Adnan Adams Mohammed
The Strategic Africa Securities (SAS) has described the government’s policy targets for 2024 as ‘undoubtedly ambitious’.
It, however, believe that the presents a balanced approach to achieving macroeconomic stability and growth.
Ghana’s 2024 Budget and Economic Policy focus on infrastructure, digitalization, and leveraging climate financing for green growth presents significant opportunities for economic diversification and sustainable development.
“The challenges lie in effectively executing these plans, managing external risks, and ensuring that the benefits of growth and development are inclusive and sustainable”, SAS indicated in its post-budget analysis.
“These will require a strong commitment to structural reforms, managing debt sustainability, and providing social protection.”
These will also require careful policy execution, transparency, and stakeholder engagement. The government’s ability to adapt to changing global and local economic conditions while staying committed to these goals will be critical to the success of this budget.
On the sectorial policy targets, SAS commented as follows:
Introduction
The 2024 Budget Statement and Economic Policy themed: “Pursuing Growth & Development Within a Stable Macroeconomic Environment” seeks to stabilize the economy and reposition the country toward sustainable growth. It covers different
aspects of the economy, with a strong emphasis on fiscal consolidation measures and ambitious goals.
We present below our comments:
Banking Sector and Credit Availability
The growth in the banking sector’s assets is a positive sign, but the rising NPL ratio is a concern. This suggests that while the banking sector remains robust, there are underlying vulnerabilities, particularly in asset quality, that need addressing.
Exchange Rate and Monetary Policy
The depreciation of the Cedi against major currencies, albeit at a reduced rate compared to the previous year, signals ongoing challenges in the foreign exchange market. Stabilizing the currency will be key to enhancing investor confidence and managing inflation.
Macroeconomic Stability:
Real GDP Growth
The targets for Ghana’s overall real GDP growth of 2.8% and non-oil real GDP growth of 2.1% by 2024 are reasonable and not overly ambitious considering the global economic situation and domestic challenges. At the broad level, the GDP growth targets reflect a cautious yet optimistic outlook, which is important for the country’s long-term economic health. To achieve these targets, it is crucial to implement the outlined policies effectively, while maintaining fiscal discipline, especially going into the 2024 elections.
The mixed trends in interest rates indicate a challenging environment for monetary policy. The central bank will need to navigate these complexities to support economic growth while keeping inflation and exchange rate volatility in check.
Fiscal Consolidation and Debt Management
The budget reflects a strong commitment to fiscal consolidation, as evidenced by the projected primary surplus of 0.5% in 2024 against 2.6% in 2023 and the efforts to keep the overall fiscal deficit in check. The success of the Debt
Restructuring Programme will be crucial in this regard. The challenge lies in maintaining fiscal discipline while supporting growth and development initiatives, especially with elections on the horizon.
The significant progress in fiscal consolidation, indicated by lower-than-programmed total revenue and expenditure, shows the government’s commitment to financial discipline. This approach is crucial in light of the high-end-period inflation rate of 31.3% and the substantial debt-to-GDP ratio of 66.4%. Fiscal prudence will be key in navigating these challenges.
Completing the Debt Restructuring Programme and adhering to the IMF-Supported PC-PEG highlight a strategic approach to managing national debt.
Inflation Management
The target to reduce inflation to 15.0% by the end of December 2024 is a challenging one, considering the year-end 2023 inflation rate of 31.3%.
Achieving this goal will require the government to strike a balance between effective monetary policies and fiscal discipline. With the 2024 election season on the horizon, we anticipate that the government will increase its spending on unplanned social interventions and infrastructure projects, which may make it difficult to meet the target.
External Sector Developments
The improvement in the trade and current account balances is a positive development. However, albeit reduced, the overall balance of payments deficit indicates persistent external vulnerabilities. How the government navigates these challenges,
especially in global economic uncertainties, will be crucial.
