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Business News of Monday, 30 November 2020


Akufo-Addo, Mahama go head to head on macro-economic management track records

President Nana Addo Dankwa Akufo-Addo and John Dramani Mahama President Nana Addo Dankwa Akufo-Addo and John Dramani Mahama

In just a week’s time, Ghana’s electorate will be faced with the crucial option of either giving the Nana Akufo-Addo administration another four year term in office of returning the immediate past predecessor, John Dramani Mahama to the position he had held for four years and five months before his bid of a second full four-year term was reject ted at the polls in 2016.

This means that for the first time in the history of the Fourth Republic, voters will be able to choose based on the respective track records of the two leading presidential candidates (who indeed are the only ones with even the faintest chance of winning) rather than just relying on the manifestos of the parties they lead – the incumbent New Patriotic Party and the opposition National Democratic Congress respectively.

This is crucial – with regards to macro-economic management, which is the most pivotal aspect of political governance by a long way, both parties are promising more or less the same things, these being adherence to prudence with regards to addressing the key performance indicators of the economy.

This means aiming to keep the fiscal deficit low; indeed the fiscal responsibility act caps it at five percent per annum but the exigencies of combating COVID 19 has necessarily suspended this indefinitely. It also means keeping inflation low; although there are no quantitative limits in palace, single digit consumer inflation is the generally accepted objective Crucially, both parties commit to curbing the inordinate growth in the public debt which instructively passed the sustainability threshold of 70 percent of Gross Domestic Product recently, a situation delayed for several years by the economic machinations of both major parties during their most recent respective tenors in office.

It is also instructive that despite their continued commitment to achieving these key objectives when in power -and their ferocious criticism of their opponents for not achieving them when they are in power – neither has been particular successful at fulfilling them.

With regards to their plans for the productive sectors of the economy, each party offers significant variations of basically the same theme for achieving accelerated economic growth but promises to win votes seem to have taken precedence over reality in terms of what can actually be done. While both parties are guilty of this to varying degrees, the NDC in particular is offering policy initiatives that would simply be impossible to fulfill.

Therefore voters would do best to make their impending electoral decisions based on which of the two candidates did better in achieving the universally agreed macro-economic goals, while in office.

In our tale of the tape, we have necessarily had to adopt the following methods.

Although former President John Dramani Mahama assumed office in August 2012, following the sudden death of his predecessor, Professor John Atta Mills, we use January 2017 as his starting date because we wish to use full year figures for our analyses. Besides it is assumed that during the last five months of 2012 he was simply executing the plans and policies of his predecessor, rather than his own.

However it should be noted that this works to Mahama’s advantage in that the economy suffered arguably its worst deterioration with regards to key macroeconomic indicators during that five month period so our method of analyses incorrectly assumes he inherited an economy in significantly worse shape than he actually did.

With regards to our analyses of President Nana Akufo-Addo’s tenor we have taken into account the distortionary effects of the outbreak of COVID 19 in 2020. Therefore, we are using end 2019 as his end of tenor position in assessing his performance, although we are also placi8ng the latest available figures for 2020 side by side, for information purposes.



Former President John Dramani Mahama began his full four-year term in office at a time Ghana had just recorded an economic growth rate of 9.3 percent. Indeed, Ghana was coming off a period of extraordinary growth propelled by investment in the emergent upstream oil and gas sector, a period during which the country achieved the highest growth rate in the world in 2011, at 14.4 percent.

However a combination of the global economic slowdown brought about by lingering effects of the global financial crisis, the collapse of global commodity prices – including those for gold, cocoa and crude oil, Ghana’s main exports – and fiscal indiscipline at home, thereafter cut growth significantly. In turn this persuaded Ghana to turn to the International Monetary Fund for a programme to restore macro-economic stability and the IMF in typical fashion put the country into a demand-management programme which put precedence on the restoration of stability rather than growth. In his final ye4ar in office, Ghana’s economic growth rate had fallen to 3.4 percent.


Inheriting the 3.4 percent growth rate left by Mahama in his final year, incoming President Nana Akufo-Addo had promised to replace demand management with supply side, expansionary economic policy to accelerate growth and create direly needed employment opportunities. However, initially he was constrained by the IMF’s insistence on demand management, which indeed was prudent under the prevailing circumstances of the time.

