Standard and Poor (S&P) cautions the Akufo-Addo led government against Reckless Borrowing and Expenditure

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One of the reasons why candidate Akufo-Addo swept to victory in 2016 was his combative and upbeat oratory. Nineteen months on, the Ghanaian President is beginning to sound unusually defensive. His characteristic bluster and bombast have begun to wane.

In his recent speeches, he has described his critics as naysayers and doomsayers, blamed the previous administration for his abysmal performance and the country’s economic ills, painted himself as a victim willing to drink poison for the good of the country. The victor has turned a victim. During the 2016 campaign and when he won his landslide, he promised jobs, low taxes, drastic fuel price reduction, better living condition etc. But under his leadership and at a time when the world economy appears to be taking off, Ghana is looking like a sorry outlier, battling an economic slowdown and job crisis. Banks are struggling with mountains of bad loans, which has choked credit hurting domestic investment culminating in the collapse of banks.

Ghana’s economy is grounded under Akufo-Addo and Dr Bawumia.

Bawumia’s response has been criticised by experts including those who hailed him few years ago, as piecemeal and clumsy. In our cities and towns including their strongholds, traders are upset over policies of the administration. In our villages, farmers are complaining bitterly of income insecurity as they believe the government isn’t paying them enough for their produce.

One indication is that even President Akufo-Addo’s fiercely pugnacious supporters are markedly subdued on social media and other platforms these days. On the other hand, social media is awash with memes making fun of the President and his Vice.

The President’s politics is also causing discontent. His utterances, decisions and actions of his appointees and party people have begun to frighten off many young people and urban folks. On the economy, Mr Akufo-Addo clearly seems to have overplayed his hand and questions are being asked over whether he can fulfill expectations.

International ratings play an important role for governments and companies in emerging countries like Ghana to raise capital in the international financial market. A lower credit rating means higher cost of borrowing through risk premium and lower investors base. The Ghanaian economy started showing improvement from 2015 in the most relevant macro indicators. The foreign direct investment inflow saw significant improvement in 2016 and the difference between receipts and non interest expenditure decreased. The country’s current account deficit to GDP fell and we saw steady improvement in the debt to GDP ratio. I listened to Kojo Oppong Nkrumah on the latest Standard and Poor rating and must say was highly disappointed.

The rating agency’s report cautioned the administration against possible crisis in the economy. The conditions attached to the report is what the administration must focus its attention on.

What S&P presented is a judgement and caution call. S&P has stated that there will be a case for upward revision in the event of an improvement in fiscal position and reduction in net debt. The agency did not factor loans contracted between May and September into its calculations. S&P clarified that upward pressure on the ratings could build if the government’s policies markedly improve its net general government fiscal deficit and lead to a deduction in the level of net general government debt. Downward pressure on the ratings could emerge if GDP growth disappoints, bringing about a reassessment of the view on trend growth, if net general government deficit rises significantly, or if the political will to undertake prudent economic measures and maintain its reforms loses momentum. Government was given a warning by the rating agency in its latest report.

According to the report Agriculture growth will slow down due to unfavourable prospects for the cocoa sector owing partly to aging cocoa plants. The Mahama administration embarked on massive replanting (cocoa) exercise and distributed free seedlings and fertiliser to the farmers. Cocoa production increased because of these policies and right prices paid to farmers for their produce. It is also captured in the report that the development of the ancillary gas sector and the introduction of new generating facilities should alleviate the previous issues associated with electricity provision and this could support manufacturing activity in the medium term. All these facilities were provided or implemented by the Mahama administration. The world bank in 2015/16 projected 8percent growth in the economy because of these investments the previous administration made. The report said, monetary policy effectiveness has improved, but quickly added that the fiscal accounts remain weak. What is the situation in the banking sector?

The report exposes more structural fiscal vulnerabilities. According to the report, government has to cut spending and reduce its appetite for loans. It made it clear that without further fiscal reforms and discipline government might find it difficult to meet its targets.

The latest S&P rating did not capture

-The collapsed banks

-The crippling cedi

-Laying off of workers

-Foldingup of businesses

-Inability import goods due to the ailing cedi

-Weekly fuel price increase

-High prices of goods and services

-Corruption at Bost and Energy Ministry (Ameri) etc

The administration has added over Ghc 50 billion to the debt stock and still borrowing. Government is going for a 50 billion dollar bond for 100 years. The world bank’s recent report rates Ghana amongst the investor unfriendly places in Africa. Ghana dropped in Transparency International’s latest report on corruption perception.

THE MAHAMA/NDC FACTOR

Standard and Poor based its projections on investments the Mahama administration made in the oil and gas sectors and the economic decisions government took as a result of accepting IMF’s conditionalities. Maintaining gains achieved as a result of these investments is becoming difficult because of the administration’s (Akufo-Addo) populist policies and high re current expenditure.

Source: Ohenenana Obonti Krow

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