PricewaterhouseCoopers Ghana (PwC), an auditing and tax firm, says if negotiations with external creditors and debt holders are not concluded expeditiously, Ghana’s economic recovery could stall.
PwC indicated that the delayed negotiations might make the investor community and financial markets jittery, and the international rating agencies may thrust Ghana’s bond ratings further into junk credit territory.
The auditing agency disclosed this in its 2024 Budget Digest on the theme: “Pursuing Growth and Development within a Stable Macroeconomic Environment.”
The agency acknowledged the progress made in the economy as headline inflation had dropped almost 1900 basis points from 54.1 per cent to 35.2 per cent.
PwC also acknowledged the stability of the currency due to the restoration of economic activity, significantly improved current account position and forex liquidity on the back of the IMF’s funding, a rebound in investor confidence, and an improved central bank gross international reserve.
The agency also acknowledged considerable improvements in the public debt position through successful debt treatment exercises, leading to a fall in the public debt-to-GDP ratio from 73.1 per cent at the end of 2022 to 66.4 per cent in September 2023.
Despite the progress made, the agency said a more critical look at the microeconomic picture beyond the shiny macroeconomic data revealed less glamorous images.
“For instance, the Minister references a banking industry that has reported after-tax profits of GH¢6.2 billion, representing 43.8 per cent growth. The question that begs an answer is “at what cost?” the report said.
“The Bank of Ghana’s Monetary Policy Committee (MPC) observed in their September 25, 2023, report that the annual growth rate of private sector credit over the 12 months up to August 2023 was 10.7 per cent compared to 35.8 per cent over the 2021–2022 equivalent period,” the report said.
“In real terms, private sector credit contracted by 21 per cent compared to a growth of 1.4 per cent in the equivalent comparable prior period,” the report noted.
According to the agency, these factors, coupled with the industry’s non-performing loans (NPL) ratio rising from 14 per cent in August 2022 to 20 per cent in August 2023, reflect the poor performance of the real sector and the increased risk aversion of banks for the real sectors of the economy.
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