Bernard Avle Breaks Down Ghana’s Economic Outlook Ahead of 2026 Mid-Year Budget Review

[00:00:00] Speaker 1: So the government revenues and government expenditures for January, February, March 2026 is what we have in the data the central bank put out. So we'll be expecting finance minister Arthur Forsen to put out information on April, May, June to give us a clear sense of where we are half year. Be that as it may, let's just walk through quickly what the Bank of Ghana put out so we are on the same page. So we call it Ghana's half year story. We put this together with our friends from Finex Skills Hub who are into a lot of these data analysis. We are dividing the presentation into just six key points. Point number one has to do with government revenue and spending and whether they are running a deficit or not. We need to point out that this is fiscal balance we're talking about, essentially taxes and expenditure, right? On the revenue side for quarter one, the orange, stay on the first slide, please. The orange chart talks about the program, what they expected. And then the provisional is the actual based on the time that this was published. So this is our domestic revenue is 57.5 as against 59 programmed. So for all the major revenue items, whether it's domestic revenue overall or tax revenue or non-tax or oil, the provisional is tracking slightly below the actual or the programmed or what what was expected. But the variances are not too high. So for example, tax at the first quarter, you are 47.9 as against 49.8. Now, the only indicator that performed better than what was programmed was the category called other, all right? The summary of this is that spending rules, when you talk about expenditure as well, because the government doesn't want to run a deficit, it also keeps spending in check so that if it doesn't raise the money, it doesn't spend it, right? So you look, this total expenditure is below what was programmed, but provisionally, whether it's salaries or grants or capital expenditure, or even interest payments, all the blue charts are lower than the orange charts. So what is the conclusion? So what is the conclusion? Government essentially does not want to run a deficit of any kind. So its primary balance is a slight 1.1% on cash basis and has an overall surplus of 0.1%. So it's essentially running a balanced budget, okay? That green chart is just telling you the percentage of revenue to GDP, 3.6% out of Q1, okay? The target for the year is 14%. So government's target for 2024 was to get 12% GDP in taxes, 2025, 13%, 2026, 14%. As of March ending 2026, they had raised 3.6% in terms of the revenue they had gotten. So one of the things we expect A240 to tell us is, by June, how are we doing getting that 14%? If you have 7% by June, it means you've met half. If you have below 7%, you have a problem. If you have above, you are doing well. So this 3.6% is Q1. Expenditure is also tracking less than 4% of GDP. Of course, this 0.1% balance is comparing actuals, not comparing percentages. Hope that makes sense. The second big thing we're showing is prices and money. And if you follow the central bank, the big discussion has been about inflation. The central bank maintained their monetary policy rate at 14% because the governor said, even though inflation has started inching up, they did not think that inflation was going to be such a huge problem to necessitate a cut or an increase, rather, in the monetary policy rate, an increase in the monetary policy rate. So they maintained it at 14%. Now, the lowest inflation we had was up to March, 2026. So if you look at the chart, the inflation chart, please move to the inflation chart. That inflation number of 3.2% was for March. That was the lowest we had in the year. By April, it went to 3.7%, stayed the same in May, and it's now 5.3% for June. So, in fact, the governor said the disinflation process that began about a year and a half ago has ended. What that means is that the continuous lowering of inflation from 13.7% June last year all through to 3.2% has ended. But they are not thinking that inflation is going to rise so quickly outside their target band because the government has a target band of plus or minus 8, plus or minus 2%. I think that's the figure, right? So they are saying even though inflation is going up, they are not as concerned about inflation as the upward uptake has shown. The other thing about inflation is that the Statistical Service is very kind to differentiate between food inflation and non-food inflation. And there's a story there. If you look at June 2025, the yellow line was higher than the red line. It meant that food inflation was a bigger issue last year. But for this year, non-food inflation is a bigger problem. So you notice that in March, non-food inflation was higher than food inflation. And it's now gone 6.3% and food inflation is 3.9%. Maybe one of my families will explain why non-food is becoming an issue. Transportation, services rising higher than food inflation. So that's a big item on inflation. So you notice 3.9% food inflation for June, 6.3% non-food inflation. Why is inflation important? Inflation is the rate at which prices are rising. That affects everything. It affects the rate at which banks lend to you. Because once the central bank sets the monetary policy rate of 14%, some banks do plus or minus. There's something called the Ghana reference rate, about 10%. It's a very key indicator of many things. It affects credit to the private sector and even affects people's ability to pay. All right. And even affects how much your salary is worth. If inflation is very high, your salary becomes quite useless. So inflation is a very important figure for an economy. The issue with inflation is that it can never be driven by money supply or it can be imported based on currency depreciation. So if you buy everything you use in Ghana from abroad and your currency depreciates, you import inflation. Other than that, inflation is also a product of money supply. And if you look at what they call money growth, money growth has been quite aggressive. The governor spoke about this yesterday. And the key one is what is called the M2+, what they call broad money, which is all the money in the economy plus deposits that we pay to banks as well. Now, the key issue here is that the governor says he's not concerned about the growth of money. He doesn't think that there's too much liquidity in the system to necessitate inflation that much, which is why they kept their rate at 14%. So even though money supply is relatively high, it's not such a big concern according to the monetary authorities. This was what we were told