The World Bank has praised government for the measures being taking to strengthen the economy. The Bank said so far government was on course towards meeting its macro-stability targets, even though challenges remained.
The Bank urged more prudent fiscal management, actions to strengthen the financial sector, and called for steps to improve the supply and quality of electricity services, among others.
According to the Bretton Wood institution, “We recognize that still more needs to be done to set the stage for what could be an unprecedented expansion of private investment, including that spurred by the CwA (Compact with Africa) initiative. Such investments could substantially enhance the “Ghana Beyond Aid” agenda and launch Ghana into the next major wave of poverty reduction and shared prosperity.”
Country Director, Henry Kerali, said at the Compact with Africa Ghana Investors Forum in Berlin, Germany that the World Bank Group will continue to support the country, in addition to strengthening macroeconomic stability, to help create the environment for private sector investment to spur growth and job creation.
The Compact with Africa is an important initiative that seeks to enhance private sector involvement and to prioritize commercial sources of financing to support the development objectives of Compact countries. This initiative Mr. Kerali said could not be more-timely for Ghana, with the potential to provide substantial uplift to aid the country’s take-off into higher levels of growth and development with more and better jobs for all Ghanaians.
“Ghana’s Government—like many others—seeks the support of the private sector to advance development goals, including transformation of sectors that are critical to economic growth. Many businesses offer valuable skills, resources, and access to markets—and many recognize that promoting sustainable development makes good business sense. This is in line with the World Bank Group approach on Maximizing Finance for Development”, said the Country Director.
He emphasized that the maintenance of macroeconomic stability over the long-term, including across political cycles is critical to setting the stage for increased private sector investment. So too are structural reforms, to enhance the business environment and create markets. These are two areas where the Government of Ghana has a crucial role to play. Let me start with the matter of macroeconomic stability.
The World Bank said Ghana has a good record of impressive economic growth with Gross Domestic Product (GDP) growth averaging 7.3 percent over the past 10 years.
The rebasing of GDP (from 2006 to 2013) at the end of September 2018 increased Ghana’s total nominal GDP for 2017 to GH¢256.7 billion, a 24.6 percent increase over the previous estimate of GH¢205.9 billion.
However, the World Bank expressed concern about the increasing reliance on natural resources and primary exports where cocoa and gold account for over 70 percent of exports.
It said growth has relied on private consumption although investment remains low.
It noted that GDP growth is reliant on private consumption (84 percent) driven by expanding labor force (2.4 percent growth per annum, equivalent to 300,000 entering the labor market every year.)
Also capital formation has generally not picked up over past decade. Total investment in 2015 was below 20 percent of GDP, against lower-middle-income country benchmark of 28 percent. The main issues it attributed were low saving rates, shallow capital markets and financial sector vulnerabilities.
The World Bank said fiscal consolidation gaining traction, but challenges remain; and financial sector vulnerabilities remain a challenge. The fiscal deficit was reduced from 9.3 percent of GDP in 2016 to 6.0 percent in 2017. The primary surplus was of 0.7 percent of GDP in 2017—the first time since 2013
The Government is targeting a lower deficit of 4.5 of GDP for 2018 but revenue performance remains weak.
On the financial sector, the Bretton Wood institution said NPLs are high and credit to the private sector is low and volatile. But added the Bank of Ghana has taken commendable actions, including raising the capital requirements and resolving weak banks, but actions on microfinance institutions is pending.