We publish below excerpts of what President Nana Akufo-Addo said about Ghana’s economic performance during his 2019 state of the nation address.
Mr Speaker, the economy is at the heart of all we seek to do, it is the success of the economy that will guarantee an improvement in the quality of the life of our people. I believe we are all now agreed that the fundamentals have to be sound if the economy is to flourish. We have just concluded a programme with the IMF, and, with continuing discipline, we shall sign off from the deal in April. This is the seventeenth time Ghana has had to go to the IMF in the sixty-two years of her independence.
Mr Speaker, we cannot make the progress we all desire unless we are consistent and disciplined in the management of our economy. The yo-yo nature of the boom and bust has not helped us achieve our goal of sustained prosperity, and lift us out of poverty. We have gone through another round of painful impositions to get to where we are today with healthy fundamentals.
Mr. Speaker, production in the economy, as measured by real GDP growth, has picked up very strongly in the last two years. From 3.4% in 2016, real GDP growth increased to 8.1% in 2017. In 2018, provisional data for the first three quarters indicate a strong real GDP growth of 6.0%, higher than the annual target of 5.6%. Real GDP growth for 2019 is forecast at 7.6%. Ghana’s recent GDP growth has placed it amongst the highest in the world. The fiscal deficit is being brought down from the 7.3% of rebased GDP in 2016 to a provisional 3.9% of GDP at the end of 2018. The debt-to-GDP ratio has declined from the 56.6% of GDP in 2016 to 54.8% at the end of 2018.
Inflation has dropped from 15.4%, at the end of 2016, to 9% in January this year, the lowest in six years, as announced by the Ghana Statistical Service last week. Interest rates are declining, and so is the Bank of Ghana Monetary Policy Rate. Our trade balance account, for the first time in more than a decade, recorded a surplus in 2017, and is expected to remain in surplus. In May 2018, a US$2 billion Eurobond was issued for 30 and 10 years of US$1 billion each with coupon rates of 8.627% and 7.625% respectively, and these were the lowest rate and the longest maturity in our history, signifying confidence in the economy. It comes as no surprise, therefore, that, today, Ghana is the leading recipient of Foreign Direct Investment in West Africa.
Mr Speaker, these are good figures, and as we prepare to exit from the IMF programme in April, we expect the impressive figures and good performance to continue. We are very much aware that this is not the first time we have had such a good set of figures, but we are determined to do things differently this time around; we have imposed on ourselves fiscal discipline, we are paying off legacy debts and deepening good governance practices and business confidence is growing. We will maintain the discipline, and bring progress to our country.
We have decided to institute a legal framework to help with the discipline. We have passed the Fiscal Responsibility Law, Act 982, capping the deficit at 5% by law, and some two weeks ago, I inaugurated the Presidential Fiscal Responsibility Advisory Council, chaired by the eminent, respected economist, Dr. Paul Acquah, former Governor of the Bank of Ghana and former Deputy Director of the Africa Department of the IMF, with some of the finest and most reputable economists of our country as members. Its purpose is to advise the President on relevant, additional measures needed to maintain fiscal discipline.
We have done this because we know the temptation to go on a spending binge will always be there, we know election years will come around and there will be pressure on government to splurge, and persuasive arguments will be made that you have to stay in government to be able to implement your programmes. However, I am bent on running a responsible administration, mindful of the next generation, and not, merely, the next election.
In the meantime, our efforts are bearing some fruits, and the world has taken notice of the improvement in our economic fundamentals. In September last year, after almost a decade, we received our first Sovereign Credit rating upgrade from Standard and Poor’s (S&P). This upgrade saw us move from B minus to B with a stable outlook. In December 2018, we also hosted the Managing Director of the International Monetary Fund, Christine Lagarde, a visit that was historical in every sense, as this was the first time that an IMF Managing Director had ever stepped foot on Ghanaian soil.
Mr Speaker, revenue mobilization poses the biggest challenge in the management of our economy, with the tax exemption policy in particular proving to be an achilles heel, and a growing menace to fiscal stability and revenue generation. In the last eight years, tax exemptions in respect of import duty, import VAT, import NHIL and domestic VAT have grown from three hundred and ninety-two million Ghana cedis (GH¢392 million), that is 0.6% of GDP in 2010, to GH¢4.66 billion, that is 1.6% of GDP in 2018.
These figures do not include exemptions from the payment of corporate and individual income taxes, concessions on tax rates, petroleum tax reliefs, customs tax exemptions enjoyed by diplomatic missions, and waiver of processing charges at the ports.
If we continue at this rate, in less than sixteen years, half of Ghana’s revenue base will be given away as tax exemptions.
Mr. Speaker, this is not sustainable, and we intend to do something about it to reverse the trend, by introducing suitable measures that may disrupt the easy and comfortable arrangements that many have become accustomed to, but which we have to take to ensure that we have the firmest of foundations for the economic take-off that has escaped us for so long.
Mr. Speaker, workers in the public sector begun the year on a good note, after receiving a 10% increase in their salaries, on top of the 11% increment of 2018. Forty-one thousand (41,000) workers in the informal sector were also enrolled onto Tier-3 pensions schemes, with pensioners seeing an average increment of 11% in their monthly pension incomes, with the lowest income bracket receiving a 14.7% increment. Last year, the Youth Employment Agency (YEA) engaged some one hundred and seven thousand (107,000) youth in various employment modules, with an additional one hundred and twenty-five thousand (125,000) set to be engaged this year.
Mr. Speaker, to consolidate further the relations between the social partners, in the post IMF era, Government will shortly sign a landmark social partnership agreement with Organised Labour/the Trades Union Congress, the Ghana Employers’ Association and Government, represented by the Ministries of Finance and Employment and Labour Relations, to provide a medium for building a sense of cohesion, trust, self-management, frank and open discussions to champion the course of development.
Mr. Speaker, the fight against child labour has chalked some modest success. Through the implementation of the second phase of the National Plan of Action (2017-2021), Ghana has been moved up from the Tier-2 Watch List position of the Trafficking in Persons (TIP) Report to Tier-2 in 2018.
Mr. Speaker, our ports remain important national assets. And we must manage them to improve trade and to the benefit of all Ghanaians. Government has introduced reforms at the port to improve efficiency. Among others, we introduced the paperless operations at the ports and goods can be cleared within 1 to 3 days. Going forward, we have set ourselves the goal of making our ports the most competitive in West Africa. In this regard, some further reforms would soon be announced by Governmentto enhance the competitive position of Ghana’s ports.