Right Policy Measures for a Gradual but Sustained Economic Recovery

Right Policy Measures for a Gradual but Sustained Economic Recovery

Economies across the globe have experienced the adverse effects of the SARS-COV-2 and Ghana has been of no exception. Businesses, jobs and livelihoods have been hugely affected by the pandemic which commenced in December 2019.

The situation, however, appears to be stabilizing now following the roll out of vaccination exercises across the world. As countries take steps to recover and rebuild, it has become necessary for Ghana to also put in place the right policy measures to speed up the process and build back better and stronger from the pandemic.

World Bank Country Director On Ghana’S Economy
In finding such right policy measures that can fasttrack the country’s economic recovery, the Country Director of the World Bank Group, Mr. Pierre Laporte, shared the group’s perspective on the country’s current economy and the way to rebuild back and better after COVID-19.
At the heart of the economic recovery program is the Ghana CARES ‘Obaatanpa’ program which is expected to invest GH¢100 billion into the economy in the next few years. The program has been designed to provide the blue print for the country’s economic recovery post COVID-19.

The two primary phases of the Ghana CARES programme include: The Stabilisation Phase which was scheduled between July to December 2020. This phase saw the government implement interventions that ensured food security, protect businesses and jobs. In view of this, and among several other measures, this phase of the CARES program provided GH¢750 million in soft loans to Micro, Small and Medium Enterprises under the Coronavirus Alleviation Programme-Business Support Scheme (CAP-BuSS). Also, this phase established a GH¢2 billion Guarantee Facility to support all large enterprises.

Moreover, the medium term (the revitalization and transformation phase) that is expected to span between 2021 to 2023 shall see the government invest in activities aimed at accelerating the ‘Ghana Beyond Aid’ agenda.

Specifically, this phase intends to pursue the establishment of Ghana as a regional hub by leveraging the siting of the Secretariat of the Africa Continental Free Trade Area (AfCFTA) in Ghana, and will include the establishment of the International Financial Services Centre (IFSC) among other things.

Laporte.jpgAssessing the medium-term Revitalization and transformation Phase of the program, Mr. Laporte noted that this was critical to accelerate the Ghana Beyond Aid agenda. Furthermore, he revealed that the program was aligned with World Bank’s priorities, notably: improvements in business regulations, digitization to improve public service delivery, access to finance, skills training, and energy sector reforms.

In all, the government is estimating the CARES programme to cost GH¢100 billion, with the government expected to raise GH¢3e government of Ghana plans to finance it jointly with the private sector.

It will be central to the success of the initiative to find ways to engage productively with the private sector, to ensure fair burden sharing between private and public sector and avoid additional public debt accumulation.

Assessing The Current Economic Performance

Ghana’s economy recorded impressive growth between 2017 and 2019 until the advent of COVID-19 in 2020, which erased all the gains that had been chalked.

The economy grew by over 8 percent in 2017, 6.3 percent in 2018 and 6.8 percent in 2019. The fiscal deficit also declined from 6.8% of rebased GDP in 2016 to 3.8% in 2018 and 4.8% in 2019 (excluding cost of the one-off financial sector bailout).

The economy also recorded primary balance surpluses for three years in a row: 0.5% of GDP in 2017, 1.4% in 2018, and 0.9% in 2019 compared to a deficit of 1.1% in 2016. Moreover, Inflation dropped steadily from 15.4% at the end of 2016 to 7.9% (rebased) at the end of December 2019, and the trade balance recorded a progressively large surplus in 2017, 2018, and 2019.

However, the impact of the COVID-19 wiped out all these impressive growth, with the economy growing by just 0.4 percent in 2020, which is one of the lowest economic growths in the country. Inflation also ended the year at 10.4 percent, with trade balance also ending the year with a deficit of 5.3 percent.

Commenting on the World Bank’s assessment of the Ghanaian economy, Mr. Laporte, noted that it was a difficult assessment to make now considering the impact of the pandemic.

He admitted that prior to the pandemic, the country’s economy was doing so well.


Ghana’s economy grew by 7 percent per year on average during 2017-2019, one of the fastest growth rates in Africa. However, the COVID-19 pandemic has had a severe adverse impact on Ghana’s economy (as it did in other developing and emerging countries as well).

Growth slowed sharply in 2020, to 0.4 percent, because of both external factors (the global slump in hydrocarbon prices) and domestic mobility restrictions which hit the services sector (wholesale and retail trade and hospitality). In turn, the growth slowdown has clearly had an impact on poverty.

He further stated that surveys conducted had also indicated that three-quarters of households saw a decrease in their incomes.

