2024 1^st Monthly Press Briefing on the Economy

By

Dr. Mohammed Amin Adam (MP)

Minister for Finance

26^th March 2024

Colleague Hon Minister

Management and Staff of the Ministry of Finance Present, 

Our friends from the Media

Invited Guests

Ladies and Gentlemen

INTRODUCTION

1. It is an honour to be with you today, to update you on the economy, the first of a series of monthly update we have instituted at the Ministry of Finance, since I assumed office as the Minister for Finance on 14^th February, 2024. 
2. The monthly briefing sessions on the economy has been instituted as part of measures to deepen transparency and accountability and build consensus in our journey to restore and sustain macroeconomic stability and promote inclusive growth and transformation whilst protecting the poor and the vulnerable. Through these engagements, it is our expectation that we will bring current information on the economy to the door step of our cherished stakeholders including the Ghanaian people, parliament, the judiciary, domestic and foreign investors, organised labour, employer associations, CSOs, the academia, FBOs, and our development partners.
3. 3.   Over the past few weeks a number of events have transpired at the Ministry. I have been appointed the Minister for Finance, my colleague Member of Parliament for Atiwa East, Hon. Abena Osei Asare has been nominated as a Minister of State designate and Dr. Alex Ampaabeng has also been nominated as the Deputy Minister designate at the Ministry.  We have also hosted the Managing Director of the IMF, Ms. Kristalina Georgieva, to strengthen collaborations in the context of Ghana’s ongoing IMF programme.

• 4.   On the occasion of my first press engagement at the Ministry of Finance, I take this opportunity, on behalf of my colleagues, to thank the President for the confidence reposed in us to lead the management of the economy at this time.   

• 5.   During this period, we have also lost our dear friend, colleague, and devoted Deputy Minister, Hon. Dr. John Kumah, the MP for Ejisu. We pray that his gentle soul finds eternal rest. 

1. Today’s briefing will, among others:
   •                  i.        Provide an update on performance the Real, Fiscal, External, and Monetary sectors of the economy in 2023 and the first two months of 2024;
   •                 ii.        Provide an update on the Ghana’s External Debt Restructuring Programme; 
   •                iii.        Provide an update on the implementation of the IMF-supported Post Covid-19 Programme for Economic Growth (PC-PEG); and 
   •               iv.        Outline the outlook for the rest of 2024 and medium-term.

2024 KEY PRIORITIES

1. Ladies and gentlemen, permit me to highlight key interventions for 2024 in addition to the ones we are already pursuing:
   •                  i.        Staying the course on the implementation of the IMF-Supported Post Covid-19 for Economic Growth (PC-PEG) and the World Bank-supported Development Policy Operations in spite 2024 being an election year.
   •                 ii.        Fast-tracking the completion of the External Debt Restructuring Programme;
   •                iii.        Optimising the mobilisation of Domestic Revenue;
   •               iv.        Rein in expenditures through expenditure controls and rationalisation; 
   •                v.        Firmly implement government’s growth strategy with a focus on improving SME productivity, efficiency, and financing, given the significant contribution the SME sector makes to growth and job creation;  
   •               vi.        Collaborate with Ministry of Energy to effectively implement the updated Energy Sector Recovery Programme (ESRP); and 
   •              vii.        Pursue an inclusive approach to economic management. This will include instituting:
     • a Joint Economic Roundtable with the academia to discuss topical economic issues;
     • a Ghana Development Forum (GDF) to bring various stakeholders together to discuss and build consensus on key interventions such as the IMF ECF Programme and Debt Restructuring Programme;
     • a monthly update on the state of the economy as we are doing today; 
     • Pre and Post Budget engagement with key stakeholders including employer associations, organised labour, CSOs, academia and think-tanks, FBOs, MDAs, EMT, Cabinet, Parliament, and the Judiciary.

