Economy on the Right Trajectory, Says Finance Minister in Mid-Year Fiscal Review
The Ghanaian economy is rebounding stronger than anticipated, with the government successfully reversing negative trends and living within its means, Finance Minister Dr. Mohammed Amin Adam announced during the 2024 Mid-Year Fiscal Policy Review in parliament. Dr. Adam highlighted improved macroeconomic indicators and successful debt restructuring efforts as key contributors to this positive trajectory.
“It is evident that we are on the right trajectory. The economy is rebounding stronger than anticipated. The choices we have made and policies being implemented are yielding results. We have reversed the negative trends, all the indicators are looking better,” Dr. Adam stated.
Dr. Adam underscored several significant achievements, including the conclusion of the Extended Credit Facility’s second review with the International Monetary Fund (IMF), which resulted in a disbursement of US$360 million. This brings the total disbursement to about US$1.6 billion. The minister also highlighted progress in external debt restructuring efforts, with the Official Creditor Committee (OCC) covering US$5.1 billion and resulting in approximately US$2.8 billion in debt relief.
“We have concluded negotiations with our Eurobond holders covering US$13.1 billion, which will lead to a US$4.7 billion cancellation of our debt and provide US$4.4 billion debt service relief between 2023 and 2026,” he noted.
The economy’s resilience is evident in the Gross Domestic Product (GDP) growth figures. The economy expanded by 2.9 percent last year, while non-oil GDP grew by 3.3 percent. In the first quarter of 2024, growth was 4.7 percent, the highest growth recorded since the second quarter of 2022.
Inflation, a key concern in recent years, has shown significant improvement, with headline inflation decelerating significantly to 23.2 percent at the end of December 2023, representing a 31.4 percentage point reduction from the peak of 54.6 percent recorded in December 2022. In June 2024, headline inflation further declined to 22.8 percent.
The external sector also showed positive developments, with the current account improving to a surplus of US$1.41 billion, driven by strong growth in remittances as reforms in the fintech ecosystem began to yield positive results.
On account of these improvements, the government has revised its macroeconomic framework for 2024. The overall real GDP growth rate is revised upwards from 2.8 percent to 3.1 percent; non-oil real GDP growth rate is revised upward from 2.1 percent to 2.8 percent, with the headline inflation target for the end of the year remaining unchanged at 15 percent.
On the fiscal front, the minister emphasized the government’s commitment to living within its means. “We have reined in expenditures to ensure we are within 2024’s Budget Appropriation and exceeded the mid-year revenue target by 0.2 percent by end-June, 2024. In effect, Mr. Speaker, we are living within our means,” Dr. Adam stated.
The government has also revised its revenue projections upward, with total revenue and grants being revised upward by 0.5 percent to GH¢177.22 billion (17.4 percent of GDP) in 2024 from the 2024 Budget target of GH¢176.41 billion (16.8 percent of GDP), Dr. Adam announced.
To achieve these targets, the government plans to implement several measures, including broadening the tax base, a simplified digital solution for operationalizing the modified taxation scheme, and an electronic bookkeeping system. Dr. Adam also mentioned plans to onboard 2,000 more taxpayers onto the electronic invoicing system (e-VAT) by the end of the year.
“Government will re-institute the integrated property tax system by synthesizing data from MMDAs, Lands Valuation, ECG, and other relevant government agencies to create a comprehensive digital property record database,” he stated.
Looking ahead, Dr. Adam announced plans to reintroduce road tolls, stating that the government will develop a framework for the re-introduction of road and bridge tolls to “facilitate the processes for implementing a modernized and efficient road and bridge tolling system commencing in 2025.”
While acknowledging the progress made, Dr. Adam cautioned against complacency. “Despite these significant risks, this Mid-Year Fiscal Policy Review reasserts the government’s commitment to pursuing growth in a context of fiscal consolidation and debt sustainability,” he concluded.
Analysts remain cautious about the government’s ability to maintain fiscal discipline while stimulating growth in an election year, stating that the coming months will reveal whether the positive trends highlighted in this mid-year review can be sustained and translated into tangible improvements in the lives of ordinary Ghanaians.
