Tuesday, Aug 03

SOCIAL BOND: Ghana’s New-Found Borrowing Option

Adopted in 2015 by the United Nations, the Sustainable Development Goals (SDGs) also known as the Global Goals, called to action the urgent need to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. However, the outbreak of the SARS-COV-2 pandemic and its containment measures have derailed the progress made on the SDGs and casts doubt on meeting the deadline set for the goals. Estimates from the World Bank show that as many as 150 million could fall into poverty in 2021.

More worrying is the restrictions imposed last year to contain the spread of the virus that impacted greatly on school going children due to closure of schools. The resulting disruptions exacerbated already existing disparities within the education system with the poor and marginalized being the worst affected. This has affected human capital development in most countries; a key ingredient in a nation’s economic development equation. Moreover, Schools closure carry high social and economic costs for people across communities. Estimates from UNESCO show that more than 888 million children worldwide continue to face disruptions in their education due to full and partial school closures.

Nevertheless, the pandemic has awakened the urgent need to tackle the numerous social problems facing the world, which have now been worsened. This, therefore, calls for urgent solutions to bridge the financing gap of about $2.5 trillion to meet the SDGs, according to the IFC. The world, more than ever, needs innovative and sustainable finance in less than a decade to meet these Goals.

Luckily, in the wake of these complex social challenges, Social Bonds have come to the fore of the sustainable bond market. According to the IFC, global social bond issuance in 2020 amounted to $142 billion, up from $17.4 billion issued in 2019. Consequently, investors now see the need to commit their funds into tackling social issues which have been exacerbated by the pandemic.

Just like other countries, Ghana is still battling with the devastating effects of the pandemic and aside the economic fallouts, it has lost 796 lives to COVID-19 as of July 3, 2021. This notwithstanding, the IMF has commended the government for managing the pandemic well, even though it recorded a marginal growth of 0.4% last year. Nonetheless, one major issue that government is battling with is the rising public debt stock. COVID-19-induced expenditures have overstretched government’s finances and compounded it by weak revenue mobilization.

As of End-December 2020, Ghana incurred a revenue shortfall of GH¢11,942.7 million and expenditure increase of GH¢14,074.2 million in relation to their respective targets in the 2020 Budget. The fiscal gap due to the COVID-19 amounted to GH¢16.8 billion in 2020. This, according to the Finance Ministry, was financed by borrowing from the IMF (GH¢5,853 million), AfDB (GH¢405.7 million), EU (GH¢504 million), and BOG COVID-19 Bonds (GH¢10,000 million), among others.

Currently, Ghana’s stock of public debt stands at GH¢304.6 billion at End-March 2021, up from GH¢291.6 billion at End-December 2020. In percentage wise, the current debt accounts for 70.2% of the country’s GDP. Even though the current debt stock is marginally above the sustainability threshold of 70%, the major challenge is that about 49.5% of government’s budget revenues for 2021 will be used to service interests on loans. The situation becomes more worrying when compensation of employees is added to interest payments, this then results to 91.3% of the projected total revenues and grants for 2021.

Why Government Keeps Borrowing?

Clearly, the situation looks gloomy for the economy. Even if the government considers just interest servicing alone, it means that government has only about 50% of its projected revenues including grants to meet the remaining expenditure components which is woefully inadequate. This leaves the government with no option than to look elsewhere to raise the funds to cater for the remaining expenditures that are equally important to the government such as capital expenditures and COVID-19-induced expenditures.

All these developments provide a justification as to why the government has become very active on the capital market in the past few years. To support its budgets, government resorts to the issuance of both domestic and Eurobonds to bridge the budget deficit.

An example was in March 2021, Ghana issued a $3billion Eurobond on the international debt capital market. The bond was massively oversubscribed, as total bids amounted to $6 billion. This made Ghana the first Sub-Saharan African country to issue a Eurobond in U.S. dollars since the outbreak of the COVID-19 pandemic.

Also, on the domestic front, the government of Ghana plans to issue fresh bonds to the tune of GH¢2.1 billion between June and August 2021 to meet its remaining financing requirements. However, majority of the bonds that government plans to issue within the period will be used to rollover maturities.

Comparatively, the current target gross bond issuance of GH¢ 21.96 billion between June and August 2021 is higher than the GH¢21.43 billion issued between April to June 2021.

Why The Need For A Social Bond?

With the current rising debt stock, it has become increasingly difficult for the government to finance some of its flagship programs while at the same time maintaining its support for businesses and households who are still struggling to overcome the challenges inflicted by the pandemic. 

On June 2021, Dr. Yaw Osei-Adutwum, Ghana’s Minister of Education, stated that the government has so far spent GH¢7.7 billion on the Free SHS Policy, which is one of its flagship programmes. Dr. Osei-Adutwum further explained that an amount of GH¢480 million was spent on the Policy in 2017, GH¢1.3 billion in 2018, GH¢1.6 billion in 2019, GH¢2.4 billion in 2020, with plans to spend GH¢1.9 billion in 2021.


To continue to finance these social interventions alongside dealing with the economic turmoil of the pandemic, Ghana needs other innovative ways to raise the needed resources. It is in line with this that, Mr. Charles Adu-Boahen, Minister of State at the Ministry of Finance, in May this year, revealed to Bloomberg that Ghana is planning to raise as much as $1 billion through the sale of sustainable bonds to fund the free SHS policy.

According to Mr. Adu-Boahen, the proceeds will help refinance domestic debt used for social and environmental projects, including loans taken to pay for the government’s free Senior High School (SHS) policy.

With this issue, we’re looking at refinancing those debts already raised to undertake projects in the environmental and social sectors


By this move, Ghana becomes the first Sub-Saharan African country to undertake this innovative initiative. Meanwhile, regardless of the rising appetite for social bonds, it comes as a surprise as no country on the continent has taken advantage of the situation. What remains unclear is why African countries, with numerous social challenges, have not yet embraced the issuance of the social bond.

More worrying, is the fact that the African Development Bank (AfDB) has been an active participant in the social bond market since 2017. After launching its social bond program in 2017, the African Development Bank has so far issued five of such bonds. More recently, the AfDB issued a social debt instrument worth $3 billion to fight COVID-19.

Should Ghana issue this social bond, it will be the first in Sub-Saharan African (SSA). Moreover, financial analysts and Economists have argued that Ghana’s planned social bond issuance could kick start a trend in Africa. “Many more countries in Africa are likely to follow Ghana’s example”, says Churchill Ogutu, Head of Research at Genghis Capital in Nairobi, because of the pandemic’s devastating impact on tax revenues, and the need to fund critical social sectors.

Ghana secures first Social Loan in SSA

Ghana sets the pace in June 2021, after it secured a €280 million Social Loan financing from Standard Chartered Bank to develop a section of the country’s Eastern Corridor road with the aim of transforming the country’s transport infrastructure.

Ghana Eastern Corridor Road
Ghana’s Eastern Corridor road starts from the Tema roundabout and ends at Kalungugu, the North-Eastern border with Burkina Faso. However, Standard Chartered’s financing is expected to fund a particular section of the road, otherwise known as Lot 1. This includes two flyovers and interchanges, 11 pedestrian bridges and three mixed bridges in a dual carriageway.

The Lot 1 stretches from the Ashaiman roundabout and ends at the Akosombo Junction, a distance of 64km. When completed, the Ghana’s Ministry of Roads and Highways expects the upgraded, tolled route to positively impact the lives of around 500,000 residents from underserved populations.

Moreover, the Highway is expected to drive employment opportunities and trade, providing shorter access to the Port of Tema and will also link regions within Ghana as well as to neighbouring countries such as Burkina Faso and Togo. Additionally, the section will improve road safety and better access to healthcare and other essential services.