Consequently his supply side thrust was only fully introduced in 2019, as Ghana exited the programme in April of that year.’ However the IMF had accepted a measured shift towards expansionary economic policy before the end of its programme.

By 2019, Ghana had resumed strong economic growth, posting 6.7 percent growth in that year. This year his government had aimed at 7.3 percent growth (although based on past experience this was unlikely to have quite been achieved), but COVID 19 has spoiled the party. Indeed at a time Ghana expected only marginal growth of 0.9 percent, although it now seems the economic slump has been shorter and shallower than originally anticipated, and so growth is now projected at about two percent.



Former President Mahama inherited a consumer price inflation rate of 13.5 percent in January 2012 although this is not quite correct; actually inflation was considerably lower in August 2012 but it spiked upwards sharply as the government went on a major deficit financing spree in the run up to the 2012 general elections which propelled inflation upwards, due to the huge liquidity injection government had given the economy during those few months.

The IMF ‘s interventions helped in the battle against inflation but in the run up to the 2016 elections the Mahama administration again lost the plot and consumer inflation by the time he left office had risen again to 15.4 percent.


President Akufo Addo promised to use fiscal consolidation to bring down inflation despite his expansionary economic plans and indeed he was fairly successful in this. The data indicates that before COVID 19 came and upset everything, by the second half of 2019 inflation had been brought down to its lowest level since the beginning of the 4th republic, falling to below eight percent consistently.

The truth though is that though his administration brought inflation into single digits, of just under 10 percent, the fall in inflation to below 8 percent was simply the result of the rebasing of the inflation computations by the Ghana Statistical Service. While this is not unusual – lots of other countries do it once in a while – critics of the government on Ghana point to the unusual practice of failing to state the results of the old computations alongside the rebased figures as evidence that the Government of Ghana rebased the computations for political rather than economic reasons.

Under the rebased inflation computations, the surge in inflation brought about by COVID 19 earlier in the year has since been curbed bringing inflation down to 10.1 percent by October this year.



The depreciation of the cedi was arguably Mahama’s Achilles Heel. Apart from fiscal indiscipline leading to too many cedis pursuing too few dollars, the central bank leadership during all but his final year adopted an ill-advised strategy of demand management in addressing the exchange rate. This in turn destroyed confidence in Ghana’s forex supply capacity and consequent speculative trading did the rest. Mahama inherited a cedi depreciation rate of 17.5 percent in 2012 – although again this was largely due to his own fiscal indiscipline during his first five months in office as he sought to win re-election for a full four year turn. In 2013, his first year in office, the cedi actually depreciated by some 30 percent during the first half of the year alone. But after a similar first half of 2014, the central bank reversed its demand management directives restoring confidence to the local forex market and the cedi consequently appreciated sharply, recovering much of the ground it had hitherto lost to the dollar.

This was the harbinger of an extended period of cedi stability but in 2016 during the run up to the general elections, the government’s fiscal indiscipline again saw significant cedi depreciation of 9.3 percent.


The Akufo –Addo administration came with the promise to stabilize the exchange rate. However it failed, with the cedi being rated by Bloomberg as the world’s worst performing currency during the first quarter of 2019, before recovering to record full year depreciation of 12.9 percent – until its final year, when despite COVID 19 and the fact that it is an election year, it has achieved the lowest cedi depreciation since the currency was floated in 1985, at 3.2 percent during the first 10 months of the year.

Importantly, this year’s performance is sustainable, deriving from a trade surplus, historically high gross international reserves, strong inward remittances, and of crucial importance, forward forex sales by the Bank of Ghana which has pulled the rug out from under the feet of currency speculators who have tended to take positions against thee cedi for profit.



Once again, Mahama gets the benefit of inheriting an inordinately high fiscal deficit figure whereas in actual fact, he brought it about himself. The fiscal deficit for 2012 was 12.0 percent but Mahama did not inherit it; rather he caused it. Instructively, barely a month before he suddenly died, Professor Mills had gone to Parliament to request approval for supplementary budgetary expenditure because Ghana was leading for a fiscal deficit of 4.5 percent for the year. Parliament approved extra spending that would take the deficit to a little over 6 percent. Somehow though, after the Presidency changed hands, Ghana ended the year with a 12 percent deficit, twice what had been targeted even with supplementary spending.

