Righting fundamentals of the economy can’t be taken for granted - EMT

The Government’s Economic Management Team (EMT) Wednesday defended its pursuit of macro-economic stability, which is posting positive results, saying it holds the key to an industrial revolution, sustainable jobs and making things better for the poor.

Addressing the maiden Town Hall Meeting, in Accra, members of the Team, chaired by Vice President Mahamudu Bawumia, rejected the criticism that the positive economic indices were ‘not putting money in the pockets’ of people.

The Vice President, Senior Minister Yaw Osafo Maafo, the Vice Chair of the Team and Mr Alan Kwadwo Kyerematen, Minister of Trade and Industry, a member of the EMT, made the case when they addressed the meeting.

The meeting was to enable the EMT to answer questions on the performance of the economy from representatives of civil society organisations, academia and members of the public.

It was held under the theme: "Our Progress, Our Status, Our Future".

Dr Bawumia said it was imperative to strengthen the weak fundamentals of the macroeconomic economy that it inherited, adding that significant progress had been made.

The prudent measures implemented by Ministry of Finance and the Central Bank were rubbing positively on the inflation rate, Gross Domestic Product (GDP) growth and debt sustainability among others.

“The efficiency in expenditure management has come from prioritising and re-allocation of spending to areas most needed.

“Fiscal deficit (on cash basis) has significantly fallen from 6.8 per cent of rebased GDP in 2016 to an estimated 3.8 per cent in 2018”.

On why the positive gains were not reflecting on the performance of the cedi against the dollar in recent times, the Vice President said: “The cedi depreciated by 8.4 per cent in 2018 largely on the account of emerging market pressures and US interest rate increases.

It cumulatively depreciated by 4.9 per cent at the end of 2017.

Dr Bawumia pointed out that data on the annual rate of depreciating of the cedi showed that the worst performance from 2017 to 2018 was better than the best performance between 2012 and 2016.

The depreciation rate for 2016 was 9.6 per cent; its best performance since 2011.

“In 2014, the exchange rate depreciated by 31.3 per cent; the fiscal deficit was 10.1 per cent; public debt to GDP rose to 70.2 per cent; inflation rose to 17 per cent, and GDP growth declined from 7.3 per cent to four per cent.

“In other words, economic fundamentals had weakened significantly and, therefore, the depreciation was easily explainable.”



The Vice President said although the start of 2019 was characterised by another ‘sudden bout’ of the sharp depreciation of the cedi, this had since been reversed.

“Within a week, the cedi reached GHC5.9 to the dollar in the market but sharply appreciated to GHC5.07 to the dollar, an unprecedented development and without any intervention from the bank of Ghana.

“As at March 29, the year-to-date depreciation of the cedi for the first quarter of 2019, stood at 5.18 per cent”.

Explaining the performance of the cedi within the period, the Vice President said, the Bank of Ghana had no room to intervene in the foreign exchange market in order to meet the approved International Monetary Fund (IMF) programme action.

Thus, it had to rather build up its reserves in a ‘period of extreme demand pressures by some $800 million’.

“This partly explains why the Ghana cedi came under significant pressure during this period, which was exacerbated by speculation.

“The reason for the sudden reversal in the sharp depreciation that we observed was that the market corrected itself. Investor sentiments, expectations and uncertainties acknowledged that the fundamentals are much stronger than suspected and that even without IMF, the fiscal and monetary are assured.”

For his part, Mr Osafo Maafo said, the macro-economic indicators meant a lot because if there was no stability the capacity to progress would be jeopardised.

A positive GDP growth would foster productivity; while a higher inflation rate would distress the poor in the society because that undermined the ability spend.

“Inflation is the enemy of the poor, therefore, the positive indices cannot be taken for granted.”

Mr Kyerematen noted that the right fundamentals were critical for the industrial revolution, the creation of sustainable jobs and the attraction of both local and foreign investors to provide essential social services.

“As the Americans say, it ain’t gonna happen, if you don’t build a stable macro-economic environment.”

The other members of the EMT, Mr John Peter Amewu Energy Minister; Mr Ken Ofori-Atta, Finance Minister; Dr Owusu Afriyie Akoto, the Minister of Food and Agriculture; Professor George Gyan-Baffour, Minister of Planning; and Dr Anthony Akoto Osei, Minister of Monitoring and Evaluation also answered questions at the forum.