Funding social programs is one of the surest ways of building back better from the pandemic. Road infrastructure and education play significant roles in Ghana’s economic development and prosperity. The current move by the government will help the country to begin focusing on financing social programs through the issuance of social bonds. Nevertheless, it will require transparency and integrity to prevent the risk of “social-washing”, that is, having proceeds used for causes other than those originally intended. Whilst the implications on public finance may be of concern in the short-term, the long term benefits of such borrowings are huge. However, policy credibility and consistency are key if government wants to make the most of this initiative.

The Social Bond Guidance framework

The Social bond, the youngest of the sustainable bonds family, is expanding so fast and gaining traction in the capital market.

Meanwhile, the move towards sustainable financial markets aimed at meeting the changing needs of people, calls for clarity and distinction among the family of bonds. Investors are keen for clarity because they want to make sure they are investing their monies wisely, both financially and socially.

The issuance of social bonds is guided by the International Capital Markets Association’s Social Bond Guidance (SBG) which aims at promoting transparency, disclosure and integrity in the social and sustainability bond market. The SBG specifies clearly what constitutes a social project.

The Guidance states “Social Projects are projects, activities and investments that directly aim to help address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially, but not exclusively, for target population(s)”.

Such Projects should provide clear benefits that can be described and, where feasible, quantified and/or assessed. The Guidance also states that examples of expected positive social impacts should be stated and may include, but are not limited to, the number of beneficiaries from these projects.

Examples of social projects include basic infrastructure such as clean drinking water, sanitation, and transport; access to essential services such as health, education and vocational training; Affordable housing; Employment generation; and Food security.

The issuer can target populations such as those Living below the poverty line, marginalized populations, Vulnerable groups (including disaster victims), people with disabilities, the Undereducated, Underserved, or Unemployed.

However, it is worth noting that the SBG is a mere guidance and does not constitute a regulation that may attract sanctions upon violation. This means that an issuer might deliver a social bond that does not fully adhere to these principles, although it is strongly recommended.


Proposed Taxes: Is The Government Asking for Too Much?

Proposed Taxes: Is The Government Asking for Too Much?

The COVID-19 pandemic has had significant impact on the global economy, Ghana inclusive. The Ghanaian economy which had been on a strong growth trajectory in the last three years suffered its first technical recession in 2020, with the economy contracting for two consecutive quarters.

With things stabilizing now, governments all over the world have started putting in place the building blocks for a quick economic turnaround.

However, with the COVID-19 pandemic ballooning government’s expenditure in the face of reduced revenues, the government has been caught in a tight fiscal corner.
With the country’s debt reaching an alarming rate, prompting caution from the IMF and the World Bank, the government was left with no other option than to resort to the introduction of new taxes to finance its expenditure for 2021 and beyond.

Currently, government’s resources have been overstretched with debt to GDP ratio hovering around 76.1% as of December 2020.

Considering its direction, the government placed a 1% increase in the National Health Insurance Levy, and a 1% increase in the VAT Flat rate. There was also the Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act (ESLA). Likewise, banks were also expected to pay a financial sector clean-up levy of 5% on their profit-before-tax effective June 30, 2021. The government upon presentation of its proposition to Parliament gained approval and as such has these taxes backed by ‘Acts’.

However, there has been a public outcry on the introduction of these new taxes. A section of the public describes the move as completely unacceptable since individuals and businesses were still reeling under the effects of the pandemic and as such the government was insensitive to the plight of people and above all, asking too much from its citizens.

Contrary to this opinion, the former Member of Parliament (MP) for New Juaben South, Hon. Dr. Mark Assibey-Yeboah has backed the government’s decision to impose these new taxes. According to him, these taxes are intended to support vulnerable households. He explained that the poor and the vulnerable (women, children and disabled) were the hardest hit by the pandemic. He further indicated that majority of the people who have lost their incomes and livelihoods are the poor and are also the ones exposed to the health risks of the coronavirus. Therefore, “all of these are targeted at the poor. When all this happens, it is the poor that are going to benefit because they suffered the most. So, if anybody is going to criticize the government, they should look at how the government’s efforts are helping the poor”


Dr. Assibey-Yeboah also disagreed with opinions suggesting the government was being insensitive to the needs of the citizens. Conversely, he indicated that the government was very sensitive in coming up with the various taxes because people have suffered income losses. He then averred that “the tax rate needs to be considerate”.
The former MP, in addition, revealed to The Vaultz Magazine that the aim of the new taxes “is not a revenue motive but to address peculiar concerns”.

More worrying, Dr. Assibey Yeboah indicated that some people couldn’t afford face masks and as such wear one face mask “forever and ever”. This, he underscored, are the reasons the government needs these taxes to support the vulnerable in society.


The government during the outbreak of the pandemic last year rolled out series of interventions. These interventions included provision of meals for 2020 BECE candidates, sharing of free meals in affected lockdown areas, provision of free water and free electricity, financial support to MSMEs etc.

This, the former MP applauded the government for its initiatives towards minimizing the impacts of the pandemic on businesses and households. He then noted that despite all these, the government didn’t tax anybody in 2020, however, the new taxes are only intended to protect lives and livelihoods. “The government has done a lot!”, he exclaimed.

Expatiating his stance, Dr. Assibey Yeboah further provided vivid justifications for his support on government’s decision to impose these taxes.


With regards to the 1% VAT Health Levy (COVID-19 Health Levy), Dr. Assibey Yeboah explained that it will be very useful because it will help the government to procure, distribute and administer vaccines. He then noted that the government cannot bear the cost of vaccinating the 31 million Ghanaians all alone.

“So, such a tax is a good tax. Because, if I’m safe and my neighbor is not safe, then the virus is not contained. It beholds every Ghanaian to get a vaccine. So, taxing for the procurement, distribution, and administration of the vaccines cannot be seen as a normal tax. If there is no COVID-19, would there be a COVID-19 Health Levy? No”.


Speaking on Sanitation and Pollution Levy (SPL), he noted that sanitation is a major challenge in the country. He indicated that there are lots of heaps of refuse on the streets of our cities especially in Accra. This, according to him, requires drastic measures to arrest the situation. He pointed out that this requires the establishment of a state-of-the-art treatment plant and new landfill sites in our major cities. This, according to him, requires a lot of money for which the government’s new levy becomes more relevant.
“All of us know of the sanitation situation in the country. When you drive around town, you will see heaps of refuse all around. The tracks cannot even go to the landfill sites that we have in Accra. We need to find new landfill sites. We need to construct well-managed landfill sites and sustainable state-of-the-art treatment plants. This requires money. The government is saying that for our own sake, why don’t we impose 10 pesewas on petrol and diesel so that we can improve sanitation and prevent pollution”


On Financial Sector Clean-Up Levy, Dr. Mark Assibey-Yeboah asserted that if anyone or institution should complain about the financial sector clean-up levy, it shouldn’t be the banks. According to him, the banks are the beneficiaries of the strong financial sector that we have now. He stated that the government has spent about GH¢21 billion to save the financial sector. According to him, the Financial Sector Clean-Up Levy is a targeted tax that only beneficiaries of the Sector Clean-Up will have to pay.

“Who are the direct beneficiaries of the strong financial sector? It’s the banks. Check the dailies and see the profits they are making. They made tremendous profits in 2020. So in the face of the pandemic, whilst other businesses are struggling, banks are making profits”.

Meanwhile, some bank managers hold a contrary opinion and think that the sector is already burdened with so much taxes and it’s as if the government is targeting them. However, Hon. Assibey-Yeboah vehemently refuted this allegation, saying “all of them have made huge profits”. He explained that the government was the first to think of the banks and intervene when the sector was in crisis. According to him, the government has sustained some of the banks through its interventions to meet their capitalization. He cited the ADB, Prudential, UMB, and OMNIBSIC as some examples.

“A strong sector is good for them and is good for the country. The act of insensitivity does not arise at all. In 2021, the government is going to spend GH¢4.5billion COVID-19 related expenditure. All these we are talking about are bringing in only GH¢6 billion”


Dr. Mark Assibey-Yeboah, moreover, asserted that all of the efforts of the government is geared towards an inclusive growth and requires all hands on deck.

