Ghana has so far put up an average performance this year per the marking scheme of the Rationalized ECOWAS Convergence Criteria which makes it unlikely for the country to meet all the targets in 2021.

So far, developments in the macro economy show that Ghana has met three (3) out of the six (6) ECOWAS Rationalized Macroeconomic Convergence Criteria in 2021 which forms the basis for implementation of the ECOWAS monetary integration programme and creation of the ECOWAS Single Currency.

ECOWAS classifies its Convergence Criteria into two main categories; primary and secondary. The primary criteria comprises four variables: Budget Deficit (Incl. Grants)/GDP ≤ 3%, inflation ≤ 5%, Central Bank Budget Deficit Financing of at most 10%, and Gross External Reserves ≥3 months.

After the first half of the year, Ghana met two (2) out of the four (4) Primary Convergence Criteria in 2021, namely, zero central bank financing and the gross international reserves cover of at least three months of imports. According to data provided by the Finance Ministry, Ghana’s import cover as of the end of the first half was 5.0 months.

The secondary criteria comprises Nominal Exchange Rate of ± 10% and Public Debt /GDP ≤ 70%. With regards to the secondary criteria, Ghana met one out of the two criteria. Specifically, the nominal exchange rate variation of within ±10 percent band which Mr. Ofori-Atta said was 0.0% as of the end of the first six months of the year.

Major macroeconomic challenges

Ghana, unsurprisingly, was unable to meet three of the criteria namely, inflation, Public Debt to GDP ratio, and the Budget Deficit. This is where the country’s major challenges are. Average inflation was 7.8% as of the end of the first half of the year, which has since increased significantly, standing at 11% at the end of October 2021.

From the recent developments, it will be difficult for Ghana to meet this particular target this year. Even within the sub-region, only 9 countries met the inflation criteria in the first six months of the year.

Also, with a Budget Deficit of 5.1% at the end of the first half, Ghana was unable to meet the 3% target. Unless government can improve its domestic resources mobilization, it will be difficult for the country to meet this target in 2021.

Akin to the deficit is the country’s gross public debt which Mr. Ofori-Atta said was 76.2% of GDP at the end of the first half of the year, 6.2 percentage points above the ECOWAS target of 70%. With government resources overstretched, it will be hard for the government to meet this criterion at the end of the year. This is especially so, when its debt servicing costs are rising. After six months, only 11 countries were able to meet the debt criterion.

The GH¢100 billion CARES Program

With the average performance so far this year, Finance Minister, Ken Ofori-Atta, believes the implementation of the GH¢100 billion Ghana CARES Program will help improve the country’s macroeconomic performance in the near-term.

“In the near term, Government, through its economic revitalization programme will seek to expand the economy with the provision of targeted fiscal stimuli while also ensuring fiscal sustainability to cushion the impact of COVID-19 on businesses and to facilitate a quick and strong recovery of our economy. Thus, this will be done without undermining fiscal consolidation programmes”.
Ken Ofori-Atta

The recent developments within the sub-region make it difficult for members to meet all the criteria this year. This means the plan to implement a common currency within the sub-region will not materialize this year.

The ECOWAS Rationalized Macroeconomic Convergence Criteria provide an assessment of the performance of Member States in relation to the macroeconomic convergence criteria defined for that purpose and the implementation of the activities contained in the roadmap for the ECOWAS single currency.

It also serves as part of the mechanism for the continuous monitoring and assessment of the performance of the economies of ECOWAS Member States and progress being made by each Member State in meeting the convergence criteria.