Another issue is that the COVID-19 crisis has really dented Ghana’s fiscal space and this is something to look out for.

Debt To GDP Ratio

The country’s debt to GDP ratio has been a major cause for concern in recent times with the International Monetary Fund (IMF), consistently warning the country that the debt was reaching unsustainable levels.

Ghana’s debt currently stands at GH¢304.6 billion, as at March 2021, representing 70.2 per cent of GDP according to latest data released by the Bank of Ghana.

With the debt to GDP projected to have reached 78 percent in 2020 by the World Bank, the World Bank Country Director averred that this was a very significant issue but also one that needs to be put in perspective.

Nevertheless, he revealed that the nominal figure was not the one to look at. He therefore stated that “we need to look at debt as a share of GDP or revenues, because different countries have very different levels of debt they can sustain.

He further explained that “the sharp increase you saw in the debt ratio in 2020 (by 15 percentage points to 78 percent of GDP), is partly a reflection of the fact that growth slowed down sharply (so the denominator shrinks relative to the numerator). Also, I think there is a consensus among economists that fiscal support was needed during the crisis to provide immediate support and immediately after to make sure that the recovery is robust.”

He, however, advised the government to put in place a credible plan to return to fiscal discipline and to rebuild the fiscal buffers that have essentially vanished during COVID.

That credible plan will also need to include a solution to issues in the energy and financial sectors that have been major sources of contingent liabilities in the past. Unless and until that plan is implemented, Ghana will remain at high risk of debt distress and exposed to shocks. This is not a situation it will want to be in


Ghana’s Budget Deficit

After keeping the budget deficit under control and below the five per cent of GDP threshold prescribed by the Fiscal Responsibility Act, the country was forced to suspend the fiscal rule that was introduced in 2018, and the budget deficit widened to 11.4 percent in 2020, largely as a result of the economic impact of the COVID-19 pandemic.

Mr. Laporte noted that countercyclical response to crisis was necessary.

He, however, pointed out that countercyclical policy also means that the government puts money aside (build up fiscal buffers) in good times and rely on those buffers in bad times.

He further indicated the country’s fiscal deficit was already very high prior to the COVID-19 pandemic, which only worsened the situation.

He also pointed out that “it did make sense to suspend the fiscal rule (in fact there are provisions for doing so precisely to address exceptional circumstances) but I also think Ghana needs a credible plan to get back to a meaningful fiscal rule in the near future and this will imply resolving issues in the energy and financial sectors; gradually phasing-out COVID-19 support measures; improving spending efficiency; and raising more domestic revenues.”

Domestic Revenue Mobilization

Domestic revenue mobilization has been a major challenge for the country, considering majority of the country’s workforce being in the informal sector. Over the years, attempts by the government to formalize the informal sector and rope them into the tax net has proven futile.

This has led to the situation where the government keeps over burdening the people in the tax net with more taxes instead of widening the tax net.

In a bid to raise more revenue to fund its policies post COVID-19, the government in the 2021 budget statement introduced some new taxes, while some others were increased.

Commenting on the country’s domestic revenue mobilization drive, Mr. Laporte said Ghana was starting from a very low tax to GDP level.

Mr. Pierre Laporte 2

“Indeed, for the past two decades, the tax to GDP ratio has remained at around 12.8 percent of GDP, well below the Sub Saharan Africa average of 15 percent. However, that means there is a lot of potential for improvement.

“In fact, a low hanging fruit is exemptions (so called “tax expenditures”), which were estimated to amount to about 5 percent of GDP for 2014.”

The Country Director described the government’s intention to increase total revenue and grants from 14.4 percent of GDP in 2020 to 16.7 percent in 2021, which represents a nominal growth of 31 percent year on year, as ambitious.

He said the World Bank, however, supports this ambition, stating “but beyond the measures that have already been announced (such as the proposed levies on petrol/diesel), it is important for Ghana to review existing tax exemptions with a view to rationalize them; strike the balance between tax efficiency and equity; and consider improving the personal income tax (PIT) systems to encourage taxpayers to move out of the informal economy while making the tax system more progressive, for instance by administering social transfers via the PIT.”

Impact Of Corruption

Corruption is identified as one of the major challenges in Ghana, robbing the country of millions of Cedis which could have been used to better the lives of the citizens.

The Government-own Coordinated Program for Economic and Social Development (CPESD) considers corruption as a major constraint on growth and development and therefore, the Government is planning to enforce stronger Anti-Corruption measures by systematizing the interface with the citizens and private sector.

On how to address this menace, Mr. Laporte noted accountability institutions have an important role to play to restore public confidence.