“That is what we call inclusive growth; …doing something that will bring everybody along. If the pandemic stays for another one year, I’m telling you that the banks will still be making profits. The rich households will still be getting wealthier and the poor ones will be getting poorer”.

Speaking on the issue, Prof. Peter Quartey, the Director of ISSER believes that the government should also consider avenues to improve revenue collection in addition to imposing the new taxes.



“So, my view is that, yes, the government has done very well in helping us fight the pandemic- cushion people with the freebies i.e., free water, electricity, feeding for school children. What has been given by the government has been good. We are tagged as one of the countries that has managed this pandemic well. Now, how does the government finance it?  Raising more revenues should be the way forward rather than additional taxes”.

Prof. Quartey indicated that the government wouldn’t have resorted to taxation if it were a developed economy. According to him, such economies were able to manage the pandemic without necessarily imposing taxes.

He then asserted that Ghana’s circumstances are such that government’s only options are to either borrow or impose taxes.

“We are coming out of a recession. So, it’s a recovery budget, and to recover, you raise revenue and then spend. In fact, spending is very key in any recovery”.

Furthermore, Professor Quartey specified that there are two sources of mobilizing resources to aid the recovery process. They include domestic and external sources. He pointed out that the domestic sources could be either through taxation or from non-tax revenue. As a result, the ISSER Boss called for more automation in the revenue collection mechanisms. This, he believes, will help raise enough revenues to finance economic activities.

“Unfortunately, we have focused on only tax revenue.  Our non-tax revenue is not expanding very much.  We have not been efficient in non-tax revenue. Even in tax collection too, we have not been very efficient.  There are a lot of human interfaces and a lot of discretion.  Let’s make use of digital ways of collecting revenues. We are not getting as much revenue as we should. So, every now and then, we are introducing new taxes”.

Debt Management Under the New Government

Debt Management Under the New Government

Debt sustainability has been one of the major problems facing most countries even before the outbreak of the COVID-19 pandemic. Ghana, one of such countries, has been battling with the situation for some time now; a situation that forced the government to enroll in the HIPC initiative in 2001 resulting in majority of its debts pardoned.

Shortly after that, the country’s appetite for borrowing started growing steadily and is currently listed among the high debt distress economies in the world by both the IMF and the World Bank. Due to its consistent borrowing, the government has always spent a chunk of its meager revenues on interest payments.

According to the Institute for Fiscal Studies (IFS) Ghana, interest payments accounted for an average of 18.4 percent of domestic revenue in 2009-2010, then dropped to an average of 14.8 percent in 2011-2012, but rose to an average of 30.3 percent in 2014-2015.

The 2019 Annual Public Debt Report shows that a total of US$874.6 million was paid as interest on government borrowings. This was 11.9 percent higher than the US$781.7 million recorded in 2018. The finance ministry attributed this to interest paid on the 2019 Eurobond which was issued in March 2019.

In 2017, the government spent a total of US$571.5 million on interest payments. The deviation of US$211.8 million recorded between 2017 and 2018 was attributed to the interest paid on the 2018 Eurobond which was issued earlier than anticipated. Interest cost as a share of total external debt service cost in 2018 was 31.3 percent.

Provisional figures from the ministry of finance indicate that Ghana has spent a total of GH¢ 11, 639 million on interest payments between January and June 2020. This accounts for 3.0% of the country’s GDP. 

Moreover, the government plans to spend GH¢7.0 billion on interest payments in Q1 2021. Surprisingly, projected revenues including grants totaled GH¢13.3 billion for the period. This means that 52.63% of the total revenues including grants will be used to pay interest on loans in Q1 2021.

As of End-December 2019, the total gross public debt stock stood at GH¢217,990.7 million. This was 62.4 percent of GDP, up from 57.6 percent at End-December 2018. The justification provided by the finance ministry for the 4.8 % jump in the ratio between 2018 and 2019 was the impact of the financial and the energy sector bailouts. Debt in 2019 was made up of GH¢112,509.4 million and GH¢105,481.2 million for external and domestic debt respectively. 

Debt sustainability, therefore, has become a major concern for the country. The IFS, therefore, has called for drastic measures to address the menace of rising debt in Ghana.


 the fiscal outlook still poses serious challenges for debt sustainability and the country is likely to continue to be at a high risk of debt distress on account of unfavorable trends in the country's debt service relative to domestic revenues and export earnings. This calls for additional measures and strategies to contain the rise in the public debt stock and the resulting high-interest costs.

The World Bank and the IMF, however, expect the country’s debt to continue to rise and only return to sustainable levels in the next 5 years.

“Total public debt is not expected to fall below the 55 percent of GDP threshold until 2026. The slow pace of decline compared to the previous DSA vintage derives from worse fiscal positions, higher projected interest rate costs, and residuals.

“More structurally, fiscal performance continues to be burdened by low government revenues and growing interest bill as deficit financing shifted from concessional to commercial sources. But the debt-to-GDP ratio would only begin to decline in 2022 with growth rebounding as new oil concessions come on line” – IMF & World Bank.

“Debt sustainability is hinged on maintaining consistent levels of primary surpluses while we continue with prudent management of contingent liabilities”Ministry of Finance.

The current stock of public debt

Exactly 16 years after Ghana graduated from the HIPC process, the country’s stock of debt is revisiting its old base.

Furthermore, the COVID-19 pandemic has currently impacted heavily on the fiscal position of the country; unbudgeted expenditure has resulted in increased government spending. With weak revenue mobilization, the government has resorted to borrowing to finance its numerous interventions.

Recent macroeconomic and financial data released by the Central Bank of Ghana (BOG) shows that from January to September 2020, Ghana has accumulated a total of GH¢54.2 billion in debt. The total stock of public debt was GH¢219.6 billion at End-January 2020 but shot to GH¢273.8 billion at end of September 2020. As a percentage of GDP, the current figure represents 71%.

Gross public debt stock for the first nine (9) months of the year is presented in Chart 1 below. In parenthesis are the debt to GDP ratios.
Chart 1: Gross Stock of Debt, January- September 2020 (Billion ‘GH¢)
chart 1
                                                                                                     Source: Bank of Ghana

Quarterly analyses

Public debt experienced the highest growth rate of 7.8% in Q1 2020. The growth rate, however, slowed down to 4.4% between April to June (Q2) before declining by just 0.4% between July and September to end Q3 at 4%.

Chart 2 presents the quarterly growth rates of public debt for the first three quarters of the year 2020.

Chart 2 Quarterly analysis of Public debt (% growth)

chart 2                                                                                                           Source: Bank of Ghana

Year-on-year analyses

A year-on-year analysis shows that public debt has gone up by GH¢64.7 billion between September 2019 and September 2020, representing a growth rate of 30.9%. In September 2019, the total stock of public debt stood at GH¢209.1 billion, which accounted for 59.8% of GDP. 

Composition of debt

According to data released by the BOG, the domestic debt component of the total debt stock has increased from GH¢ 129.0 billion (33.5% of GDP) in August 2020   to GH¢135.3 billion (35.1% of GDP) at the end of September 2020. However, the domestic debt at the end of September 2019 stood at GH¢101.4 billion representing 29.0 percent of GDP.

Revenue performance

Government’s revenue mobilization has been poor despite the immense pressure on the government to meet its numerous needs. The inability of the government to mobilize enough revenues has been the main reason why it continuously resorts to borrowing. Most often than not, government misses its revenue targets.

