As part of his third State of the Nation address to Parliament, delivered yesterday, President Nana Akufo-Addo made several claims concerning the performance of Ghana’s economy since his administration took office. TOMA IMIRHE validates the claims to ascertain their accuracy.
As usual, this year’s edition of the annual state of the nation address, delivered to Parliament on February 21, 2019 by President Nana Akufo-Addo, has generated frenzied controversy with his critics, inevitably led by the political opposition disputing the veracity of most of the claims he has made. While many of them are qualitative in nature and consequently disputable as a matter of opinion, his claims regarding Ghana’s economic performance during his tenure in office and the resultant economic standing of the country are verifiable quantitatively, since they comprise economic and financial data which is in the public domain.
However, even some of these claims cannot be confirmed or disputed in a cut and dried manner because in some cases, the data itself varies from one source to the other, due to differences in the way various institutions compute the data; and due to differences in how the data can be interpreted.
Nevertheless, we have attempted to verify the claims on a best effort, non-partisan basis and present them below on a claim by claim basis.
ECONOMIC GROWTH RATE
The President’s data on the economic growth rates achieved by Ghana over the various periods he considered are accurate.
His contention that “Ghana’s recent GDP growth has placed it among the highest in the world” can be debated on the grounds that there is no concrete definition as to what rankings constitute the ”highest in the world.” However we charitably agree with his assertion on the grounds that according to the International Monetary Fund’s World Economic Outlook published in late 2018 (which therefore contains provisional rather than final growth rates for countries world-wide, Ghana ranks 16th in the world and 7th in Africa with regards to real Gross Domestic Product growth.
Instructively the same report forecasts that Ghana will achieve real GDP growth of 7.6 percent which, placed against the IMF’s forecasts for other countries around the world, ranks Ghana 6th in the world and 4th in Africa.
Again the President’s figures are correct. We are impressed that he resisted the temptation to use the recent rebasing of Ghana’s economy to give the impression of a wider improvement in the fiscal deficit that is actually the case by using pre-rebased data for 2016. Instead he played straight by using rebased figures throughout for his comparison which brings the fiscal deficit for 2016 down to 7.3 percent of GDP, down from 9.8 percent of pre-rebased GDP which would have better served him politically, but would have been dishonest.
However he has neglected to note that while the fiscal deficit has been reduced to 3.9 percent of rebased GDP for 2018, his government has targeted a deficit of 4.2 percent for 2019, which is the first, deliberately targeted increase in the fiscal deficit since 2014.
DEBT TO GDP RATIO
Again the debt figures which indicate a comparative improvement in Ghana’s public indebtedness situation are correct and again he has played fair by using rebased GDP as the denominator in all the figures used for the comparison which makes both his government and his predecessor, John Dramani Mahama’s administration look better than otherwise.
However he has neglected to provide absolute debt figures which would have shown a significant increase in Ghana’s public debt figures, for both cedi denominated domestic debt and dollar denominated foreign debt.
The fact is that Ghana’s debt continues to grow in absolute terms although not quite as fast as the economy itself. Most worrying is the fact that Ghana’s foreign exchange debt servicing obligations are growing faster than its ability to meet them as measured by foreign exchange earnings.
The consumer price inflation figures are correct. However as the President himself pointed out when the opposition’s Presidential candidate in 2016, the relationship between lowering inflation rates and improved living conditions are tenuous at best.
The President did not provide figures to back up his assertion that interest rates are declining because this claim is only partially true. Indeed the benchmark Monetary Policy Rate has been cut significantly from 25 percent as at the time he assumed office to 16 percent currently. However, after similar reductions across all types of interest rate in 2017, rates on government treasury bills, notes and bonds all rose through 2018, with medium to long term treasury rates rising by as much as four percent and more last year although short term treasury rates only rose by slightly over one percent.
On the upside though, both the weighted average interbank lending rate and the average lending rate of the banks fell last year, by 3.2 percent and 2.4 percent respectively. The fall in both rates since the start of 2017 is even wider.
The sum result of all this is that financing costs for borrowers from banks have fallen on average but the financing costs of corporate bond issuers have risen over the past year.
The President is correct to assert that Ghana’s trade balance has improved since he assumed office and that the trade account surplus achieved in 2017 was the first in more than a decade. What he did not reveal though is that the trade balance surplus, measured on a quarterly basis, actually started in the last quarter of 2016, before he assumed office and indeed, the primary platform for this positive transformation was established by his predecessor and inherited by him – a reduction in oil imports for electricity generation brought about by the increasing use of domestically produced gas for that purpose.
EUROBOND RATES & TENORS
The President is completely correct to claim that his government has done the longest tenured, lowest rate Eurobond issues since Ghana began issuing those bonds on the international capital markets in 2007. Prior to last year’s historic issuance, the longest tenor achieved was 15 years, for the 2015 issuance. Indeed, last year’s issuance was the first time Ghana issued bonds with a coupon rate below eight percent.
FOREIGN DIRECT INVESTMENT
Unless the President is privy to data not yet in the public domain for FDI inflows into West African countries, then his assertion that Ghana is the leading recipient of FDI in the sub region may not be true. According to UNCTAD’s most recently published World Investment Report which covers 2016, Nigeria’s inflows of US$4.4 billion exceeded Ghana’s US$3.5 billion, although in the previous year, according to the same source, Ghana’s US$3.152 billion in FDI inflows marginally exceeded Nigeria’s US$3.064 billion.
Comparative figures for 2017 from the other West African countries are not available in the public domain, although Ghana itself achieved a new record of over US$6 billion and this may explain the President’s assertion. But Ernst & Young’s report on FDI into Africa for 2017 puts Nigeria ahead of Ghana by number of projects, reporting that while Ghana attracted 43 projects – up from 28 in 2016 – Nigeria attracted 64 projects, up from 51 projects in 2016.
SOVEREIGN CREDIT RATING
The President is correct in his claim that the sovereign credit rating upgrade by Standard & Poors from B- to B was the first such upgrade in almost a decade and this is indeed a key indicator Ghana’s economy is getting better, at least with regards to the macro-economic fundamentals that measure the country’s ability to meet its foreign exchange obligations which itself is crucial.
THE VISIT OF THE IMF’S CEO
The President is correct to assert that the visit to Ghana of Christine Lagarde, the Managing Director of the IMF, was historical. However since her visit was primarily to convince the government not to abandon the fiscal discipline it pressured Ghana to adopt since 2015, now its programme is coming to an end, we question whether this should count as an achievement or indeed the opposite – an expression of lack of confidence in Ghana to retain fiscal discipline when left to its own devices.
However the legal enforcement of a five percent cap on the fiscal deficit is evidence that Ghana will have that self -discipline, even if forced upon itself by the threat of legal sanctions if not