In this respect, Ghana has enacted several laws and established institutions to deal with corruption in the public sphere. Besides the Ghana Audit Service, these include the Economic and Organised Crime Office (EOCO), the Commission for Human Rights and Administrative Justice (CHRAJ), the Internal Audit Agency, the Public Procurement Authority, the Central Tender Board, and the Public Accounts Committee. Despite these legislation and accountability institutions, further reforms are needed to resolve pending issues.

CPESD also acknowledges that governance and institutional challenges are the two internal binding constraints on development. Despite improvements in governance indicators of voice and accountability and political stability and absence of violence in Ghana, indicators of government effectiveness and control of corruption have declined by 18.66 and 4.19 percent, respectively.

Mr. Laporte further said the World Bank, through a combination of interventions, was supporting government’s reform measures for improving governance and Anti-Corruption mechanisms.

These include reform of public financial management systems, strengthening revenue administration, local governance, State Owned Enterprises’ performance and reforms aimed at efficiency of service delivery expenditures and value for money.


World Bank’s Economic Projection

Rating agencies, Fitch and Moody’s at the beginning of the year projected a strong economic growth for the country in 2021. While Fitch projected a growth of 4.8 percent, Moody’s projected a growth of 4 percent. These two projections were in line with the government’s own projection of 5 percent for 2021.

The World Bank, at the beginning of the year was, however, conservative with their projection, predicting a GDP growth of 1.4 percent.

Mr. Laporte commenting on the projection revealed the forecast at the beginning of the year formed part of the World Bank’s global exercise.

However, he noted the World Bank has revised that projection and upgraded its forecast due to the improvement in the global economy.

Our new projections point to a recovery albeit with growth below pre-COVID levels. We now expect that growth will average 4.5 percent per year over 2021-2023 (which is lower than the pre-2020 10-year average of 6.0 percent).

Building Blocks For Turnaround

With the COVID-19 situation now stabilizing, the World Bank Country Director proffered some measures to help fix the economy and bring it back to the pre pandemic levels.

He intimated the country’s first priority and the most effective measure to support the economy is to continue the efforts on the vaccination campaign


The second priority is to extend enough support to households and firms so that they are in a position to support the recovery. The third priority is to ensure fiscal consolidation over the medium term. Finally, structural reforms will be needed to raise the growth potential of the economy. In that respect the AfCFTA offers great potential to support economic diversification in Ghana.

Ghana’s National Development Bank

The Ministry of Finance in May 2021 signed an agreement with the European Investment Bank (EIB) for €170 million to establish the Development Bank Ghana (DBG). Prior to this the World Bank had supported with $250 million in a bid to get the National Development Bank established. Also other developmental organizations including KfW and AfDB have all shown their support behind the establishment of this new National Development Bank.

The Minister of Finance, Mr. Ken Ofori Atta, said the DBG is expected to be a key pillar in the government’s efforts to quickly recover from the effects of the COVID-19 pandemic and quickly resume the economic transformation path as articulated in the Ghana CARES ‘Obantanpa’ Programme.

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The DBG is intended to be a model institution that supports the financial system to play its role in supporting the private sector to expand and create jobs. It will help address two important constraints in the financial system, namely: the lack of long-term funding, and the lack of adequate funding to the productive sectors of the economy.

Commenting on how critical the DBG is to the economic recovery process of the country, Mr Laporte asserted that Ghana’s financial sector did not provide adequate support to the private sector and as a result, credit to GDP stood at 12 percent, which is very low, compared to other similar economies.

“Indeed, many enterprises (esp. SMEs) identify poor access to finance as a major constraint for their opera tions and growth. Moreover, credit is expensive and usually only available as short-term financing (whereas firms need access to long-term financing). But if you ask the banks, they will say that they themselves don’t have enough access to long term funding.


This is precisely the issue that the new National Development Bank is trying to address (with World Bank support). Specifically, the new Bank will provide wholesale long-term funding to financial institutions to on-lend to creditworthy enterprises in agribusiness, manufacturing, and high value services.

Furthermore, he revealed that “the DBG is expected to start with a seed funding of US$ 700 million, including lines of credit from the European Investment Bank, KfW, and the World Bank.”

The US$200 Million Covid Fund

The World Bank on June 10 approved a US$200 million additional financing for Ghana’s COVID-19 Emergency Preparedness and Response Project. This additional financing will provide financing to support the Government of Ghana procure and deploy COVID-19 vaccines for 13 million people in the country.

The project is also expected to strengthen Ghana’s health systems to better prepare for future pandemics; and help secure essential health and nutrition services, including routine childhood immunization.

