John Dramani Mahama is the President of Ghana
Africa Policy Lens (APL) has observed with puzzlement the ongoing and deliberate misinformation churned out in the media about the actual causes of the economic downturn in Ghana in 2022.
The factors that caused the crisis are far from what is being thrown into the public.
APL would like to discuss these factors, educate the public about what actually happened, and explain why economic indicators are positive now. Inflation hit 54% in December 2022, the highest in 27 years! That’s true.
Inflation was 15.4% in December 2016. This declined to 7.9% in December 2019! These are verifiable facts.
Ghana’s economy breathing again, stronger and steadier’ – Dr Ato Forson
However, after the deadly coronavirus pandemic struck the world, inflation went up again, reaching 13.9% in January 2022. The reason for the rise was because of the global supply crisis. A number of factories went out of production, and it became difficult to get goods in the needed quantities on the global market.
Let’s ask ourselves one critical question. Are we having any global supply crisis today? The answer is NO!! Note that at the beginning of 2022, the Bank of Ghana had total reserves of $9.9 billion (far higher than the $6.1 billion the NDC government left in 2016). Then suddenly, a barrel of crude oil that was selling at $72 in January 2022 started rising astronomically, reaching $121 in the course of the year.
This affected the global market. The US recorded its highest inflation in 40 years! Germany recorded its highest inflation in 70 years! Prices everywhere went up! Therefore, importers needed more foreign currencies to import the same quantities of goods.
There were severe pressures on the Cedi and the Bank of Ghana nearly exhausted all its reserves by July, when $1 was traded for GH¢18.20! Between August and October 2022, because BOG did not have many reserves, Cedi became exposed, and $1 was traded for a little over GH¢115 (interbank) and GH¢117 (at the forex market).
Are we experiencing such conditions today? Oil price is now $64 per barrel, and if it goes beyond $100, the economy will head back to the situation in 2022. When fuel prices went up in 2022 and prices of imported goods went beyond the skies, fares went up and everything was on an upward movement!
No political party in power at the time could have done anything to reverse the trajectory of the economy. It is worth noting that when the Bank of Ghana got dollars in November 2022, it started with aggressive intervention, and by December 2022, $1 was trading for GH¢18.
Now, what has the current government done differently? Nothing, apart from being bequeathed with so much reserves and excessively intervening in the secondary forex market.
The Mahama government had a whopping $8.98 billion in the reserves. We recently received $1.6 billion from cocoa sold last year! Gold prices have gone up and that is stimulating the value of our 37 tonnes gold reserves.
On top of it all, we are currently not paying anything on the foreign debt stock because of the debt restructuring exercise undertaken by the previous Akufo-Addo administration.
The suspension of debt payments until 2027 is another major reason why BOG is intervening excessively in the forex markets. After 2026, there would be no such luxury to pump so many dollars into the secondary forex market.
The receipts for the inflows from cocoa have gone up over US$2 billion. All these have contributed to the numbers being seen with respect to the economy.
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In effect, Ghana’s economy was plunged into a tailspin due to global economic turmoil brought about by the COVID-19 pandemic and the war Vladimir Putin of Russia waged against Ukraine. The seeming turnaround in the economy is as a result of the domestic debt restructuring program and other measures adopted by the previous administration.
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