As the dissolution of the 7th parliament takes hold and paves way for the inauguration of the 8th Parliament of the Fourth Republic and the investiture of Nana Akufo-Addo, the President-elect, a strong economic test awaits his presidency. Will he pass or will he fail? That is the question.
State of Ghana’s present Economy
Already, the economic challenges brought upon by the financial sector crisis and the recent pandemic has brought about a Gross Domestic Product (GDP) growth rate cut from 6.3% to 0.9% in 2020, a contraction in the economy that pushed the fiscal deficit from an early estimate of 4.7% of GDP to 11.4% of GDP and led to a debt level that exceeded the sustainability threshold (71% of GDP).
A harsh economic ride certainly awaits the president-elect who faces a hung parliament and the legitimacy of his re-election being contested at the Supreme Court.
- The Financial Sector
In Akufo Addo’s last State of the Nation Address to Parliament on the 5th of January, 2021, Akufo Addo cited the financial sector as
“the most difficult problem” that his administration had to face. He said many of the financial institutions were “glorified Ponzi schemes” and radical measures were needed to prevent the collapse of the entire financial institutions.
“Many of our banks were in distress, and had been kept on unsustainable and artificial life support by the central bank. The supervisory agencies were, unfortunately, not performing their duties, and the governance and management structures of many of the banks were clearly not adequate. If truth be told, many of the finance houses were running what can only be called glorified Ponzi schemes, and had lured many depositors into these schemes,” said Akufo Addo.
A “desperate situation, and urgent, radical measures had to be taken to prevent the collapse of the entire financial and banking sector,” he further said.
Akufo Addo cautioned Ghanaians to be wary of offers that “sound too good to be true.”
“There is no question that many people got attracted to the unsustainable high interest rates that some of these financial houses were offering. In all financial dealings, we have to accept what the experts tell us that, whenever whatever on offer sounds too good to be true, it invariably ends up being untrue and unsustainable,” he said.
- Covid-19 Pandemic
Having to face what he calls “the most difficult problem,” the impact of the COVID-19 pandemic will certainly exacerbate the headache of reviving the economy.
With the roll-out of such initiatives as the COVID-19 Revitalization of Enterprises Support (CARES) Programme, the Ghana Incentive-based Risk Sharing Agricultural (GIRSAL) and the stimulus packages being administered by the National Board for Small-Scale Industries (NBSSI), we certainly hope that remains a priority to ensure the economy bounces back to Pre-COVID levels.