yesterday when we observed the monetary policy meeting. When money grows faster than prices, it could lead to inflation, which is why we are being told. The next big question is debt, right? The key issue with debt is we have domestic debt and then we have foreign debt. Because Ghana's currency has strengthened against the dollar over the past few years, our dollar-denominated debt is not as alarming as our CD debt, right? That's the first issue you should notice. The other issue is that our domestic debt is very high. Don't forget that the government had to make payments for two groups of people who it owes. The DDP meant that some bond money started to be paid indeed. Finance Minister paid $700 million a few days ago to people who had lent us money as part of our DDP. So our total public debt is about $61 billion. The key issue is the debt-to-GDP ratio of 45. In CD terms, our debt has increased to about $720 billion CDs. But the domestic component is much higher than the foreign component, 23% versus 21%. So currency appreciation has helped the way our overall debt feels. Because if your currency depreciates, the same amount of dollars requires more CDs to pay. Hope that makes sense. So even though debt-to-GDP is 45, it's not such a concerning figure. Again, the monetary authorities don't seem too much concerned. And I'm bringing all this because my panel will compare the sentiments of the monetary authorities to the sentiments of the fiscal authorities. If they are in sync, we are in good progress. If they are misaligned, we have a problem. Which is why we keep referring to what the governor said yesterday where he met the media after the MPC meeting. Let's talk about the real economy where Chonam comes in. The central bank has something called the CIEA, the composite index of economic activity, which basically picks certain items and decides where the economy is growing. So it's sort of like a picture of economic growth. The trend is positive, 13.4%. If you look at the trajectory, it's been going up. It means economic activity is moving up. They also have this very interesting thing they use called the job adverts. They scan all the job adverts and it's trending up upwards. You can have more job adverts, if the poor don't qualify, don't get the job. But this figure of 3,519 is higher than what it was a year ago of 2,800, right? So about 1,500 more job adverts as of June, 2026 when you compare it to June, 2025. Now, consumer confidence and business confidence are very important. Any figure above 100 is good. So consumer confidence is 102.7, which is good, but the trend is downwards. It means even though the economy has stabilized, consumers are worried and they will explain why consumers may be worried. So even though things are stable, maybe the macroeconomy has not translated to people's microeconomies, which is why consumer confidence, even though it's higher than 100, it is trending downwards. Business confidence seems to be flat, although you can say, yeah, it's not trending downwards, obviously, but it's not going up a great deal. So he will explain why business confidence is 107.7. All this is from central bank, by the way. In terms of what is driving our growth, by the way, overall GDP growth for first quarter was 6.4%. GDP is the total value of the economy, right? The main issue is what is driving the growth. If you look at what the central bank gave us, services is where our growth is coming from and industry because of gold. So when you say industry is manufacturing and mining, industry can be growing, but manufacturing may not be growing. And in our particular case, even though industry is the second driver, a lot of it is good. And I'll explain the good point much later. Overall GDP growth is 6.4%, a Greek which employs a lot of people is not growing that much. Something that my panel will pick up on. Services is growing as well, 7.1%. Let's quickly look at what's happening outside. Now, in terms of Ghana's, okay, there's something we call the country's current account balance, right? It's basically its trade and finances put together. So how much you get from your exports versus how much you spend on your imports. Now, it appears that when it comes to Ghana, we have a very nice trade surplus. We got about $18 billion from our exports and spent only $9 billion importing. So we have a healthy trade surplus of our $8 billion. The other issue is that our export revenues of $18 billion, about 68% of that came from gold, right? 68%, about $12 billion of that $18 billion is all gold. The next is cocoa, 12%, and then oil, 9%, and then the rest, 9.8%. So there's a big story there. Gold is driving Ghana's economic growth. Is that good or bad? My panel will answer. The other issue is I'll ask the taxman because there's something they do call a risk if you have concentration of your revenues from one particular indicator. Is that good or bad? Nelson to comment on that. Right? So gold is 63%, cocoa 12%, oil 9.4%, other 9.8%. This is January to June. So gold is the main item here. Let me jump the gold price issue. So as I said, Ghana ran an $8 billion trade surplus. The other point you need to know is that even though we ran a trade surplus, the reserve position of the country reduced from 5.7 months of import cover to 5 months of import cover. So typically when your trade surplus increases, you expect more reserves. But it appears the reserves reduced by about $1.2 billion. I think the Bank of Ghana will address that. Panel can talk about that. Maybe some of the dollars were used to finance other things or pay debts. So even though we have a nice trade surplus, our reserve position weakens slightly. So that's another point of interest. So we have a positive trade balance which is very, very good indeed. And as I said, the reserves, gross international reserves dropped from March $14.2 billion to $12.9 billion by about $1.2 billion or so. Is that a matter of concern? Five months of import cover. Don't forget, the government said they want to do something called GAMRAP. They want 15 months of import cover. We don't know what they want to use 15 months of import cover for, but they will explain that. Let's end quickly to what all of this means. So these are the big numbers. Revenue, 3.6% of GDP, as of March. We look for that figure for June. Overall, primary balance is positive. That's not bad. Inflation, 5.3, still single digit. That's your GDP, 45%, which is reasonable. If you get to 70, you're in trouble. GDP growth, 6.4. It's not the best, but it's very good. Better than we had three, four years last year as well. Trades surplus, 8 billion. Right, so this is a summary of the economy.