In 2018, the government’s total revenues and grants amounted to GH¢47,637 million, which represented 15.5% of GDP. In 2019, total revenue and grants amounted to GH¢53,379.61.14 million (15.3 percent of GDP), which was lower than the target of GH¢58,896.53 million (17.0 percent of GDP); a shortfall of GH¢5,517 million.  This outturn in nominal terms represented a per annum growth of 12.1 percent, despite the 9.4 percent shortfall relative to the revised target. Domestic Revenue, which comprises all revenues except Grants received from Donor Partners, constituted about 98.1 percent and amounted to GH¢51,988.01 million compared to a target of GH¢57,786.66 million. The recorded shortfall in Domestic Revenue was mainly due to a shortfall in non-oil tax revenue driven by the weak performance of all tax handles in 2019.

In 2020, total revenue and grants for January to June 2020 amounted to GH¢22,007 million, compared with the program target of GH¢29,759 million, resulting in a shortfall of 26.0 percent or a performance rate of 74.0 percent. The provisional outturn constitutes 32.8 percent of the annual target compared to the programmed expectation of 44.4 percent of the annual projection.


Higher expenditure relative to revenues always means constant budget deficits.  Aware of this, the government normally aims at reducing its deficit. This has, however, not been the case as the government's targets have always been missed.

Government targeted a budget deficit of GH¢10,971.2 million (3.7% of GDP) in 2018 but the provisional budget deficit outturn for 2018, excluding the financial sector bailout, was GH¢11,672.4 million (3.9% of GDP). The ministry of finance then cited lower than expected revenues relative to expenditure as the reason why the target deficit couldn’t be met, including financial sector clean-up costs, however, the provisional budget deficit outturn was GH¢21,474.0 million (7.2% of GDP) in 2018.

Also, the overall budget balance in 2019 recorded a cash deficit of GHȻ16,891.84 million, an equivalent of 4.8 percent of GDP, which was financed from both domestic and external sources. The companion fiscal indicator, the primary balance, recorded a surplus of GH¢2,877.41 million (0.8 percent of GDP) in 2019.

The government’s fiscal operations in the first half of 2020 resulted in a cash basis deficit of GH¢24,345 million, or 6.3 percent of GDP, compared to the program target of GH¢11,794 million, or 3.1 percent of GDP for January to June cumulatively. Total Expenditures including arrears clearance amounted to GH¢46,352 million, exceeding the target by 11.5 percent. The minister of finance, Ken Ofori-Atta indicated that the lower revenue performance against the programmed target and higher expenditures compared to the target, significantly influenced by the impact of the COVID-19 pandemic.

For the first quarter of 2021, total Revenue and Grants are projected at GH¢13.3 billion while total expenditure including the clearance of arrears is projected at GH¢24.0 billion. This results in the projected fiscal deficit of GH¢10.7 billion for the period.

End of Year Forecasts of Debt Stock

The International Monetary Fund has forecast a debt-to-GDP ratio of about 76% by the close of the year 2020. The IMF expects the country’s external debt to increase to 34.5% of the country’s GDP in 2020, from 30.3% recorded in 2019. This is above the 28.1% forecast for the whole of the Sub-Saharan African region. The Fund, however, expects this to decline to 32.0 percent in 2021 in its recent forecast.

The parliament of Ghana having approved an amount of GH¢27.4 billion to carry on the services of government in the first quarter of 2021, will see the debt stock likely to go up as the government plans to borrow more from the capital market next year.

Policy Considerations to manage the rising debt

In 2021, the next government, though same, must try as much as possible to limit its borrowings and rather resort to using more innovative ways to raise revenues, leveraging the recent investment in technology in the country.

The government must make frantic efforts to increase tax revenues from large companies and rich individuals. The government can also pass the ‘millionaires levy’ as has been done in Argentina recently to raise money for specific projects.

Also, the government must cease to grant tax waivers, including for public-private partnership projects, and increasing the capacity of tax collection authorities to ensure existing laws relating to issues such as transfer mispricing are implemented.

Similarly, the government must stick to its 2020-2023 macro-fiscal framework, borrowing plans, and debt sustainability analyses. Specifically, the next government must stick to the implementation of its liability management program to actively manage the public debt portfolio by redeeming benchmark size bonds before maturity with the view to minimize refinancing risk.

It is expected that the suspension of the government’s fiscal rules must be reinstated as COVID-19 cases continue to decline in addition to the vaccine that has been found.

Last but not least, the next government needs to ensure transparency in debt management. The government must make sure to disclose all individuals or institutions that hold the greater portions of its debts.

To achieve these, the Ghanaian government should periodically conduct a debt audit to publicly reveal how much debt there is, which loans were given by, what the loans were used for, that is, whether for projects or general budget support, and on what terms.



Election years have always been characterized by high euphoria and this year’s election is no exception. Election 2020 is a special kind of election in the history of Ghana since the inception of the 4th republic in 1992. Why is this the case? It is so, because, this is the first time in Ghana’s political history that a former president is contesting an incumbent. Since the presidential candidates from the two major political parties; the NPP and NDC, have had the chance to govern this country for at least a term each (4 years), it is clear that the outcome of the 2020 elections will be determined to a large extent by credibility and track record.

Nananomics & Mahamanomics, therefore, take a look at the major achievements of the two candidates; H.E. Nana Addo Dankwa Akufo-Addo of the NPP and Former President John Dramani Mahama of the biggest opposition NDC in their first terms of office.



Macro-economic indicators are very important in assessing the health of every economy. Thus, analyses of certain key macro-economic variables over the past eight years of the two candidates (4years each) is critical. This is aimed at providing a clear picture of the state of the Ghanaian economy under the watch of these two competitors.


Under Nananomics, Ghana’s economic growth prospects looked bright and promising before the outbreak of the COVID-19 pandemic.  Data from the International Monetary Fund (IMF) suggests that real GDP growth will average 5.5% between 2017 and 2020. Real GDP growth was 8.1% in 2017 but declined to 6.3% in 2018 before picking up marginally to end 2019 at 6.5%. As a result of the devastating effects of the current pandemic, growth is projected by the Fund at 0.9% in 2020. However, the economy contracted by 3.2% in Q2 2020.

However, real GDP growth averaged 4.7 % between 2013 and 2016 under Mahamanomics. From a high of 7.3% in 2013, GDP growth continually declined within the 4 years to 3.7% in 2016. Real GDP growth was 4.0% and 3.8% in 2014 and 2015 respectively.

Sectoral value addition & contribution

GDP growth in the Ghanaian economy continues to be driven mainly by three major sectors; Agriculture, Industry, and services.

Under Nananomics, between 2017 and 2019, the highest gross value addition of 15.7% was recorded in the industry sector in 2017.  It, however, continued to experience a nose dive as it reduced to 10.6% in 2018 before declining further to 4.6% in 2019. Value addition to agriculture which saw a rise to 6.1% in 2017 from 2.9% in 2016, has fallen to 4.6% in 2019. The services sector continues to expand in value addition as it rose from 3.3% in 2017 to 6.5% in 2019.

With regards to the sectoral contributions to GDP; the services sector continues its dominance with the sector’s contribution rising from 45.6% in 2017 to 47.2% in 2019. Also, the contribution of the industry has increased from 33.2% in 2017 to 34.2% in 2019 while agriculture’s contribution continues to decline from 21.2% in 2017 to 18.5% in 2019.

Figure 1 Gross Value Added Growth Rate by Sector (%)

pic 1 page 001Source: Ghana Statistical Service

Under Mahamanomics, the value-added figures are unavailable for 2013 since the rebasing of the country’s GDP was done in that year. Therefore, 2013 serves as the base year for the analyses under value addition. Between 2014 and 2016, data from the Ghana Statistical Service (GSS) shows that the services sector recorded the highest value addition of 5.4 % in 2014. This, however, could not be sustained as it dropped to 2.8% in 2016. Gross value added in the agriculture sector increased from 0.9% in 2014 to 2.9% in 2016.