GLOBAL ECONOMIC DEVELOPMENTS OUTLOOK 

1. Ladies and Gentlemen, I will now present a quick update on the global environment to provide a good context for the update on the domestic economic performance.  
   •                  i.        Global recovery was more resilient in 2023 than expected.  According to the IMF’s January World Economic Outlook (WEO) a rising growth momentum in the second half of 2023 resulted in an estimated 3.1% growth for 2023 largely on the back of stronger activity in China, US, and some large emerging markets and Developing economies. Though global growth is projected at 3.1 and 3.2 percent in 2024 and 2025 respectively, they are still below the historical pre-pandemic average of 3.8 percent. Growth in Sub-Saharan Africa is projected to rise to 3.8 percent in 2024 from an estimated growth of 3.3 percent in 2023.

•                 ii.        End period global inflation in 2023 is estimated at 6.4%, down from 8.9% in 2022. It is projected to decline further to 5.1% and 4.5% in 2024 and 2025 respectively. SSA inflation is expected to follow similar trend, though relatively higher with end-period inflation projected to decline from 16.2% in 2023 to 10.5% in 2024 and further to 8.6% by 2025. 

•                iii.        Ladies and gentlemen, global financing conditions which became tightest in 2020 on back of the Covid-19 pandemic have eased, somewhat, but are expected to remain relatively tight. Sovereign spreads in some emerging markets in developing countries remain elevated amid concerns of a growing indebtedness.

1. These global developments and outlook have direct and indirect implications on Ghana’s economy as they affect our exchange rate movements, inflation, crude prices at the pump, and external flows, among others.

DOMESTIC ECONOMIC DEVELOPMENTS 

1. Ladies and Gentlemen, on the domestic front, the latest data indicate that the macroeconomic environment continues to remain stable and signs of economic recovery is emerging as the Government implements the IMF-supported PC-PEG. 
2. More specifically:
   1. growth is proving to be more resilient and robust than initially programmed;
   2. inflation is declining;
   3. exchange rate has largely stabilised;
   4. gross International Reserves is improving;
   5. the external balances, namely the current account balance and trade balance continue to improve; 
   6. the fiscal consolidation is holding; 
   7. the rate of accumulation of public debt is declining following the good progress in the debt restructuring programme and the success of the fiscal consolidation agenda;
   8. interest rates are falling; and
   9. key structural reforms to support growth, improve the PFM system, improve revenue mobilisation, and support sound monetary and exchange policy are beginning to yield fruits.
      1. This economic performance we are witnessing has been achieved through the cooperation and sacrifice of all Ghanaians. I take this opportunity to express Government’s appreciation for the immense support. 
      2. Ladies and gentlemen, I will now provide some more details on the performance of the economy in the real, fiscal, external, and monetary sectors. 

Real Sector Performance

1. Ladies and Gentlemen, the latest GDP release from the Ghana Statistical Service (GSS) indicates that, on provisional basis, Overall Real GDP for 2023 grew by 2.9%, compared to the Original 2024 Budget target of 1.5% and the revised Mid-Year Review Budget target of 2.3%. Growth is, therefore, proving to be more robust than anticipated. The 2023 growth outcome is, however, lower than the 2022 growth rate of  3.8%.
   1. Non-Oil GDP for 2023 expanded by 3.3% compared with the original budget target of 1.5% and the revised Mid-Year Review target of 2.8%. The 2023 non-oil GDP growth is, however, lower than the 2022 growth rate of 4.7%.  
      1. The key drivers of growth for the period are:
         1. Services sector which expanded by 5.5% on the back of the expansion in Information and communication (18.0%), Health and Social Work (8.3%) and the Transport and Storage (5.6%) subsectors; 
         2. Agriculture sector which expanded by 4.5% supported by expansion in Livestock subsector (6.5%), Crops subsector (4.8%) and Fishing subsector (4.1%); and 
         3. Industry sector which rather contracted by 1.2% in 2023 driven mainly by negative growth recorded in the Electricity (10.9%) and Construction (9.9%) subsectors. The contraction in the industry sector occurred in the first three quarters of 2023. The 4th Quarter, however, showed a recovery of 1.6% growth, signaling a rebound.
      2. Going forward, fast-tracking the implementation of the growth strategy with a key focus on SME development and financing is expected to support accelerated economic expansion in 2024 and the medium-term.

