Ken Ofori-Atta has succeeded in Collapsing Ghana’s Economy

With the extremely negative economic outlook, poor credit rating, unsustainable public debt levels and a practical collapse of the Ghanaian economy, critics are questioning why the Akufo-Addo government has not sacked Finance Minister Ken Ofori-Atta for his incompetence.

Due to the economic mess Ghana finds itself in, all the global rating agencies have downgraded Ghana’s creditworthiness to the lowest levels ever in the history of the country; Moody’s has downgraded Ghana’s outlook to the danger zone and Fitch has degraded the ratings to B- with a negative outlook.

Standards and Poor’s (S&P) is expected to release its ratings soon and economists are confident that it will be one of the worst-ever that S&P has given Ghana in recorded history.

At that rate, international investors are unwilling to advance credit to Ghana for its much-needed investment in social infrastructure. This has resulted in an increasingly downward slide in the profitability of local businesses and a resultant spike in inflation and cost of living.

Also responsible for the collapse of the country’s economy is Vice President Mahamudu Bawumia, who heads the Economic Management Team (EMT). Dr. Bawumia’s rise to the high office was because, having been a former Deputy Governor of the Bank of Ghana, he was hailed as an economic wizkid who would drastically transform the economy.

Indeed, while in campaign mode in 2016, the New Patriotic Party (NPP) and its flagbearer, Akufo-Addo promised to turn the Ghanaian economy around within 18 months, with Akufo-Addo famously stating in the Twi language that Ghana is sitting on wealth, but the people are hungry-“Ye ti sika so, nso okom di yen”.

At over GHC 300 billion public debt stock, Ghana’s debt to GDP ratio is about 80%. This is at a worse level than the pre-2000 levels that drove Ghana into the Heavily Indebted Poor Country (HIPC) status.

Of the total public debt, the Akufo Addo had borrowed close to GHC 200 billion in approximately five years. This is more than all the public debts accumulated by previous governments since Ghana’s independence.

Currently, the government is desperately seeking to impose an obnoxious electronic transaction levy (e-levy) on Ghanaians to raise an estimated GHC 6 billion annually, even though the amount wasted on corruption, unbridled tax exemptions and elephant-sized government of the Akufo-Addo administration are collectively five times more than the estimated collection from the widely rejected e-levy.

Whatsup News has been gathering that the government’s plan for floating the generally unpopular plan to extract the “pickpocketing” e-levy is to allow it to use it as collateral to source for at least GHC 70 billion from the international market.

That amount will be substantial in providing funds for the GHC 113 billion (2021) required by Ghana to fulfill its annual budget obligations. Internally generated revenue and grants amount to roughly GHC 60 billion, so the government could be coasting comfortably if it can pull the e-levy gymnastics through.

However, with its poor credit ratings, the country would have to contend with high interests on such a planned credit move with the e-levy.

According to available data, Ghana has the worst debt interest payment record in the world, only second to Sri Lanka.

According to Dr. Mark Yama Tampuri, an economist and digital finance expert has in a report monitored by Whatsup News, Ghana’s economic managers will need to have a frank discussion on the direction of the country

“…The country is constrained in liquidity, while the international financial market is shutting out the country. Ghana is being shut out from those markets ordinarily because the country is now considered as high-risk debt distress, even for risk-loving investors. The tradeoff therefore as we have seen is that the country is borrowing at high-interest rates and at unsustainable levels. These debts are rising, and therefore choking corresponding interest payments,” Dr. Tampuri stated.

“…The avenues readily available to Ghana for funds to meet part of its expenditure are local borrowing through banks in Ghana. This implies the government will be competing with citizens for funds from the banks, which it projects to borrow 75% of its financing in the country this year.”

According to him, if the government goes that route, it will put the local financial sector at grave risk should government default.

Already, the desperation for funds is pushing the cash-strapped Akufo Addo to go back to outs vomit by re-introducing levies that it claimed it had scrapped, including the Petroleum Price Stabilisation and Recovery Levies (PRL).

Late January 2020, the National Petroleum Authority (NPA) announced it will restore the levy today, February 1, 2022.

The levies were scrapped in October 2021 when the government claimed it is trying to mitigate the impact of rising prices of petroleum products on the world market on consumers in Ghana.

The restoration of this levy is therefore expected to shoot petroleum products to almost GHC 8 per little from the current levels nearing GHC 7.5 per litre; a situation that will further exacerbate prices of goods in services in the country.

Source: Whatsupnewsghana