As shown in figure 1, the industry also experienced an increment in value addition to 4.3% having stagnated between 2014 and 2015.  Within this period, the services sector’s contribution to GDP rose from 41.1% in 2013 to 46.7% in 2016. Industry’s contribution decreased from 36.9% in 2013 to 30.6% in 2016. Agriculture’s contribution, however, declined marginally from 21.7% in 2013 to 22.1% for three consecutive years; 2014, 2015, and 2016.


Under Nananomics, inflation averaged 9.8% between 2017 and 2019 Thus, declining from 12.4% in 2017 to 9.8% in 2018 and then fall further to 7.2% in 2019. Inflation as of October 2020 stood at 10.1% but the IMF forecasts 2020 inflation at 10.6%.

For Mahamanomics, the average inflation for the period between 2013 and 2016 was 15.5%. Inflation saw a rising trajectory within this period, increasing from 11.7% in 2013 to 17.5% in 2016. Inflation rate for 2014 and 2015 were 15.5% and 17.2% respectively.

Governance and Accountability

Given recent scandals, corruption is expected to feature prominently in electoral debates during the upcoming elections in 2020”Transparency International.

Known as a beacon of democracy in West Africa, Ghana dropped 6 points on the Corruption Perception Index (CPI) since 2013, moving from 46 in 2013 to 41 in 2019. The murder of investigative journalist Ahmed Hussein-Suale in early 2019 cast serious doubts on the country’s anti-corruption efforts.

Figure 2 Corruption Perception Index

pic 2 page 001Source: Transparency International

 Ghana has scored low marks on the corruption perception index over the past three years. In 2017, the Office of the Special Prosecutor was established, which has the power to investigate and prosecute cases of corruption. In 2019, a right to information bill was also passed. These efforts, according to Transparency International (TI), combined with the enhanced performance of the Auditor General’s office, offered hope for improvement. However, the resignation of the Special prosecutor and other related issues unfolding may affect the country’s subsequent scores.

Ghana’s CPI scores dropped from 46 in 2013 to 43 in 2016. Revelations of bribery in Ghana’s high court in 2015 is one of the major issues that dent the image of the country as far as the fight against corruption was concerned. Data presented in Figure 2 shows that the country dropped 3 points under the NDC.

Akuffo addoNPP Presidential Candidate, H.E. Nana Addo Dankwa Akufo-Addo


There’s a further look at other major policies and programs rolled out by the two major political parties under their first term administrations as presidents. Only selected programs under some key sectors were considered.  Under health, the analyses were categorized into two; health infrastructure development and the policies to maintain or remodify NHIS to make healthcare accessible to the ordinary Ghanaian.



The NPP has supplied over 300 Ambulances to the National Ambulance Authority (NAS), one in every Constituency, under the “One-Constituency, One Ambulance” initiative. NAS was also provided with a state of the art, digitized Command Centre to field emergency calls and to dispatch ambulances.

Also, the NPP introduced drones in the distribution of blood and medicines. Four medical drone centers were established and operational in Omenako, Mampong, Walewale, and Sefwi Wiawso. As of the end of June 2020, 79,800 medical products have been delivered to 945 health facilities of the service range of the drone centers. Also, drones have delivered over 2,500 COVID-19 samples to testing centers in Accra (Noguchi) and Kumasi (KCCR).

Under the John Mahama-led administration, the NDC established the National Ambulance Service Training School and Trained over 500 Emergency Medical Technicians. The administration also increased the number of Health Training Institutions to 95 in 2015 as well as increased the number of Licensed Midwives from 500 in 2009 to over 2,000 in 2015.

The NDC has boasted of several major investments in the development of health infrastructure. Some of which were made in the Teaching Hospitals including the expansion of 400-bed Tamale Teaching Hospital to an 800-bed facility; Construction of 617-bed University of Ghana Teaching Hospital; Construction of new modern Emergency Department for the Korle-Bu Teaching Hospital; Refurbishment of Intensive Care Unit (ICU) for the Department of Surgery at the Korle Bu Teaching Hospital; Refurbishment of the Operating Theatre at the Korle Bu Teaching Hospital; and Completion of the Eye Care Centre at the Komfo Anokye Teaching Hospital in Kumasi

The NDC also rolled out a US$264 million initiative to ensure the provision of critical diagnostic and treatment equipment for over 150 hospitals nationwide under the National Medical Equipment Replacement Program.



The introduction of the NHIS in Ghana in 2003, during the Kufuor’s administration, has significantly contributed to improved health services utilization and health outcomes. However, stagnating active membership, reports of poor quality health care rendered to NHIS-insured clients, and cost escalations have raised concerns on the operational and financial sustainability of the scheme.

Furthering the course of activities in the Nana Addo’s administration, the NPP has initiated the Digitization of the renewal of the National Health Insurance Scheme (NHIS) Membership. All NHIS members can now renew their membership using their mobile phones.

The NPP stated in their manifesto that the number of NHIS subscriptions have increased from 10.6 million to 12.2 million since they took office.  Additionally, NHIS arrears have been reduced from 12 months to 3 months making the scheme sustainable.

Under the John Mahama administration, the National Health Insurance Authority (NHIA) paid an unprecedented GH¢1.073 billion in claims in 2014 as compared to GH¢748 million in 2013, GH¢362 million in 2009, and GH¢7.6 million in 2005.

The NDC also indicated in its 2016 manifesto that it had increased the out-patient utilization of the NHIS from 9.3 million in 2008 to 29.6 million in 2015; Increased claims payment from GH¢183 Million in 2008 to GH¢1,073 billion in 2014; and also established new Claims Processing Centers at Tamale, Cape Coast, and Kumasi.

jOHN Dramani MahamaNDC Presidential Candidate, John Dramani Mahama


The major program rolled out by the NPP government led by H.E. President NANA ADDO DANKWAH AKUFO ADDO in his first term at the presidency was the “Planting for Food and Jobs (PFJ).”

The “Planting for Food and Jobs (PFJ)” is being executed through five modules: “Rearing for Food and Jobs (RFJ)”, “Planting for Exports and Rural Development (PERD)”, the Food Crops component, Greenhouse Villages, and the Agricultural Mechanization Centers.”

The NPP revealed in its 2020 Manifesto that the success of PFJ has led to increased farmer participation from 202,000 in 2017 to 1.2 million in 2019.

According to the NPP, the PFJ has led to an increase in the national production of maize by 71%. Maize production has increased from 1.7 million MT in 2016 to 2.9 million MT in 2019. On the other hand, paddy rice has also increased from 688,000 MT in 2016 to 925,000 MT in 2019. This represents an increase of 34%.

The Global Food Security Index, which measures affordability, availability, and quality of food across 113 countries, placed Ghana in 59th position in 2019 up from 79th position in 2018. The same Index placed Ghana in 3rd position in Sub-Saharan Africa after South Africa and Botswana

Under RFJ; 30,000 cockerels have been distributed to 3,000 farmers in selected regions for crossing with local hens to improve weight and egg-laying rate. A total of 7,500 small ruminants were also distributed to 750 farmers

Under the “Planting for Food and Jobs” Programs, the Ghana Commodity Exchange has been established and the National Food Buffer Stock Company (NAFCO) has also been reactivated.

The NDC in its 2012 Manifesto, promised among other things, to promote agriculture modernization and to transform the rural economy. The objective was to ensure food security and increased production of cash crops.

Recounting its achievements, the NDC stated in its 2016 manifesto that Local rice production had increased from 301,900 metric tonnes in 2008 to 604,041 metric tonnes in 2014. This according to the NDC helped Ghana attain 56% self-sufficiency in rice production and reduced the rice import bill by 45%, from US$392.3m in 2013 to US$215.23m in 2014.

Supply of 40 incubators to 40 districts in the Northern, Upper West, and Upper East Regions to facilitate access to day-old Guinea fowl keets through the West African Agriculture Productivity Programme (WAAPP) II.

Furthermore, the NDC asserted that 250 greenhouses were imported under the WAAPP II and distributed to farmers to enhance protected vegetable production. Also, 1,600 superior Guinea fowl keels were supplied to women and youth in the Upper East, Upper West, and Northern Regions under the first phase of the Credit-In-Kind Programme.