Price Developments

1. Ladies and Gentlemen, price pressures have eased significantly in response to ongoing fiscal consolidation, appropriate tightening of monetary policy, and relative stability in the exchange rate and the relatively good food production. 
2. Headline Inflation (year-on-year) declined by 30.9 ppts to 23.2% in Dec 2023 from 54.1% in Dec 2022 before picking up slightly to 23.5% in Jan 2024. Inflation resumed its downward trend, thereby, easing to 23.2% in Feb 2024. 
3. Month-on month inflation for Feb 2024 eased at 1.6% down from the 2.0% recorded for Jan 2024, largely on the back of non-food inflation at 1.3% compared to food inflation of 2.0% for Feb 2024.  
4. More specifically:
   1. Food inflation dropped to 27.0% in Feb 2024 from 27.1% in Jan 2024, 28.7% in Dec 2023 after peaking at 59.7% in Dec 2022;
   2. Non-Food inflation declined to 20.0% in Feb 2024 from 20.5% in Jan 2024, and 18.7% in Dec 2023, after peaking at 49.9% in Dec 2022;
   3. Inflation for locally produced items increased slightly to 24.6% in Feb 2024 from 24.2% in Jan 2024 and 23.8% in Dec 2023 after peaking at 51.1% in Dec 2022; and
   4. Inflation for imported items dropped to 20.1% in Feb from 22.0% in Jan 2024 and 21.9% in Dec 2023 after peaking at 61.9% in Dec 2022.
5. The current exercise to rebase the CPI basket will provide opportunity to report inflation that reflects more current developments.

Exchange Rate Developments

1. Ladies and Gentlemen, The Cedi has been largely stabilised since early 2023 against the major trading currencies, even though we are seeing some pressures on the cedi in recent times:
2. The cedi cumulatively depreciated against the US Dollar by 27.8% at the end of December 2023 down from the depreciation rate of 30.0% at the end of December 2022 and 50% at the end November 2022;
3. February to December 2023 depreciation against the USD was only by 9.1% compared to 29.8% over the same period in 2022, showing significant stabilisation over the last 11 months of 2023; 
4. The high depreciation of the cedi against the US Dollar in January 2023 (20.6%) was largely on the back of realignment of the foreign exchange market between the official and the forex market; and
5. The Cedi’s stability has continued into 2024, with a cumulative depreciation of 6.8% as @ 20^th March 2024, compared to 22.1% recorded in the same period in 2023. 
6. However, the exchange rate has witnessed some pressures in the last few weeks due mainly to the strengthening of the US Dollar against major trading currencies. Additionally, payments made for energy and corporate sectors, compounded by the delays with the disbursement of the 2^nd tranche of the cocoa loan and the World Bank DPO1 have placed further pressures on the cedi. According to the Bank of Ghana, these pressures have been mitigated somewhat by the continued inflows from remittances and mining companies, and from the domestic gold purchase programme. 
7. To further stabilise the currency, we are expecting a total disbursement of about US$1.2 billion from our Development Partners namely the IMF, the World Bank, and the African Development Bank before the end of 2024. Additional planned disbursements from ongoing projects will also support our growth interventions and strengthen the currency. In this vein, we kindly request Parliament to approve the US$150 million World Bank facility for the GARID project to enhance flood protection at the local level. 

External Sector Developments

1. Ladies and Gentlemen, we continue to make progress in the external sector with improvements in both the current account balance and the trade balance. The current account recorded a surplus of US$0.46 billion at end of 2023 compared to a deficit of US$1.52 billion at the end of Dec 2022. Likewise, the trade balance ended 2023 at a surplus of US$2.6 billion compared to a surplus of US$2.9 billion at the end of 2022. The surplus trend continued in 2024 with a trade surplus of US$392 million at the end of Feb 2024.
2. Gross International Reserves (GIR) including encumbered assets and petroleum funds) stood at US$5.9 billion (2.7 months of import cover) at the end of December 2023 from US$6.3 billion (2.7 months import cover) at end December 2022. The GIR improved to US$6.2 billion at the end of February 2024 compared to US$5.9 billion in the corresponding of 2022. 
3. Excluding encumbered assets and petroleum funds, GIR stood at US$3.7 billion (1.7 months import cover) at the end of December 2023 compared to US$1.5 billion (0.6 month import cover) recorded at the end of December 2022. The GIR, excluding encumbered assets and petroleum funds improved to US$4.0 billion (1.8 months of import cover) at the end of Feb 2024. 
4. The GIR is supported by BoG’s Gold-for-Reserve Programme and the government’s Gold-for Oil Programme.  In addition, external inflows from the IMF and World Bank as well as the Cocoa Syndicated Funds have helped shore up the GIR.  The IMF has so far disbursed US$1.2bn since May 2023 and the World Bank is disbursing US$300mn following the recent parliamentary approval of the World Bank DPO.