Mr. Laporte noting the use of the funds said the additional financing builds on the existing Ghana COVID-19 Emergency Preparedness and Response Project that was approved on April 2nd, 2020 by scaling up and strengthening surveillance of the pandemic; case management; increasing public acceptance of COVID-19 vaccine; and COVID-19 vaccine deployment, including strengthening cold chain equipment, vaccine safety monitoring and medical waste management.


The $200 million funds come from the World Bank’s International Development Association (IDA), that was established in 1960 to provide grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of development assistance for the Africa region.

As all World Bank operation, it needs to be approved by the Parliament and there is an accompanying legal agreement that need to be signed by representative of the Government of Ghana, who is the Minister of Finance and myself. Since this is an additional financing to a project that is already being implemented, the additional conditions to utilize the funds by the government of Ghana are simplified. We estimate that Government of Ghana will be able to access the additional funds by the end of this month, June 2021.

Moreover, he revealed the World Bank has been the biggest contributor to the fight against Covid-19 pandemic worldwide, stating that “in Ghana, in the Africa region and throughout the developing world. The World Bank Group approved on April 2, 2020 a US$12 billion Fast Track COVID-19 Facility to assist countries worldwide in addressing the global pandemic and its impacts.”

Of this amount, he noted US$6 billion came from the World Bank (the public sector arm of the World Bank Group) and US$6 billion from the IFC (the private sector arm of the World Bank Group).


The IFC subsequently increased its contribution to US$8 billion, bringing the Fast Track COVID-19 Facility total to US$14 billion. The World Bank committed a total of $365m of the Fast Track COVID-19 Facility to support the fight against the Covid-19 pandemic in Ghana through the original Ghana COVID-19 Emergency Preparedness and Response Project that was approved last April 2, 2020 and the two Additional Financing, approved on November 10, 2020 and June 10, 2021, respectively.

World Bank funds have been deployed by the Government to implement the country’s emergency response and preparedness plan (EPRP) for COVID-19 response, which comprises five components: (i) testing and diagnostics; (ii) case management; (iii) social support for the vulnerable; (iv) the continuation of essential health and nutrition services at the PHC level; and, (v) the preparation for COVID-19 vaccine deployment.

Mr Laporte, however, gave an assurance that the World Bank has put in place a number of tools, procedures, and mechanisms to ensure that these funds are used for their intended purposes to achieve the intended results.


First, it is important to clarify that the Government of Ghana is in the driving seat. It is the Government that is responsible for the implementation of the project using the funds provided by the World Bank. The implementing government agency (the Ministry of Health and the Ghana Health Service in the case of Ghana COVID-19 Emergency Preparedness and Response Project) prepares the specifications for the project and carries out all procurement of goods, works and services needed, as well as any environmental and social impact mitigation set out in agreed upon plans. Financial management and procurement specialists on the Bank's project team ensure that adequate fiduciary controls on the use of project funds are in place.

Once underway, the implementing government agency reports regularly on project activities. The Government of Ghana and the Bank also join forces twice a year to prepare a review of project progress and produce Implementation Status and Results (ISR) Reports that are publicly available.

Finally, when a project is completed and closed, the World Bank and the Government of Ghana document the results achieved; the problems encountered; the lessons learned; and the knowledge gained from carrying out the project. A World Bank team compiles this information and data in an Implementation Completion and Results (ICR) Report, using input from the implementing government agency, co-financiers, and other partners/stakeholders. The report describes and evaluates final project outcomes. The knowledge gained from these evaluations is intended to benefit similar projects in the future.

World Bank-Ghana Partnership Going Forward

Speaking about the twos relationship, Mr. Laporte revealed the World Bank Group and the Government of Ghana are in the final stages in the preparation of the Country Partnership Framework (CPF) for 2021 to 2025.
He intimated that the overarching objective of the CPF will be to support Ghana’s efforts towards creating a dynamic and diversified economy, creating job opportunities for a greener, more resilient, and inclusive society. The WBG’s activities under the CPF are structured around three interrelated focus areas.

“The three proposed focus areas are: (i) Improving Equitable Access to Services for Human Capital Development; (ii) Enhancing Conditions for improved productivity and competitiveness with Quality Jobs; and (iii) Promoting Sustainable Resilient Development. The CPF will have a cross cutting theme of Digital transformation.”

Consequently, he noted these focus areas aim to support Ghana’s COVID recovery and the government’s ambition to leverage its strategic position in West Africa and its overall favorable political and economic environment for transformational development.

“The CPF will also reflect our World Bank corporate priorities of addressing climate change, gender, and improved governance,” he concluded.