Economy was in crisis before COVID – Mahama

Former President John Dramani Mahama has debunked suggestions that the economy is in a crisis because of the COVID-19 pandemic.

According to the 2020 flag bearer of the main opposition National Democratic Congress (NDC), COVID-19 just exacerbated the situation but already, the management of the economy was in a crisis long before the pandemic hit.

Speaking on Bolgatanga-based URA Radio, as part of his thank you tour on Tuesday, 17 August 2021, Mr Mahama who reiterated his earlier assertion that the economy is in crisis said “with the way the economy is going, something needs to give”, adding that he “won’t be surprised if this administration eventually goes into some sort of programme with the IMF.”

“It’s easy for everybody to see that the economy was in a crisis before COVID-19 hit”, he said.

“In 2019, it was obvious that the rate of borrowing was excessive and things were not going correctly. COVID just exacerbated it but already, the management of the economy was in a crisis long before COVID arrived”, he asserted.

Meanwhile, the World Bank Country Director for Ghana, Liberia and Sierra Leone, Mr Pierre Laporte, has said Ghana’s debt-to-GDP ratio was negatively impacted by the COVID-19 pandemic.

Speaking on Class91.3FM’s Class Morning Show on Monday, 16 August 2021, Mr Laporte told Kofi Oppong Asamoah that the situation has led to Ghana being at high risk of becoming debt-distressed.

This, he noted, however, does not mean the country’s debt is higher than others.

Ghana, before COVID-19, recorded positive growth and was considered as one of the fastest-growing economies but like many countries, COVID-19 has negatively impacted the country’s growth.

Although Ghana is one of two countries that recorded a small growth in 2020 despite the pandemic, its debt is quite high, resulting in the country being characterised as having a high risk of becoming debt-distressed.

Ghana’s public debt stock shot up by GHS27.8 billion in April 2021 and May 2021 to GHS332.4 billion, according to the Bank of Ghana.

This is equivalent to GHS57.9 billion, about 76.66 per cent of Gross Domestic Product.

Mr Laporte said: “Ghana’s economy before COVID was one of the highest growing economies in the world actually and we are talking about 6 or 7 per cent annually”.

“Of course, COVID-19 hit Ghana like it hit everyone [but] the encouraging thing is that most countries in the world also declined in growth in 2020 and Ghana happened to be one of the two countries that still recorded a small positive growth because it handled the COVID-19 economic effect better than others and also what we observed is that the recovery has been stronger than the rest of the region…”

The World Bank Country Director was, however, worried about the country’s high debt.

He said: “Ghana’s debt is quite high”, adding: “HIPC is no longer relevant; there’s no more HIPC… but what we do constantly is debt sustainability analysis with the IMF almost annually or every two years”.

“In the case of Ghana, what the latest figures show is that Ghana’s debt-to-GDP ratio is close to 80 per cent or about 78 per cent and it should be noted that before COVID, it was a bit lower than that; it was in the 60s, so, COVID-19 has contributed to Ghana’s debt like every country in the world”, Mr Laporte said.

“So, what we are saying is Ghana is at a high risk of debt distress. What this means is that Ghana is more at risk of going to default or distress if certain things happen. For instance, Ghana depends on oil, so, if oil prices were to crash, this will put Ghana in a much more uncomfortable position vis-à-vis payment of its debt”, Mr Laporte explained.

“If gold prices or commodities Ghana export go down, if for whatever reason domestic revenue, which are already very low, go so low because of a shock, then Ghana will have trouble fully servicing its debt”, he indicated.

Mr Laporte, however, clarified that this “characterisation doesn’t mean because you are high risk your debt level is higher than others, it means that other factors or risks of occurrences happening like external or domestic shocks, then you’re at risk…”


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