Monetary Sector Developments

1. Ladies and Gentlemen, The Monetary Policy Rate was lowered by 100 basis points to 29% in Jan 2024 (116^th MPC) in response to the disinflation process that started in Jan 2023. At its 117^th meeting, the MPC maintained monetary policy rate at 29%. 
2. Although interest rates moderated from 35.5% (91-day TB) in Dec 2022 to 19.7% in Apr 2023, the rates increased to 29.36% as at end-Dec 2023 on the back of T-bills remaining the main source of domestic financing after the DDEP. However, the first twelve auctions in 2024 have witnessed a consecutive decline in interest rates with the 91-Day Treasury Bill rate at 26.0 as of 25^th March 2024. 

Fiscal Performance

1. Ladies and Gentlemen, the fiscal balances are also improving. Provisional data on government’s fiscal operations for end- 2023 show that we met our primary balance (commitment) target. 
2. More specifically:
3. The overall budget deficit (on commitment basis) improved from a deficit of 11.8% of GDP (Ghs72.2 billion) in 2022 to a deficit of 3.9% at the end of 2023, and lower than the target of 5.7% of GDP (GH¢49.0 billion). 
4. The Primary balance (on commitment basis) also improved from a deficit 4.3% of GDP at the end of 2022 to a deficit of 0.3% of GDP (GH¢2.5bn). The 2023 outturn was lower than the target deficit of 0.5% of GDP; 
5. The overall budget balance (on cash basis) also saw an improvement from a deficit of 10.7% of GDP in 2022 to a deficit of 3.2% of GDP (GH¢27.4 billion) and lower than target of 6.4% of GDP)
6. The Primary balance (on cash basis), equally improved  from a deficit of 3.2% of GDP (Ghs27.4bn ) at the end of 2022 to a surplus of 0.4% of GDP GH¢3.7 billion). The primary balance outturn turned out better than the programmed deficit target of 1.2% of GDP, 
7. These favorable fiscal balances recorded in 2023 were on the back of:
   • Total Revenue and Grants collection of 15.8% of GDP (GH¢134.9bn), representing a 39.6% growth in revenues with respect to 2022 revenue collections.
   • Total Expenditures (commitment), on the other hand, reduced by 0.2% to GH¢168.4bn (19.7% of GDP) in 2023 from the 2022 outturn of GH¢168.8bn (27.7% of GDP). The 2023 Expenditure outturn was contained within the target of GH¢183.9bn (21.5% of GDP).

Public Debt 

1. The Public Debt trajectory is improving as the debt to GDP ratio reduced to 71.4% of GDP at the end of 2023 from 73.5% of GDP at the end of 2022:
2. The total debt stock at the end of Dec 2023 was GH¢610.0bn (71.4% of GDP) representing a nominal growth of 36.1% from the end-2022 stock of GH¢448.3bn (73.5% of GDP);
3. Domestic Debt amounted to GH¢259.7bn (30.4% of GDP) and constitute 42.6% of total Public Debt; and 
4. External debt amounted to GH¢350.3bn (41.0% of GDP) and constitute 57.4% of total Public Debt.

