FULL TEXT: NPP’s True State of the Nation Address

President Mahama accused the previous government of ending the year with a headline inflation of 3.8% above the IMF target of 18%. This divergence, the President indicated, showed a poor performance of monetary policy. Isn’t this the typical story of the glass being either “half empty or half full? If one looks at the fact that the COVID and Russia-Ukraine war crisis driven inflation rose to 54% at the end of 2022 and dropped sharply to 23% at the end of 2023 (within 12 months), then a headline inflation of 23% should be seen as a significant positive performance. Of course, not at the medium-term target yet, but the disinflation process is on track. It is also instructive to note that the IMF has an upper band of 22% for inflation for December 2024. This suggests a rather marginal deviation compared to the programme target, contrary to what President Mahama wants us to believe. If such a marginal deviation from the disinflation path is bad, then the President is the worst culprit when his last Government deviated from an inflation target of 10.1% in 2016, by recording 15.4% at the end of December 2016.

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For those who are familiar with Ghana’s programme with the IMF, these minor deviations from the programme targets are sometimes normal because we are dealing with a very uncertain economic environment, and deviations like these can always be explained when one analyzes the data. Per the rules of the programme, we will need to enter into consultations with the Fund as provided by the consultation clause so that both the government and the Fund can assess what went wrong and see the way forward. President Mahama has shot himself in the foot by his rush to paint this situation as bad; and soon, we will see how he recovers from this.

What the President also failed to do was to inform the people of Ghana that there are other significant measures of the performance of the economy that informs the state of the nation other than inflation alone. – real GDP growth, trade balance, current account balance and international reserves, the performance of the financial sector, among others.
These are the important components of an economy – the real sector, external sector and the financial sector.

The average growth in real GDP for the first three quarters of 2024 was 6.4% and expected to end the year at a rate above the IMF target of 4%. This trend outperformed all projections and revised projections by both the IMF and the World Bank. If this is bad by President Mahama’s standard, see the President’s previous record – In 2016, the economy grew by 3.4% below a target of 5.4%. It was 4% the year before. He underperformed by all standards, whilst President Akufo-Addo over-performed.

The trade balance also shows a significant economic improvement maintaining a surplus trend since 2017 ending 2024 with a surplus of 5.9% of GDP. If this is bad economy; let’s, consider President Mahama’s record of a deficit of 2% of GDP in 2016. The current account balance also ended 2024 with a surplus of 4.2% of GDP (the very few times in recent history to have a surplus current account). And such a surplus tells us of the strength of the external payments position of the country. Throughout the history of when President Mahama was in office, and without any confluence of crisis as faced by the previous government, the current account was consistently in deficit, and he ended 2016 with a deficit of 3.1% of GDP.

Gross international reserves measure the resilience of the economy, particularly in times of crises, and how prepared the country is to weather external shocks and vulnerabilities. The Bank of Ghana has through novel innovations, accumulated high levels of reserves, the largest in our history with $8.9 billion. This is 4 months of import cover. The NDC left office in 2016 with gross international reserves of $6.2 billion or 3.5 months of import cover.

Ladies and gentlemen, the true state of our nation is that economic growth has rebounded strongly, the external sector is impressive and our resilience towards shocks and external vulnerabilities is at an all-time high. This is the true state of our economy, but the President and his government has a different understanding of what a strong economy means.