Window of opportunity in Ghana

What is the outlook for the Ghanaian economy?
The outlook is positive. Ghana is already more diversified than many economies in the region. It is important to continue the process to ensure broad-based economic growth. While oil and gas are important for the Ghanaian economy, the government’s focus on developing agriculture and value addition would help alleviate Ghana’s vulnerabilities to external and domestic shocks. In 2017, the oil and gas sector was the most important contributor to economic growth. At the same time, what is important for the future and long-lasting prosperity of Ghana’s economy is economic diversification, which will generate productive and income-generating jobs.
I believe 2018 will be another strong year for Ghana, with GDP growth projected at 6.33%. Economic growth in 2017 was driven by the recovery in oil production, due to additional production generated by the new oilfields that became operational that year and also the delay in repairs of the malfunctioning turret [on FPSO Kwame Nkrumah] to 2018. We, therefore, expect that the contribution of the oil sector to growth would taper of this year.

Do people have the entrepreneurial spirit in them or is it something that needs to come out more in the future through better education and incentives?
Every country has a business spirit within, the question is whether the private sector can see opportunities, and whether business environment is sufficiently friendly to the private sector.
There are plenty of opportunities in Ghana in many sectors. While business environment has been gradually improving, the government would like to do more. They are focusing on the issues that are of the greatest concern for the private sector. One example which has already affected the private sector in a positive way is a more reliable electricity supply. The electricity supply has become much more stable. If electricity tariffs could be reduced through efficiency gains, that would also help business development. Another area is access to finance. Lending rates would decline, if inflation further subsides and non-performing loans diminish. It is also important to keep the banking sector sound.

Is there still a high level of non-performing loans (NPLs) in Ghana?
Yes, Ghana’s NPLs are still high and the Bank of Ghana has been working with the banks to address this issue. Importantly, last year the government issued an energy bond backed by the proceeds from the energy sector levies. This bond, which significantly reduced banks’ exposure to the energy sector, was supposed to bring NPLs down. At the same time, the Bank of Ghana has also been working on a strategy with the banks that would reduce NPLs. This is extremely important for the banks to be able to reduce the lending rates and also increase private sector lending.

How should Ghana respond to higher oil prices?
The major impact of the oil sector in Ghana is on government revenues and economic growth.
Ghana has many needs, and the issue of taxation of extractive industries is an important one. Oil has been contributing quite significantly to the budget and at the same time the authorities are focusing on improving the efficiency of taxation of the mining sector, not by changing the tax regimes but focusing on strengthening control and monitoring, data collection and reporting.

Do you think fiscal prudence is achievable for Ghana in the sub-Saharan context?
I believe that it is achievable for Ghana. They had started macroeconomic adjustments several years ago, and in 2017, the authorities made a very strong push towards macroeconomic stability. The authorities have been working on revenue mobilisation to ensure that fiscal consolidation does not undermine economic growth. Following expenditure-based fiscal consolidation in 2017, when domestic capital spending and financing of goods and services were tightly contained, it is time to focus on revenue mobilisation to achieve fiscal stability over the medium term.
The government has already launched consultations with stakeholders on measures which would help to mobilise revenue, and they already announced that at the time of the mid-year budget review, they will present a package of measures which would help increase revenue.

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