UPDATE ON THE IMPLEMENTATION OF THE IMF-SUPPORTED PROGRAMME

1. Ladies and Gentlemen, the 2^nd Review of the 3-year, US$3bn IMF-Supported Post Covid-19 Programme for Economic Growth (PC-PEG) to be conducted by the IMF Staff has been scheduled for 2^nd – 12^th April 2024, following the successful completion of the 1^st Review of the Programme on 19^th Jan 2024.
2. During the 2^nd Review, IMF mission will engage the authorities in technical and policy discussions to enable them assess Ghana’s performance on programme objectives, the 6 Quantitative Performance Criteria (QPCs), the 3 Indicative Targets (ITs), 1 Monetary Policy Consultation Clause (MPCC), and the Structural Benchmarks (SBs) with respect to end Dec 2023 targets. They will also review performance towards upcoming QPCs, ITs, and SBs.
3. The test date for the 2^nd Review is Dec 2023. The approval of the 2^nd Review by the IMF Executive Board, possibly in June 2024, will trigger the release of the 3^rd tranche of US$360mn, bringing the total disbursements so far under the programme to US$1.56 billion. 
4. The 2^nd Review will be the first of the two semi-annual reviews programmed for 2024. The 3^rd Review has been programmed for Nov 2024.
5. The Ministry of Finance is working with the BoG in preparation for the IMF   2^nd Review Mission. Preliminary assessment undertaken by MoF and BoG shows that we are on course to meeting most of the targets under the Programme.

UPDATE ON DEBT RESTRUCTURING PROGRAMME

1. Ladies and Gentlemen, I will now provide an update on Ghana’s debt restructuring programme. 
2. You recall that, the Government in December 2022, embarked upon a comprehensive debt restructuring of both its domestic and external debt, except for the treasury securities (domestic) and multilateral debt (external) as part of measures to restore fiscal and debt sustainability and put the economy on the path of recovery.  
3. Due to the length and complexity of the task, Government sequenced the process by implementing first its DDEP. The size of the domestic debt restructured, as well as the swift execution time, makes the DDEP an unprecedented achievement. 
4. The first phase of the DDEP, which concerned Government Treasury Notes, Daakye & ESLA bonds held by the financial sector apart from pension funds, provided significant relief with the average coupon rate reduced from 19.1 percent to 9.1 percent and the average maturity increase from 3.8 years to 8.3 years.
5. Following the first phase, USD-denominated locally issued bonds, COCOBOD corporate bills, and holdings from pensions funds were all individually restructured. Non-marketable holdings by the Bank of Ghana were treated with a 50.0 percent nominal haircut, leaving the Bank with negative equity.
6. 45.      Government as part of the structural measures under the IMF-Supported program have made progress under the operationalization of the Ghana Financial Stability Fund (GFSF) project. This is an important safety net to help mitigate the potential impact of Government’s debt operation on the financial sector, especially in protecting state owned banks and eligible indigenous financial institutions.  

• 46.      Since November 2023, the GFSF has supported the partly state-owned banks to recapitalise in line with their right issue roadmap as approved by their regulators. Progress has also been made in securing additional support under US$250 million World Bank loan to provide broader support and buffer in available additional Tier 1 (AT1) capital instruments by the end of April 2024. 

• 47.      Ladies and Gentlemen, the Government is also committed to addressing the remaining legacy problems in the financial sector. We will announce measures to gradually complete the fiscal support provided to some clients of failed asset management. Ladies and Gentlemen, we will programme these reliefs within the fiscal framework.

1. The DDEP had a significant impact on the banking sector, however, we according to the Bank of Ghana, banking sector profitability has improved and remained strong coming into 2024. 
2. Ladies and Gentlemen, the external debt restructuring involves bilateral debt and commercial debt (Eurobonds). On 13th December, 2022 Ghana formally requested for debt treatment under the G20 Common Framework for Debt Treatment Beyond the Debt Service Suspension Initiative (CF-DSSI) for a portfolio size of US$5.1 billion. 
3. Ghana’s bilateral creditors subsequently established the Official Creditor Committee (OCC) on 12th May 2023, under the auspices of the Paris Club to restructure the bilateral debt. The OCC is co-Chaired by France and China. 
4. The Government on 12th January 2024 announced that it has reached an agreement with its Official Creditors under the G20 Common Framework, on a comprehensive Debt Treatment Beyond the Debt Service Suspension Initiative. The terms of the agreed debt treatment are expected to be formalised in a Memorandum of Understanding between Ghana and Official Creditors, which will then be implemented through bilateral agreements with each member of the Official Creditor Committee.
5. The OCC agreement constitute an additional step towards restoring Ghana’s long-term debt sustainability in line with the International Monetary Fund (IMF) programme targets. 
6. The final step involves the restructuring of our commercial debt, particularly our Eurobonds. The IMF Board's approval of the First Review and the recent agreement with Official Creditors set the stage for accelerating our engagement with the bondholders. 
7. Government has received counterproposals on the debt treatment scenarios from the two bondholder groups. 
8. In the coming week, Government and its advisors will start extensive discussions with bondholder representatives to advance restructuring talks following agreement with the OCC. Ultimately, the engagements with Ghana’s commercial creditors, including bondholders are expected to ensure that Ghana achieves the targets set under the IMF/World Bank Debt Sustainability Framework.