Under the Livestock Development Project (LDP), 40,800 small ruminants (sheep and goats) were supplied to 4,500 farmers in 35 districts in seven regions; Under the pilot phase of the Ghana Broiler Revitalization Project launched in July 2014, 650,000 birds were raised, processed and sold by 2015.


We must admit that there are several programs and interventions rolled out by both the NPP and the NDC in the past 8 years under the two administrations. However, the analyses focused on some key policy interventions, especially at the SHS level, and also touched on infrastructural development within the education sector.

Before the 2016 elections, the presidential candidate of the NPP, Nana Akufo Addo promised to implement the “Free SHS” Policy.

The President of the Republic, Nana Addo Dankwa Akufo-Addo, who launched the Free Senior High School policy on Tuesday, 12th September 2017, described the program as a means to create a society of opportunities and empowerment for every citizen.

At the ceremony at the West Africa Senior High School, President Akufo-Addo noted that he made the Free SHS pledge “because I know that knowledge and talent are not for the rich and privileged alone and that free education widens the gates of opportunities to every child, especially those whose talents are arrested because of poverty.”

“The cost of providing free secondary school education will be cheaper than the cost of the alternative of an uneducated and unskilled workforce that can retard our development. Leadership is about Choices- I have chosen to invest in the future of our youth and our country”, he said.

The NPP avers that the current enrolment stands at 1,199,750 students from 2017 to 2019. 52.1% of all these students are male and 47.9% female. The policy is not limited to arts, business, and science subjects: it also covers Technical, Vocational, and Education Training (TVET).

In the area of infrastructure, the NPP states that 163 Kindergartens have been awarded for construction out of which 77 have been completed to date

The NPP also notes that it has completed the construction and commissioning of Phase I of the Somanya campus of the University of Environment and Sustainable Development (UESD) for which sod was cut in December 2016 by the outgoing Mahama led NDC government. Also, the NPP stated that it has secured funding for Phase II of the campus and cut the sod for construction to commence. The party further points out that it has increased the capitation grant by 122% from GH¢4.5 per pupil to GH¢10 per pupil for Primary Schools.

The NDC moreover stated in its 2016 manifesto that it had introduced social interventions in the education sector including the implementation of the progressively free SHS program, scholarships for over 10,000 Senior High School (SHS) students, free school uniforms, free exercise books, and free sandals for school children. They also intimated that they expanded the school-feeding program, thus reducing the direct and indirect cost barriers to parents, and that had allowed for improved attendance rates in the education system.

The NDC further noted that it passed the Colleges of Education Act, 2012 (Act 847) to upgrade Teacher Training Colleges to Tertiary institutions under the Teacher First Agenda.  Abolished the quota system in the Colleges of Education allowing for all 38 public Colleges of Education to admit at full capacity. Provided free laptop computers to over 50,000 teachers since 2013.

The party further revealed that it had commenced the construction of 123 out of the planned 200 Community Senior High Schools with ongoing commissioning of completed ones.  It also implemented the Progressively Free Senior High School Program in line with Article 25 of the 1992 Constitution and quadrupled Feeding Program from about 440,000 in 2008 to 1.7 million in 2014.


The 1D1F initiative is one of the major policy decisions of President Nana Addo Dankwa Akufo-Addo’s administration. It is part of the New Patriotic Party (NPP) government's industrialization agenda to propel Ghana from being an import-dependent economy to an industrial economy to boost local production of goods to create employment and drive growth. Per the NPP's Election 2016 manifesto, "it will implement the 1D1F in collaboration with the private sector to ensure an even and spatial spread of industries".

The Minister of Trade and Industry, Mr. Alan Kyerematen, said whilst speaking at the Nation Building Updates series in Accra that the 1D1F initiative of the government has created close to 140,000 jobs. He stated that of the number, 18,811 were direct jobs, while 120,520 were indirect jobs.

The current data from the Ministry of Trade and Industries as of 25th November 2020 shows that the total number of IDIF projects are 232. Mr. Kyerematen giving a breakdown of the projects said 76 companies were currently operating, 107 projects were under construction, 36 were under the mobilization stage, with 13 more in the pipeline. Out of the 232 projects, he explained, 64 were existing companies that were revived or given support to revamp their operations, with 168 being new companies.

 The NDC stated that its industrial development strategy during the first 4 years under John Mahama aimed at linking industrialization to Ghana’s natural endowments in agriculture, oil and gas, minerals, and tourism.

This strategy, according to the NDC recorded significant achievements including the establishment of the following: Komenda Sugar factory, Kumasi Shoe factory, Ghana Gas Processing Plant, Atuabo; Volta Star Textiles, Juapong; Savannah Cement Factory, Buipe; Ceramics Manufacturing, Eshiem; Revamped Tema Oil Refinery and BOST Company.

Considering the various economic policies implemented under the two administrations, it is worthy to note that their previous performances can attest to their ability to perform in the next four-year mandate they seek from Ghanaians. Thus, without casting our minds in the shadows but having evidence of previous performances, Nananomics and Mahanomics policies provide the platform for better assessment of the two candidates for December 7, 2020. These are some of the things the two candidates competing, Nana Addo Danquah Akufo-Addo and John Dramani Mahama, have done in their first terms of office. Therefore, whoever wins this year’s election is the one whose leadership has been appreciated by the majority of Ghanaians during his first term as the president of the nation.

Ex-ante Assessment of the ‘CARES’ Program with Dr. Said Boakye

The 2020 mid-year budget statement presented by the Finance Minister, Hon. Ken Ofori-Atta, announced a very ambitious programme, The COVID-19 Alleviation and Revitalization of Enterprises Support (CARES) program to mitigate the impact of the pandemic on the lives and livelihoods of Ghanaians as well as to ensure Ghanaians quickly emerge from the pandemic with a stronger and more resilient economy.

Under The CARES Program, the government plans to invest GH¢100 billion into the Ghanaian economy over the next three and half years.

In analyzing the critical success of the initiative, a Senior Research Fellow at the Institute for Fiscal Studies (IFS), Dr. Said Boakye believes the amount in question (GH¢100 billion) is too huge and doubts the government has the capacity to raise the said amount. He, therefore, suggested that government should pursue something more moderate.


 “I agree that the government has to do something but I don’t think GH¢100 billion is the way to go. Government should pursue something moderate so that over time they can increase it… it’s a very huge amount of money and the sources of funding are not that convincing for now.

“… Where will the money come from? The biggest component is to come from the private sector, about 70% or GH¢70 billion… The same private sector you are going to help be on its feet are the people going to support you with GH¢70 billion? So, I’m finding it difficult to see how they can attract that GH¢70 billion from the private sector.”

The feasibility of the CARES Program

The announcement of The CARES program threw many Ghanaians into disarray as to where the funding was going to come from. Considering the economic woes facing various countries across the globe, raising such an amount on the international market looks bleak.

Picture 1 Dr. Said Boakye                    Dr. Said Boakye, Senior Research Fellow at the Institute for Fiscal Studies (IFS) 

The feasibility of the program, according to Dr. Boakye, is difficult to determine since the full details of the program are yet to be disclosed.

He however, raised red flags questioning the possibility of the government’s ability to raise the said amount if it considers to do that internally or on the foreign market.

It’s very difficult to conclude that it’s feasible or not in the sense that I have not seen the details. But I’m raising red flags about the sources of funding; I find it difficult to understand where they will come from. Domestic private sector rather needs help and for foreigners you need certain things to attract them. And so far, attracting GH¢70 billion, if you look at our record, it’s not so easy…”

 Ghana’s attractiveness to investors

Currently, the pandemic can be said to have had its devastating activities on everyone including the investors government is trying to attract and those investors are now having a rethinking of how and where to invest.

