, no one can deny the need for immediate, targeted injection of cash into public services. The energy sector needs redemption from the huge debt of GHC68 billion we have incurred in the last eight years. Businesses are crying for a stronger cedi; households are crying for a reasonable income tax; consumers are crying for a sensible VAT on goods, etc. The Bank of Ghana must step up with a sensible monetary policy to boost demand and strengthen the cedi.
But we still need to unlock faster growth. There’s no disagreement between both the NPP and NDC on that – the question is can Ato Forson’s plan do the trick? The finance minister has announced areas in the economy that need reform. I actually agree – In fact, he has announced some major steps in his budget to speed up the approval time for business planning applications. But any economic plan needs to be about much more.
Take labour supply, which currently stands at 13.67 per cent. Post-pandemic, you can’t say you want to be the fastest growing economy within the ECOWAS region without saying where companies will find the workers they need. The previous administration failed to talk about this; neither did they put in place wide-ranging plans to bring millions of unemployed adults back into the workforce. Personally, I was looking forward to a pro-growth tax cut for businesses which will help to generate the equivalent of 150,000 people rejoining the labour market – enough to reduce around a quarter of unemployment.
Or take productivity, a long-standing issue for Ghana with a drop of 0.45 per cent. Full expansion for capital investment would be a game changer for the country’s chronically low business investment, alongside super deduction of corporate tax will trigger the biggest growth in business investment for the country, given how the economy has struggled to boost the cedi in the last eight years. This should’ve featured as one of the growth measures in Ato Forson’s first budget.
Then there’s our future growth model. The previous administration got it right that one of our opportunities as a country was to become Africa’s Silicon Valley but failed to make it a reality. We now lag behind all the largest tech ecosystems in Sub-Saharan Africa such as Kenya, Nigeria, South Africa, Mauritius, Rwanda, Senegal and Cape Verde. All these countries have remote working programs and flexible working visas for foreigners. Our life sciences sector needs a proper revival to make us more competitive on the continent. Our creative industries are falling behind other major countries because of lack of investments.
The successes we seek in our innovation industries can only become possible if we can attract major investments and revive our financial sector, given the fact that Ghana has some of the most respected educational systems and universities in Sub-Saharan Africa – something we have to strengthen further with our spin and strategy alongside other major reforms in the “reset” programmes.
So let’s move on to the choice about the future. The finance minister is right to talk about stability, reminding us constantly about what went wrong under the previous administration throughout the two hours of his budget speech in the parliament. We get it. What we need now is something more: ambition and a coherent plan to unlock our extraordinary potential. That is something the previous administration had little to talk about during their entire eight years in office.
An even bigger choice is on tax. Cut through the fog of electioneering and this is the most substantive difference between the NPP and NDC. Having put up taxes during the previous administration, the NDC has decided to bring them down. Why does this matter for businesses? Because if you look around the world, the most successful economies are tend to be where taxes are lower. Economists argue about ‘cause and correlation’ but most businesses people know there is a causal link: lower tax means a more vibrant private sector with higher level of investment.
But if you want lower taxes and good public services – as both parties do – you have to explain how to live within the current tight fiscal envelope. The answer is straightforward: to ask the public sector to make some percentage of productivity efficiencies every year. In this budget, I agree with Ato Forson’s decision to overhaul the health sector, since the previous administration’s “agenda 111” was a thing of fantasy, in return to signing up to a GHC9.93 billion annual commitment. And if the sector can do it, so can everyone.
To govern is to choose. Ato Forson should admit that he may not always get things right in his new role as finance minister. But he has to be prepared to take unpopular decisions when it is the right thing for Ghana’s economy.
The trouble with ‘Ming Vase strategy’ is that difficult decisions get ducked – and progress we need to make to improve our productivity and growth does not materialised. That would be a tragedy because our economy has the most phenomenal opportunities on the ECOWAS block. Ghana is a much underpriced share right now which makes investing here a great buying opportunity – but only if the government is willing to take the necessary tough decisions.
The finance minister shares these sentiments with the intent to implement the vision of Mahama’s second act – a “reset” to fixing the foundations of the economy. While this agenda remains great on the table, we must first get the big decisions right by being ambitious in our approach to resetting the country.
