Economist Prof Stephen Adei has said Ghana is currently going through an economic crisis partly because the Akufo-Addo-led government used GHS21 billion to collapse some nine banks and other financial institutions.
Some nine local banks, 23 savings & loans companies, 347 microfinance institutions, 39 finance houses and 53 fund management companies have been closed down since 2017 under President Nana Akufo-Addo in a financial sector clean-up exercise.
Two banks, UT Bank and Capital Bank, were first taken over by GCB Bank in a purchase and assumption agreement.
Seven others, the Sovereign Bank, The Beige Bank, Premium Bank, The Royal Bank, Heritage Bank, Construction Bank and UniBank had their licences revoked and placed under the Consolidated Bank Ghana.
As a result of the banking sector reforms, the Bank of Baroda willingly folded up and exited.
Also, six banks merged. First Atlantic Merchant Bank Limited and Energy Commercial Bank merged into one; OmniBank Ghana Limited and Bank Sahel Sahara Ghana merged, and First National Bank and GHL Bank Limited also merged.
Ghana now has 23 functional universal banks in the country.
Speaking to Kwame Obeng Sarkodie on Accra100.5FM’s morning show Ghana Yenson about the current economic crisis in Ghana, the former Chairman of the National Development Planning Commission (NDPC), said: “The truth is that times are hard because inflation is 15%, the price of petrol has doubled and the cedi has depreciated”.
In his view, “half of the fault is not from the government while the other half is the fault of the government”t.
For instance, he said, the Russian-Ukraine war and COVID-19 pandemic cannot be blamed on the government since it had no control over them.
On the other hand, the former Rector of the Ghana Institute of Management and Public Administration (GIMPA), said: “What the government can be faulted for is that they wanted to do so many things at the same time when they first came into power and, so, they borrowed so much”.
“So, the huge debt is killing us now, especially when the borrowing has not yielded any fruits yet”, he noted.
Secondly, Prof Adei added: “In my opinion, the manner in which they collapsed some banks and financial institutions with GHS21 billion is partly responsible for the country’s economic crisis”.
Thirdly, he said the size of the government and the public sector wage bill have also not helped the situation.
He, however, noted: “I believe if they commit to the things they have promised to do, things will start getting better by the end of the year”.
Meanwhile, Vice-President Mahamudu Bawumia is billed to speak on the country’s ailing economy today, Thursday, 7 April 2022.
Dr Bawumia will be the main speaker at a National Tertiary Students Confederacy (TESCON) Training and Orientation Conference at Kasoa in the Central Region.
The youth wing of the governing New Patriotic Party is collaborating with pro-NPP think tank Danquah Institute to organise the event.
Among the guests will be First Lady Rebecca Akufo-Addo (Special Guest of Honour), National Chairman of the NPP Freddy Blay and the party’s General Secretary John Boadu.
About a week ago, Dr Bawumia said he has not run away from the economy as his critics claim.
Instead, he said his focus on digitalisation was part of the measures being put in place to build a stronger and more efficient economy.
Addressing some student participants and an agriculture boot camp at the Jubilee House on Monday, 28 March 2022, Dr Bawumia said: “We’ve been doing things for so many years and that transformation wasn’t coming. And, so, coming into government and heading the Economic Management Team, the President gave me that mandate and gave me that opportunity to focus on how best we can transform and modernise Ghana to make sure that some of the challenges, some of the risks that; you know, people just want to operate in our economy are facing, how we mitigate those risks, how we make this economy an efficient economy and this is why I have focused on digitalisation”.
“Sometimes, people say, ‘Well, we thought you were an economist but you’re doing so much in IT space; have you left economics behind?’ No, no; not at all”.
“In fact, it is because of the economy that I’m focusing on digitisation because without building those pillars, our economy will just not be able to stand on its own feet”, he noted.
“We need to build those pillars to allow all our sectors in the economy to be able to compete and, so, we decided to address some of the major bottlenecks that businesses face, you in the agric sector face, through digitalisation.”
“First of all, whatever problems exist and make this economy inefficient affect everybody – whether you are in agric or industry or service, you’ll face those problems. If you don’t know who you are dealing with, if identity, just establishing your identity is a problem and you go to Dr Kofi Mensah of Agric Development Bank and you say to Dr Kofi Mensah, ‘I want to borrow money for my business’, now they need to establish your identity first of all and if that is not clear, if there is any doubt about what your identity is, there may be even doubts about your age and all of that, you are not likely to get that loan”, the Vice-President said.
“If you don’t have a track record that goes with your identity, you have a problem and we had a situation in Ghana where for 60 years, we have a 30 million population but we don’t have unique identity numbers and this is why we introduced and sort of went ahead to implement because in 2008, the National Identification Card project was introduced but when we came into office in 2017, we thought that was the key pillar digitisation of this economy”, he explained.
Economy in crisis
Fuel prices have kept rising in Ghana for the past few months crossing the $1-dollar-per-litre mark.
The cedi also keeps losing its value against the US dollar and other major currencies of international trade.
According to Bloomberg, the Ghana cedi lost more than 18 per cent of its value to the dollar in the first quarter of the year making it the worst-performing currency on the African continent.
Additionally, inflation keeps soaring.
This means people are having to spend more money to buy either the same quantity of items than they did a few weeks and months back due to the combined effect of the depreciating cedi and spiking inflation.
Furthermore, the international market has closed its doors to Ghana as far as borrowing is concerned since the country’s books do not look good.
As of December 2021, Ghana’s debt stock was ¢351.8 billion, the March 2022 Summary of the Economic and Financial Data by the Bank of Ghana (BoG) revealed.
It was ¢344.5 billion in November 2021.
The current debt stock is about 80.1% of the country’s Gross Domestic Product (GDP).
The Summary indicated that about ¢730 million fresh loans were added to the total public debt stock in December 2021.
The domestic debt went up to ¢181.8 billion in December 2021, from ¢179.4 billion in November 2021.
This is equivalent to 41.4 of GDP.
The external component of the total public debt shot up to $28.3 billion (¢170.0 billion), from $27.9 billion in November 2021.
However, the debt-to-GDP ratio of the external debt was equivalent to 38.7% of GDP.
The cedi component shot up by ¢6.3 billion, primarily due to the decline in the value of the cedi to the dollar during the period.
Both Moody’s and Fitch downgraded Ghana’s economy a couple of months ago as a result of the bad books of the gold-, cocoa- and oil-producing West African nation.
As part of measures to arrest the slump and infuse some oomph into the economy, President Nana Akufo-Addo’s government recently announced certain austerity measures and business-boosting policies which included the opening of the country’s land borders that had been closed for the past two years as a result of the pandemic.
A one-sided parliament, also, recently passed the controversial electronic transaction levy which imposes a 1.5 per cent tax on some digital transactions.
The President has already assented to the bill.
Speaking to the BBC’s Peter Okowche about the prevailing economic situation in the country under his watch, President Nana Akufo-Addo said: “The world is going through very difficult times. Ghana is no exception, Nigeria is no exception”.
“There is no country in the world that has escaped the ravages of COVID-19”, he insisted, adding: “What you need to look at is the elements being put on the ground that look beyond the Russia-Ukraine war.”
The economy, he noted, “has gone through very difficult times. I can quote statistics of the US and UK economies but they will not serve a purpose. It is a phenomenon that is going on which has made life difficult,” Akufo-Addo explained.
He said: “In Ghana, the recovery programme we have is very credible and that is what is going to give us the opportunity to come out of this period a stronger economy, and it is that future we are looking at. The digital economy is emerging as the biggest economy in the country and for a long period, it has not had any tax at all, so it is important that it also comes into the net”.