Ghana's Minister of Finance, Kenneth Ofori-Atta, outlined a cocktail of measures on March 24 to try to turbo-charge the country's flailing economy.
The consequences of lockdowns, border and business closures, and unplanned expenditures have combined to have a devastating impact on the economy.
Data from the Ministry of Finance reveals that the government in Accra has spent about $2.28 billion trying to try to contain the coronavirus pandemic since 2020.
The figure, which was mostly raised through borrowing, represents about 4.6 per cent of Ghana’s Gross Domestic Product (GDP).
Coupled with job losses, business closures, falling tax receipts and the on-going economic fallout from the Russian-Ukrainian war, Ghana has seen inflation rise from 9.8 per cent in December 2021 to 19.6 at the end of April.
Its currency, the cedi, has also depreciated against the dollar by 15.6 per cent, further impacting living standards.
The cedi’s collapse against the dollar combined with rising international crude oil prices has affected the price of petrol and diesel at the pump, feeding into high transportation fares; between January and the end of April, the average ex-pump price of diesel rose by 59.7 per cent in Ghana.
As a result of its various woes, international rating agencies have downgraded the country’s credit rating.
Fitch, for instance, downgraded Ghana to a B- ‘with a negative outlook’.
Moody’s downgraded it to CAA1 with a ‘stable outlook’.
Meanwhile, Standard and Poor affirmed Ghana's rating at B- ‘with a stable outlook’.
According to Ofori-Atta, these announcements have impacted the country negatively: ‘These downgrades have had implications for market access, exchange rate depreciation, capital flight and increased cost of financing.’
With a lower credit rating, the Ghanian government will struggle to access the cheap loans needed to offset the money lost by Covid restrictions, increasing its reliance on austerity measures and tax rises going forwards.
Despite the difficult situation the Ghanaian economy finds itself in, Ofori-Atta believes that the raft of measures announced in late March will help restore West Africa's second largest economy to a healthier status.
The measures include cuts to government spending, fuel price mitigation measures, a ban on all non-essential government travel and slashing ministers’ salaries by 30 per cent.
The government also plans to cut spending on ‘discretionary’ expenses like conferences and training workshops, for example, by 30 per cent, halve the amount it gives in fuel subsidies to government agencies and other parastatals, and purge government payrolls of all ‘ghost employees’ by the end of the year.
The finance minister said that the government intended to make a savings of GHc3.2billion ($410 million) from these measures.
The 50 per cent cut to the value of fuel coupons given to government workers is expected to save the state in excess of $7.7 million alone.
A moratorium has also been placed on the importation of vehicles by state agencies.
Meanwhile, to help consumers, the government plans to cut fuel prices by roughly $0.02 per litre by waiving some of the money it levies on the petroleum sector.
Ofori-Atta believes that these ‘tough measures’ will restore some level of stability to the economy and usher it into recovery.
He added: ‘These are truly challenging times globally. No country has been spared, the government therefore calls on all Ghanaians to stand together. Together we shall surely overcome.'
However, some economists have dismissed the measures as insignificant.
According to Professor Godwin Alufar Bokpin from the Economics Department of University of Ghana, the measures are not enough to bring the economy back to the path of stability.
He told NewsAfrica that the proposals on expenditure cuts and revenue revitalisation are stop-gaps measures that won’t regain the confidence of investors.
The economist said that the government should have taken advantage of the crisis to reduce the size of government.
He added that a comprehensive review of social programmes from independent institutions should also be carried out and strong measures to boost revenue collection introduced.
Ghana's total public debt currently stands at $50.8 billion – or 80 per cent of GDP – according to Central Bank figures.