Dr. Boakye noted that many people are coiling because they are afraid and do not know when the pandemic will be over.

“So, if you assume that the pandemic will be over and perhaps it lasts a bit longer, then you will be the loser. But, if investors believe that the pandemic is going to be over very soon, perhaps businesses will also try thinking of investing. But the question is, how attractive is it to invest in Ghana?”

The Senior Research fellow also revealed that investors do not just invest but they consider certain macro-economic fundamentals in the country before making the decision to invest in such countries.

The first thing investors look at is the government finances.  Government finances, that is the foundation of the entire economy. For instance, if the government finances are such that deficits are always high, you realize that it will have macroeconomic impact – macroeconomic instability -- and investors are not going to invest in such countries.  Thus, if the government is not able to attract foreign investors, it will mean that the government may also be borrowing from the financial system taking the money that private sector will need.

But the sad news is that even before the COVID hit, the government finances were in a very poor state and the pandemic has worsened it. So, I’m still finding it very difficult to see how the government will be able to attract GH¢70 billion from the external sources.

Raising tax to GDP ratio– Realistic?

The Finance Minister in his mid-year budget presentation revealed that government was putting policies and reforms in place to raise the tax-to-GDP ratio from the current level of 13 percent to 20 percent by 2023.

This, he said, formed part of the measures the government was putting in place to raise revenues for the other developmental projects under the CARES program.

However, looking at the current situation in the country where businesses and households are struggling for survival, the question that comes to mind is whether this target is realistic.

The IFS Senior Research Fellow, said this target was not realistic looking at the past trends in revenue mobilization over the years.

He suggested that the projections for revenue growth in 2021 is also very marginal and such based on the past records of the current government with regards to revenue mobilization, it is not possible to meet this target.


Based on what they have been doing in the past; the behavior of the current government since they came to power, and even if I’m to expand on that– in 2009 to 2012 revenue growth was 31.5%; then this amount decreased to 19.6% in 2013 to 2016; and from 2017 to 2019, it decreased further to 16.7% as average. In fact, if you even include 2020, it’s 12.7% including the projected revenue for 2020 as average. Imagine 31.5% average growth in 2009 to 2012 and it has decreased to 12.7%. If you look at government projection for next year, revenue growth is also going to be very marginal. From GH¢53 billion, the government is projecting about over GH¢56 billion which is a very marginal increment. So, you do not see where the money will come from.


“But the Government is arguing that they are going to get money from property tax. I have not done assessment as to how much they can raise from property tax. That is why I started by saying perhaps they are stepping on something I do not know. So, let us see if they are going to use a different methodology and will be more aggressive in taxing properties.  The Vice President was, for instance, saying, they are going to digitally tag every property in the country so that they know everything. I do not know how much will come in and if this will bring in the money, then good. But with this historical record, I will say no.”

Time to fall on extractive resources for development

Considering the severe fiscal strains on the Ghanaian economy which has been worsened by COVID-19, businesses and households have also been severely affected. Lives and livelihoods are threatened, jobs are lost and above all, lives have been lost.

The reduction in incomes for households and profitability of businesses means taxation will be a very bitter pill to swallow at this time. It has therefore become very important to consider how well government can raise revenues without putting much strain on the people it seeks to support.

According to the economist, he believes, this is the time the government can fall on the extractive resources that God has blessed this country with.

He suggested that the extraction of these resources could raise the much-needed revenues for development rather than always taxing the citizens. He cited a number of countries in the Middle East and elsewhere, including Saudi Arabia, the United Arab Emirates, and Botswana, which have raised large amounts of government revenues from their extractive resource.

Therefore, these countries over the years have relied on extractive resources for development, achieving high levels of per-capita national incomes. He expressed the worry about how we allow foreigners to extract our resources and only give paltry sum in return.


“ I have been selling this idea and of course the government knows. Do you know that in this country, and of course almost everywhere, that extractive resources belong to the public?


The gold in the ground, the oil in the ground; they are all government properties. And if they belong to the public, and you the government is the one to use them, you have to be more interested in the revenues which naturally belongs to you. Taxation means taking money from the private sector.  If you tax the private sector too much, you are killing it, because it’s the transfer of money from one economic agent to another economic agent. And we know that the private sector is always more efficient in utilizing money. And you are transferring it to government which is usually less efficient.



Some revenue from taxation to the government when moderately and appropriately done is important because of the need for public goods. But you don’t tax so much money from the private sector. My concern is what about the resources that belong to the government?

“… So, the solution is that, the government should concentrate on the extractive sector. I keep on repeating, you cannot allow foreign investors to come and tap your resources and take the lion’s share away, and you get pennies out of it and your target is the private sector. It’s just illogical to me.”


Ghana ripe for IFSC?

A key pillar of the CARES program is to make Ghana a regional financial hub by establishing an International Financial Services Centre (IFSC).

However, looking at the country’s financial sector, it raises major concerns as to whether Ghana has what it takes to achieve this within the stipulated time. 

According to Dr. Boakye, merely establishing a financial center is not what will make Ghana a financial hub. He revealed that other factors needed to be considered as well to attain such a dream.

You can have a good and attractive financial sector not necessarily because you have established a financial center but because there is so much trust in your economy.”

He revealed factors such as “Your macroeconomic environment has been stable for a long time, your fiscal position has been strong, your monetary management is good, then the real sector is picking up.

“Based on this, people will then say, look at Ghana, it’s been managed well. When people feel this way, it is then that when you have the center, they will trust you and use your country as their financial intermediation center. But just merely establishing a center is not the solution. I will not tell them not to establish this, but I will say they have to improve upon the economic management of the country.”

The economic pundit, in concluding, advised the government to be efficient in spending and in resources allocation despite the fact that 2020 is an election year, with already high deficits which is compounded by a pandemic.

This, he believes, will reduce the deficit and bring government back on track in her quest to build a stronger and a more resilient economy within the next 3 years.

He further added that drawing from the experiences of previous policies, the government should be careful with respect to the steps it takes towards the delivery of this new policy– Ghana CARES program.

BOG Policy Measures– An Imminent Inflationary Hike in Ghana?

BOG Policy Measures– An Imminent Inflationary Hike in Ghana?

The economic and financial crises brought by the outbreak of the coronavirus will leave great scars on several economies across the globe. To mitigate the health and economic crises of the COVID-19, countries need more resources than ever. However, emerging economies for now seem to be the worst hit by the pandemic due to limited financial resources and fragile health care systems.

Ghana, among several countries, approached the IMF for financial assistance to the tune of US$1billion so as to help contain the spread of the virus and also to support businesses as well as to protect livelihoods. The COVID-19 fund has also been established to harness private sector support in terms of donations so as to ease the burden on government whose debt stock stood at 59.3 percent of GDP at the end of March 2020, according to the Ghana’s central bank.

The Bank of Ghana indicated that as at the end of the first quarter of 2020, a deficit equivalent to 3.4 percent of GDP has been recorded compared with a deficit target of 1.9 percent of GDP in 2019. The rise in the deficit according to the central bank is as a result of shortfalls in tax revenues due to unfavourable external and domestic conditions which has been compounded by unbudgeted COVID-19 related expenditure.

One interesting and remarkable experience of the outbreak of the COVID-19 is that Central Banks have stepped up to the challenge by tearing down their own ‘rulebooks’. That is, the banks have stepped up to purchase government bonds so as to finance the ever-increasing expenditures that governments are forced to make due to the outbreak of the coronavirus.

Eswar Prasad, a professor of trade policy at Cornell University and a senior fellow at the Brookings Institution said,


more than ever, the World Looks to Central Bankers for Deliverance. Central bankers, once considered cautious and conservative, have shown they can act with agility, boldness, and creativity.


|The Bank of Ghana has embarked on massive expansionary policies following the outbreak of the coronavirus in an attempt to boost growth in the economy. The central bank embarked on the purchase of government bonds and a reduction in the policy rate whilst keeping its focus on inflation targeting of 8.0 per cent plus or minus 2.

