The Vice President, Alhaji Dr. Mahamudu Bawumia, has asserted that the government’s decisions to seek aid from the IMF resulted from a mixture of external and internal components. While stressing the COVID-19 pandemic and the Russian-Ukraine war as the external factors, he mentioned the banking sector clean-up and excess energy capacity as internal factors which led to the economic distress.
Speaking at the launch of two IT programmes at the Accra Business School, Dr. Bawumia conceded to the untold hardships that the crisis has brought upon the Ghanaian people, evidenced by “rising prices of virtually everything from fuel to bread, tomatoes, building materials and so on. In the midst of this global crisis, Ghana’s fiscal and debt sustainability has worsened.”
According to the head of the economic management team, but for the “quadruple whammy,” Ghana would not be heading to the IMF for support.
“If you take out the fiscal impact of this quadruple whammy, Ghana will not be going to the IMF for support because our fiscal, debt, and balance of payments outlook would be sustainable,” he pointed out.
He was quick to add, however, that most of the issues are of a global nature.
Today, all over the world, fuel prices are rising in virtually every country; food prices are rising; inflation is at a high for many years; currencies are falling in value; fiscal deficits are increasing; debt levels are increasing; etc. “This tells us that what we are dealing with is a global phenomenon,” he argued.
He admitted claims by analysts that COVID-19 is not solely to blame for the dire economic situation, noting that the banking sector, which cost the government some GHC 25 billion, and the energy excess capacity payments contributed significantly to the fiscal imbalances.
He further explained that the banking sector clean up was necessary to keep the banking sector robust and to prevent millions from losing their lifetime savings.
Commenting on the excess capacity payments, Dr. Bawumia revealed that the payment was necessary to prevent the country from plunging into an era of load-shedding popularly known as “dumsor”. He said that the previous administration negotiated an offtake agreement with ENI Sankofa for a predetermined amount of gas on a take-or-pay basis that was significantly more than was required at the time, thus warranting a payment for annual excess capacity charges of about GHC 1 billion.