Fiscal profligacy under Mahama ended when the IMF programme started and the deficit was steadily reeled in to more sustainable levels until 2016 when once again the Mahama government lost the plot in the face of general elections, leaving office with a 9.0 percent fiscal deficit.


President Akufo-Addo, on assuming office worked at fiscal consolidation with successive annual reductions in the fiscal deficit in 2017 and 2018. Instructively, however, upon exiting the IMF programme this began to change. Without the rebasing of Ghana’s economy in 2018 the fiscal deficit would have been higher than the previous year, not lower. Indeed the 2019 fiscal deficit was higher than 2018’s although still within the 5 percent imposed by the Fiscal Responsibility Act, at 4.8 percent.

This year’s deficit target was 4.7 percent, although the conventional wisdom was that if in reality it could be kept at not more than the 5 percent statutory cap it would count as a win.

COVID 19 has completely changed the situation, however, with government now having a revised target of a massive 11.8 percent. The extraordinary circumst6ances, however, make it impossible to compare this against any previous year. Suffice it to say however that the revised target has allowed government to accommodate all its considerably large election-motivated expenditure – both budgeted and impulsive expenditure – without going over the target.


This comparison is done in US dollar terms to remove the distortionary effects of cedi depreciation.


He inherited a total public debt equivalent to US$18,832.77 million, this translating into 49.4 percent of GDP at the time. Aggressive borrowing during his tenure – he started what has now become a tradition of successive administrations in Ghana of doing a Eurobond issuance each year – led to his leaving a public debt of US$ 29,203.8 million four years later, which translated into debt to GDP ratio of 56.8 percent.


This will count as one of his biggest failings. After justifiably criticizing the Mahama administration roundly for the amount of new debt it had added on both in absolute terms and as a proportion of GDP, as well as its effect in crowding out government spending on both recurrent items and on capital projects, his administration has done much the same thing.

The statistics indicate that the debt to GDP ratio only rose from 56.8 percent to 63.0 percent over the three years 2017 to 2019, this is basically because of the rebasing of the economy in 2018. In absolute terms, the public debt rose from US$29,203.8 million to US$39,344.2 million during that time. This means it added on almost the same amount in three years as the Mahama administration added on in four years.

Mahama’s supporters point out that his borrowing left more brick and mortar infrastructure to show for it, while the Akufo-Addo administration spent a large part of its borrowing on non-quantifiable things such as the financial sector reforms which has added nearly GJHc20 billion to the public debt.

Akufo- Addo’s supporters retort that what it borrowed for is no less important than the infrastructure Mahama borrowed to implement; that Akufo Addo was also left with a much bigger debt servicing bill than Mahama inherited; and that some of the things Akufo-Addo borrowed for are still projects in progress ( such as railway infrastructure and One district one factory initiative) which will soon show their usefulness.



Mahama inherited gross international reserves of US$5,835 million at the start of 2013 and left leaving just about the same level, at US$5,867 million four years later. The level of reserves was inordinately low and in part explains why the cedi suffered heavy depreciation during his tenor. Indeed at times Ghana’s reserves fell to levels barely enough to cover two months’ worth of imports.


During his tenor Akufo-Addo deliberately built Ghana’s reserves to historically high levels, at a time in 2019 actually exceeding the US$10 billion mark. They ended that year at US$7,563 million and by October 2020 had been beefed up again to US$87,655 million, enough for over four months of imports.

This has been crucial in both providing the cedi with exchange rate stability, unlike in previous times, and in securing better terms from international lenders for Ghana’s dollar denominated sovereign bond issuances on international capital markets.

The comparisons put the Akufo Addo administration ahead with regards to macro-economic management, but while this provides the foundation for a stronger economy it does not automatically translate into one; the productive sectors have to be handled well if good macro-economic management is to be taken advantage of.

On the upside, ahead of the 2020 general elections both major parties know what is required with regards to prudent macro-economic management will have learnt from past mistakes. The question now though is who can put their knowledge to best use and who can exercise the most fiscal discipline.