Under the Bank of Ghana’s emergency financing provisions, which permits it to increase the limit of purchases of government securities, BoG purchased the government's COVID-19 relief bond with a face value of GH¢5.5 billion at the monetary policy rate with a 10-year tenor and a 2-year moratorium of principal and interest. BOG indicated that it was ready to continue with its asset purchase program up to GH¢10 billion in line with the current estimates of the financing gap from the pandemic.

Furthermore, the Bank of Ghana in March 2020 reduced its policy rate by 150 basis points from 16 percent to 14.5 percent. The reduction was due to elevated risks to inflation after an exaggerated rise in food prices following two episodes of panic buying of food before fumigation of markets across the country and the partial lockdown in the two largest cities.


Inflationary hikes in Ghana

Although these measures by the BoG are meant to support the government and also boost money supply in the economy, many have expressed concerns that this may come at a cost to the country as it will lead to a spike in inflation.

Already, inflation has been on the increase in the country as the country recorded a year-on-year inflation rate of 11.3% in May this year, from 10.6% in April– outside the central bank’s inflation target band- after recording 7.8% in January-March 2020. According to Bank of Ghana (BoG), this sharp rise in inflation is attributed to increased demand for food items stemming from the two-buying episodes preceding the market fumigation exercises across the country and the partial lockdown in both Accra and Kumasi– the two largest cities. This led to increased food prices in April and continued in May. Food and non-alcoholic products recorded the highest year-on-year inflation rate of 14.4%, followed by housing, water, electricity and gas division with 11.2%. Non-food inflation increased to 8.4% in May, from 7.7% in April and 7.5% in March 2020. Food inflation was thus the predominant driver of the year-on-year inflation, contributing 59.6%.



Quite clearly, the restrictions imposed on the movement of people and the closure of the country’s borders by the Government in response to the COVID-19 pandemic had significant impact on the prices of goods and services since April this year. Indeed, the high demand for food as a chunk of the population remained at home to observe the COVID-19 protocols put pressure on local food producers to deliver as imports were no longer coming in due to the closure of borders. The rise in inflation is projected to peak in the second quarter of the year and begin to return to disinflation path in subsequent quarters with inflation settling within the medium-term band by the end of the year.

In view of the rising inflation, The Vaultz magazine sort the views of Professor Newman Kwadwo Kusi, the Executive Director of Institute for Fiscal Studies (IFS) Ghana on the implications of the decision by the Central Bank to provide the Government with the GHȻ10 billion emergency financing. According to him,

the implication of this is that the residual fiscal financing gap has, in part, been closed by GHȻ10 billion; finance is available to help stimulate businesses– hospitality industry, trading activities, agriculture value chain, etc.– adversely impacted by the COVID-19 pandemic; and the public debt increased by GHȻ10 million.




Effects of Inflation on The Economy

As part of the measures to contain the spread of the coronavirus, the Government imposed a three-week partial lockdown in the Accra-Tema-Kasoa and Kumasi Metropolitan Areas and the country’s borders were closed. Quite obviously, the restrictions on the movement of persons and closure of borders affected the supply of goods (domestic and foreign) and services, causing local prices to rise.

The effects of inflation are mostly felt by various economic agents and sectors in diverse ways. The incidence mostly falls on firms, households and the macro-economy at large but with diverse degrees of severity. With regards to the sectors that will be most affected with the inflationary pressures, Prof Kusi indicated that the tourism sector is one of the severely hit sectors. However, the consumers seem to be the economic agents that will suffer the most with regards to the recent inflationary hikes.

He further indicated that


the nationwide lockdown, which has since been lifted, and border closures have created some difficulties for the agriculture sector. The supply chain for farm produce has experienced some disruptions in the transportation of farm produce to the markets due to increases in general prices in the country affecting demand for agricultural products in the process. The general increases in prices have also limited farmers’ access to farming inputs, such as seeds, fertilizers and insecticides, and access to markets. This has created a general fear in the country that acute shortage of food will emerge if the pandemic prolongs. This will lead to further increases in food prices, especially food security crops such as rice, beans, millet, sorghum, as well as poultry, vegetables and other agricultural produce.  


“Statistics from the Ghana Tourism Authority indicate that the tourism sector will witness a downsize in the next five months which may result in revenue loss of US$170 million in its entire value chain due to the COVID-19 impact on country’s economy.


The global trend in the cancellation of flights, closure of borders, and the need to maintain social distancing, including the ban on public gatherings, are also having huge negative impacts on economic activities in the hospitality industry. Among the worst hit are hotels, airline business, tourist sites and attractions, and car rental services which are experiencing cuts in occupancy rates down to under 30% and staff are being sent home.” 


Very high inflation distorts economic decisions and moderate levels of inflation can also distort investment and consumption decisions. Inflation normally erodes the real value of money and therefore benefits borrowers than lenders. In inflationary era, the quantity of goods that a cedi can buy today will reduce in a later date as less amount of goods will be bought by that same amount of money.

High levels of inflation have often resulted in currency substitution as people lose confidence in the domestic currency. Increasing demand for foreign currencies will further results in the depreciation of the Ghana cedi.  When this happens, monetary policy effectiveness is lessened in the domestic economy.

Another effect is the phenomenon of “Money Illusion”– where people seem to base their sense of satisfaction on nominal earnings rather than real earnings. Inflation could fool economic agents especially about their real wages. Even though wages will increase in nominal terms, the quantum of goods and services to be purchased by the same amount of money will reduce.


Policy Interventions

On the measures that Government could consider to ensure that inflation doesn’t become unmanageable in the coming months, Prof Kusi said,


Food inflation will need to be reduced in the coming months by a significant support of the agriculture value chain by the Government. A widening of the basket of foods produced under the government’s ‘Planting for Food and Jobs’ flagship program, together with strong financial support will help to significantly increase food production and reduce food prices in the country. Effective implementation and widening the basket of foods cultivated under the government’s Planting for Food and Jobs program during this pandemic period will help”.



He further stated that, some experts are of the view that Ghana’s Buffer Stock Company could be relied upon to flood the system with enough food items to contain the situation should it get to a worse point. Unfortunately, the preparedness of the Buffer Stock Company relative to food security in the country is weak to the extent that the company does not have enough stock to curtail a possible food shortage that may hit the country. This is because the country has not organized itself adequately in the area of food security to forestall such eventualities. The need therefore to address food security problem in Ghana cannot be over-emphasized.

Also, there is the need for disbursement of funds to be done in utmost good faith so as to make sure that businesses that are hardest hit by the pandemic benefits more. There is therefore, the need for more commitment by various stakeholders through avoidance of corrupt acts and compliance with government directives.

For government stimulus packages to make an impact on the economy, the Executive Director at the IFS said


the businesses stimulus package announced by the Government should target and support essential SMEs, especially those SMEs that provide inputs and services to support other SMEs. SMEs that have immediate demand for their products and services and the potential to create jobs must also be supported. There is also the need to ensure that disruptions to farmers’ access to inputs, such as seeds, fertilizers and insecticides, are eliminated”.


He further challenged government to pursue import substitution industrialization policy as a way of sustaining the economy since the pandemic has thrown international trade into a state of uncertainties.

Government also has to pursue an aggressive import substitution industrialization as uncertainties of international trade volumes to return to levels before the pandemic remain unlikely in the short to medium term.

The pandemic has posed serious threats to human lives and livelihoods. Thus, to lessen its effect on the Ghanaian economy, there is therefore the need for more commitment by various stakeholders through avoidance of corrupt acts and compliance with government directives.

There is also the need for massive education of the public so as to reduce fear and panic surrounding the coronavirus, this if properly done, will mitigate future panic buying as the COVID-19 cases continue to rise in Ghana.


"A number of local banks (plus branches) EQUALS Number of ATMs …?"