There are eight more weeks till the end of the year. They will be busy. This week, the statistical service is scheduled to release new inflation data1. Less than a week after that the finance minister is scheduled to deliver the 2023 budget. His sixth and perhaps most consequential. At least, it was scheduled...
According to the Majority Leader Osei Kyei Mensah Bonsu, the bill may be delayed to accommodate ongoing IMF negotiations that the president says are at an advanced stage and will conclude before the end of the year. In the interim, the government will make USD 265 million in Eurobond coupon payments while funds from the USD1.1 billion COCOBOD syndicated loan continue to make their way through the local economy. And before the end of this month, the Bank of Ghana Monetary Policy Committee (MPC) will have their last scheduled meeting for 2022, then publish their decision against a backdrop of dramatic inflation and currency depreciation at home, rate rises and war abroad.
As one might expect, the economic distress is accompanied by tensions across the political landscape. Finance Minister Ken Ofori-Atta has become a focal point for dissatisfaction.
SIGNIFICANCE - CLARITY AND ALIGNMENT
Looking at the most recent official data – the Ghana Cedi has fallen by 54% against the USD since the start of the year, consumer price inflation was 37.2% in September, producer price inflation was 46.0% in August, the fiscal deficit in September was equivalent to 6.4% of GDP against a target of 5.0% of GDP due to revenue underperformance, and provisional growth figures for the first half of the year suggest a slowdown in the non-oil economy. Clearly, the market and the country require clarity on policy direction. To that end, in a major address on 30 October, President Nana Addo Dankwa Akuffo Addo, offered the following:
- Goals. (a) To reduce total public debt from 68% of GDP, according to the Bank of Ghana's October estimates to 55% of GDP by 2028 and reduce annual external debt servicing costs from around 50% to 18% of annual revenue, (b) to increase tax revenues from 13% to 18-20% over the same period.
- Policy plans. (a) To secure a deal with the IMF by the end of the year, (b) via Bank of Ghana directives "ensure" that foreign exchange earnings from mining and hydrocarbons production are initially held by local banks, (c) continue enhanced supervision of forex bureau markets, and (d) review "the standards required for imports into the country" and management of foreign exchange reserves in relation to imports of production..."which with intensified government support and that of the banking sector, can be manufactured and produced in sufficient quantities in Ghana"... before reviewing the situation again in May 2023.
- Assurances. The president has said that there will be "no haircuts", that "no individual or institutional investor, including pension funds, in government or treasury bills or instruments will lose their money as a result of our ongoing IMF negotiations".
- Common cause. The president has said "money does not like noise" and encouraged his compatriots to talk up the currency.
Those four bullet points capture something of the difficulty the government has had delivering a coherent, compelling and sustainable message to its constituents at home and abroad. Neither forcing extractive companies to hold earnings in Ghana or FX exchange controls a la Nigeria appear compatible with an IMF programme. And a debt restructuring of some kind is required. The pledge that there will be no haircuts without explaining how or why assumes a level of trust and goodwill that no longer exists. Not even within the ruling party itself.
There are 275 legislators in parliament, 138 from President Akufo Addo's New Patriotic Party (NPP)2 and 137 from the opposition National Democratic Congress (NDC). Such a slim majority was always a strategic vulnerability for the government programme. President Akufo-Addo's 2021 State of the Nation address suggested a new more collegiate inter-party parliamentary modus operandi might emerge as a result. It did not3. And now, the government's ability to whip even its own caucus into a united platform is under historic strain.
In fact, in the last week of October, eighty NPP parliamentarians gave a press briefing calling for the scalp of the finance minister and minister of state at the finance ministry, Charles Adu Boahen. The group seemed to relent after deliberations with the office of the presidency, and the reported payment of delayed MP remuneration. However, on 3 November, Majority Leader Osei Kyei-Mensah Bonsu said that the whole party is now behind the motion. They are joined by the NDC, which entered a motion of censure against the finance minister accusing him of mismanagement, conflict of interest, misreporting of economic data inter alia4. The threat is that without agreement on the fate of Ofori-Atta and Boahen, whenever it is introduced and whatever its merits, the MPs will not allow the budget to pass.
The gap between the party and the government is widening. The president has served two terms and will not face the electorate again. He said in response to threats of voter exodus, "people make those kinds of threats, they don't frighten me...if it comes to the election and you chose to vote for the NDC, that is your own issue, not my worry because nobody holds your thumb to vote; it is your own work". Well, it must frighten his MPs. Few imagine that the NPP could win the presidency in 2024, no matter the eventual candidate. But of the 275 constituencies, more than 100 were decided by a margin of 10% or less – they are spread across all but two of the 16 regions. A little less than half of the marginal seats are held by the NPP. MPs know the mood in the country5. In the current scenario, the question is not whether or not the NPP will lose power and its slim majority in 2024. But whether the party will see its representation gutted, to an historic extent.
OUTLOOK - CHOICES
Clarity and alignment in strategy and messaging is still an unmet ambition for the government. To get there, it would have to make plans and statements on the assumption that currently, its audience (a) has no faith, in fact its bias is to disbelieve, and (b) that it is angry. An IMF programme is a necessary but insufficient condition for reversing this state of play. It would likely remove the seeming contradictions in the economic strategy described above. And then either side of the publication of an IMF letter of intent, opportunities to gain confidence must be sought.
For example, changes to the governing team. Currently, the most prominent appointees with (varying degrees of) influence on the design and implementation of economic policy are Ofori-Atta and Boahen at the Ministry of Finance, Nana Bediatuo Asante at the Office of the Presidency, Vice-President Mahamadu Bawumia, Majority Leader and Minister for Parliamentary Affairs Osei Kyei Mensah Bonsu, and Godred Dame at the Ministry of Justice. Politics is a game of snakes and ladders, they all know. The national interest and the president's legacy are at stake.
Akufo-Addo might look to draw in technocratic expertise – the constitution only requires that most cabinet ministers are drawn from parliament i.e. not all of them need to be MPs. Although theoretically, the president could reach across the aisle, getting opposition politicians to step in and share responsibility for the next two years of economic adjustment is a tough sell. The costs for them are clear, the spoils, less so. And even for the president and his NPP, such a concord with their perennial adversaries is difficult to imagine.
1. 09 November.
2. if you include nominally independent Andrew Asiamah Amoako
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