2024 AND MEDIUM-TERM MACROECONOMIC OUTLOOK

1. Ladies and Gentlemen, Ghana’s medium-term macroeconomic outlook and prospects remains positive and favourable:
   1. Real GDP growth rate has been programmed to increase from a provisional 2.9% at the end of 2023 to 5% by 2027; 
   2. Non-Oil real GDP growth is to increase from 3.3% in 2023 to 5% by 2027;
   3. The primary balance on commitment basis is projected to improve from a provisional deficit of 0.3% of GDP in 2023 to surplus of 0.5% of GDP in 2024 and 1.5% of GDP from 2025 to 2027;
   4. Public debt is expected to return to sustainable trajectory by 2028 with the PV of public debt to GDP ratio reducing to 55% by end 2028;
   5. Inflation is projected to return to the medium-term band of 8±2% by 2025 down from the inflation rate of 23.2% at the end of Dec 2023;
   6. Gross International Reserves are expected to improve to reach 4.4 months of import cover by 2027 up from the 2023 reserve position of 2.7 months of import cover.
      1. We will continue to implement strong and ambitious structural reforms in the areas of tax policy, revenue administration, public financial management to address structural weaknesses and enhance our resilience to shocks.
      2. Government will aggressively pursue its growth strategy with the objective of progressively reviving Ghana’s industrialization drive, modernize agricultural with focus on value-addition to create economic and employment opportunities. Emphasis will be placed on SME growth and financing to promote job creation.  
      3. 59.      Ladies and Gentlemen, SMEs in Ghana account for 92% of existing companies, 85% of manufacturing jobs and 70% of GDP. Therefore, they have a growth potential with possible significant impacts at both macroeconomic and sector levels (technology, creative industries, agro value-chains, construction, tourism, commerce of local goods, transport, healthcare, pharmaceuticals, etc).
   7. 
      
      • 60.      Preliminary consultations with stakeholders unearthed 3 main challenges for SMEs, namely:
        1. access to finance;
        2. access to markets & exports; and
        3. tax constraints and formalization.
      • 61.      Government is determined to address, particularly, the financing challenges which has become very critical in SME development. This will ensure that we generate growth internally from SMEs underpinned by a robust SME financing ecosystem that can be leveraged as a vehicle for sustainable growth.
      • 62.      We are talking to various agencies of state, the private sector such as the financial institutions and we are reviewing our existing SME programmes all aimed at consolidating our efforts at providing opportunities for Ghanaian SMEs. 
   8. 
      
      1. A comprehensive SME financing strategy is being developed and once approved, you will see a roll-out of various products to support SMEs.

1. Ladies and gentlemen, subsequent briefings will provide updates on;
   •                  i.        The outcome of the IMF mission which commences next week; 
   •                 ii.        Progress on the implementation of key reforms, especially in the financial, cocoa and energy sectors; 
   •                iii.        Progress on the debt restructuring programme; 
   •               iv.        Implementation of the 2024 budget, focusing on growth interventions; as well as
   •                v.        Measures to ensure that the fiscal slippages that usually characterises election years do not happen this year. 
2. We very much appreciate your participation in this morning’s press briefing. 

Summary of Key Macroeconomic Indicators

Appendix 1: Structural Benchmarks (2024)

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