“It is a new dawn for the private sector – the private sector which we believe in is the one to drive the economy and the government is determined to put the right structures and create the conducive environment for businesses to triumph,” the Chief Executive Officer of the GIPC, Mr Yoofi Grant, told the Graphic Business.

Speaking in an interview in Accra last Tuesday on how the gloomy picture painted by President Akufo-Addo in his maiden State of the Nation address to the House could impact investor confidence in the country, he said the government was putting in place measures that would make the private sector thrive, urging the investors to take full advantage of the incentives, details of which would be fully captured in the national budget, to invest in the economy.

“In the government’s maiden budget, we will see some tax cuts among some major initiatives announced which will set the stage for private sector businesses to heave a deep sigh of relief, grow and create jobs for the people,” he said.

Mr Grant also noted that there would be measures taken to ensure that instead of front-loading taxes on imported raw materials among many other things meant to be used by industry, those taxes would be back-loaded to create space for the investors to produce, “after which we will tax them accordingly”.

State of the economy

Ghana has so far, virtually missed all the targets under the International Monetary Funds (IMF) programme, as of December 2016, according to President Akufo-Addo.

“Fiscal indiscipline, once again, reared its head in the 2016 election year. Total projected expenditure for 2016 was GH¢43.9 billion (26 per cent of Gross Domestic Product (GDP) but actual expenditure amounted to GH¢50.3 billion (30.2 per cent of GDP),” he told Parliament in what many described as a dire situation for a fledgling economy.

In the area of revenue, the government’s total revenue target for the country was pegged at GH¢37.9 billion (22.7 per cent of GDP), but the actual revenue came in at GH¢33.2 billion (19.9 per cent of GDP).

The combination of higher expenditures and lower revenues than projected resulted in a significant increase in the budget deficit for 2016. As compared to a target of 5.3 per cent under the IMF programme, the fiscal deficit for 2016 was nine per cent of GDP on a cash basis and 10.2 per cent of GDP on a commitment basis (that is on the basis of expenditures undertaken but not yet paid for). Under the IMF programme, the government was expected to restore fiscal discipline but the fiscal deficit was 10.2 per cent of GDP.

The increasing fiscal deficits, the President said, were financed by increased borrowing which brought the country’s debt stock to GH¢122 billion, representing 74 per cent of GDP.

Ghana’s economic growth also declined dramatically, according to the President. He said: “Notwithstanding the record amount of financial resources at the disposal of the previous government, Ghana’s GDP growth in 2016 (including oil) is estimated at 3.6 per cent. This is the lowest GDP growth in about 23 years.”

Ghana’s banking sector has not escaped the economic decline and has become increasingly fragile. Bad loans in the banking sector have risen significantly. Economic and financial data from the Central Bank show that non-performing loans have risen sharply from 11.2 per cent in May 2015 to 17.3 per cent in December 2016. The recent Asset Quality Review of Banks shows significant vulnerability of banks to current economic conditions, with many exhibiting significant weaknesses.

In spite of some of the targets missed, there seems to be some hope in the revival of the economy which is likely to restore confidence in investors.

For instance, inflation has started dropping steadily. For instance, as of the end of January this year, the inflation rate stood at 13.3 per cent, having dropped from 15.4 per cent in December, 2015.

Treasury bill rates which hovered around 24 per cent for 91-day bills some six months ago, have declined significantly to about 15.69 per cent as of February 14.

Assurance

Mr Grant, who is an investment banker, said the government would incentivise the local investors to be able to compete favourably with their foreign counterparts.

He said much as the situation looked a bit gloomy, the government would not take its eye off the ball, “we will keep to our promises to ensure that investors do good business in the country.”