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IMANI Review: Ghana’s Fate and Choices under the IMF Program


The decision of government to go for a bail-out at IMF in August 2014 came as a surprise to the international investment community, but not to Ghanaian economists and analysts who chronicled the seeming failure in policy formulation and implementation following the 2012 general elections. For a model country and a poster child of economic growth and investment opportunities; having achieved high growth rates which looked inclusive on the outside for more than a decade, the turnaround was a manifestation of the inexactitude in macroeconomic management. Ghana’s growth averaged 6% from 2001 to 2010, and peaked at 14.8% in 2011 after being buoyed by oil discovery, strong growth in the mining sector and bumper cocoa. This strong growth made Ghana the likely destination of FDI in West Africa. Following the pattern of this impressive growth, the current economic slump and its consequent bail-out package is expected because the economic growth was precarious. Higher commodity prices, increase in productivity from the agricultural sector together with growth in the services sector, and the discovery of oil boosted GDP growth that peaked at 14.8% in 2011.

Overview of Macro-Economic Projections

The analysis of the Ghanaian economic environment for the focal period will be undertaken using trends in the following macro-economic metrics (variables); total productivity analysed into nominal gross domestic product (GDP), real GDP (non-oil sector), and real GDP per capita, inflation (proxied by the consumer price index), interest rate (average lending rate, policy rate), exchange rate, balance of payments (export and imports), demographics (population dynamics and per capita income dynamics).

Gross Domestic Product

The Ghanaian economy is estimated to grow in 2015 by about 3.5% of which 2.3% is attributable to the non-oil sector. This marks a stark deviation from expected estimates in the immediate periods after the global financial crises. Projections by the International Monetary Fund indicate that by 2017, growth will be around 9.2% inclusive of the oil and gas sector and 5.5% without the oil and gas sector. For 2016 however, the trends evinced in 2015 is envisaged to be reversed following the strategies to be adopted in the extended credit facility provided by the Fund. Non-oil sector growth is estimated 4.7% with the oil sector contributing 1.7% to growth in output. Figure 1 below is indicative of the fact that, from 2011 to mid-2014, the oil and gas sector was a major driver of growth as non-oil sector growth shrinked following perennial energy crises and the decline in the prices of commodities on the global markets. Growth and output projections appear to be based on the country’s further expansion in output in the oil and gas sector and the commercial production of gas which is deemed to commence in 2015. The estimates also appear to be banked on the stability and recovery of global crude and commodity prices. These are all factors which are completely extraneous although necessary to the current challenges in total productivity of the economy. The immediate reparation of the ‘damages’ caused by unstable power supply will be instructive. This by no means delinks this fact from underlying challenges in the broad O&G sector. All in all, the outlook provided by the projections as shown in Figures 1 and 2 below, will be hard to reach. The danger will be an erosion of the policy credibility (the anchor) of this entire facility and program, particularly when projections for the past 3 fiscal period have been widely missed.

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IMANI Review-Ghanas Fate and Choices Under the IMF Program

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