Dr. Ernest Addison, the Governor of the Central Bank of Ghana, touching on the Bank of Ghana’s high frequency indicators during the MPC brief meeting disclosed that economic activity moderated in the fourth quarter of 2022.

According to the Governor, the updated Composite Index of Economic Activity (CIEA) contracted by 6.2% in November 2022, compared with a growth of 10.2% in the same period of 2021. The major items that weighed down the Index during the period were port activity, cement sales, imports, and industrial consumption of electricity.

However, Dr. Addison in his speech averred that latest confidence surveys conducted by the Central Bank in December 2022 pointed to some marginal improvement in sentiments. Consumer confidence improved on the back of the recent reductions in ex-pump petroleum prices and transportation fares.

Per the frequency indicators, Dr. Addison noted that business sentiments also turned positive due to achievement of short-term targets and optimism about company and industry prospects, following the rebound of the local currency during the month.

The survey findings, he said, were broadly aligned with observed trends in Ghana’s Purchasing Managers Index, which improved to 47.0% in December 2022 from 44.9% in the previous month.

Restoring Debt Sustainability And Inflation Cut

The Monetary Policy Committee of the Bank of Ghana with optimism noted that fiscal measures implemented by government and captured in the International Monetary Fund (IMF) Staff Level Agreement (SLA) will aid in restoring fiscal and debt sustainability, reduce inflation and help stabilise the currency.

Briefing Financial Journalists on developments in the Ghanaian economy, the Governor of the Bank of Ghana, Dr. Ernest Addison uttered that revenue enhanced measures such as the 25% increase in VAT, the complete removal of benchmark values on imports, and the review of the Electronic Transaction Levy (E-levy) would help improve the revenue outlook.

Elaborating on the expenditure aspect, the Chairman of the MPC mentioned that the lower capping on transfers to earmarked funds from 25 to 17.5%, and the reduction of budgetary allocation to goods and services, as well as rationalization of executive compensation should help contain expenditures in 2023.

“The concerns being expressed in the public domain relating to high government expenditures have been addressed in the SLA and reflected in the 2023 Budget”.

“The Staff Level Agreement (SLA) is also contingent on the Domestic Debt Exchange Programme and external debt restructuring, which when concluded and the necessary financial commitment obtained, will allow the presentation of the SLA to the IMF Board.”
Dr. Ernest Addison

Speaking on measures to cut down inflation, the Governor pointed out the need to remain vigilant and moderate liquidity in the system to underpin macroeconomic adjustments taking place.

Fiscal deficit

Fiscal deficit , which is known to be the difference between total revenue and total expenditure of the government stood at 9.8% in 11-months of 2022.

However, provisional data on budget execution for the period January to November 2022 indicated an overall broad fiscal deficit (cash) of 9.8% of Gross Domestic Product, against the programmed target of 6.7% of GDP.

The corresponding primary balance for the period was a deficit of ¢18.8 billion (3.1%of GDP), against a deficit target of ¢3.1 billion (0.5% of GDP).

Over the review period, total revenue and grants was ¢81.8 billion (13.3% of GDP), short of the projected target of GH¢84.0 billion (13.6% of GDP).

Total expenditure of ¢142.2 billion (23.1% of GDP) was above the programmed target of ¢125.4 billion (20.4% of GDP) with the deficit of ¢60.4 billion financed mainly from the domestic sector.