The Governor of the Bank of Ghana, Dr. Ernest Addison has stated that the restructuring of the government’s macroeconomic framework is essential in restoring the economy to a growth path in the post-COVID-19 era.
The country faced severe shocks with the advent of the pandemic, including domestic economic disruptions due to containment measures, which reflected in negative growth rates, declining GDP per capita, and increasing extreme poverty.
Dr, Addison in a speech at the University of Ghana Alumni Lecture, said: “at the end of the year, the stage is set to redesign a medium-term macroeconomic framework to return the economy to fiscal consolidation and to further consolidate macroeconomic stability to provide an essential lever for positioning the Ghanaian economy on a path of higher growth, job creation, and a faster pace of poverty alleviation.”
Containment of the pandemic and for necessary fiscal expansion in the short-term, public debt levels rose higher reaching 71 percent of GDP at the end of September 2020.
According to Dr. Addison, there is the need to design a plan to bring down the debt to sustainable levels to contain risks posed to future financing of the budget, exchange rate stability, and financial sector stability post-COVID-19.
It is estimated that the fiscal cost, in terms of stimulus package deployed to moderate the adverse socio-economic consequences on the households and businesses, is more than GH¢11 billion.
“If you add the financial sector costs and the energy sector costs raises the estimate of the financial burden from these three sources alone to GH¢24 billion.
As of half-year, it was estimated that the government paid GH¢4.7 billion in excess capacity payments in the energy sector. This has pushed the debt/GDP ratio above the threshold for the Market Access Countries,” the Governor explained.
He recommended that the framework should include a clear priority towards expenditure rationalization and efficiency, as well as improving revenue collection capacity.