A week ago, DUBAWA published Part One of the investigations it did on claims made by the National Communications Officer of the NDC, Sammy Gyamfi, during a press conference he organised on August 3. The press conference was largely a comparison of records of economic performance between the erstwhile National Democratic Congress and those of the incumbent government. Mr Gyamfi also vehemently disagreed with suggestions by government officials that Ghana’s current economic crisis is a result of the COVID-19 pandemic and the Russian-Ukrainian War. The video of the press conference can be found here. Part Two of our investigations is as follows.
Claim: Budget deficit hit 7.5% in 2018 and dropped to 7% in 2019 before Covid struck. (43 minutes, 26 seconds to 44 minutes, 32 seconds of the video)
By: Michael Aidoo
Verification: Budget deficit is a situation whereby a country’s current expenditures become more than its revenue. Budget deficit is, thus, a negative balance of a country’s budget. Over time, budget deficits form national debt. This phenomenon can be corrected by increasing taxes and/or reducing government spending. Ghana has been recording budget deficits calculated as a percentage of its gross domestic product (GDP) over the years.
Ghana’s Fiscal Responsibility Act, 2018 (Act 982) provides for how the government should manage its GDP in order to control its budget deficit. For instance, Section 2 of the Act enjoins the government to ensure that its annual budget deficit does not exceed 5% of its GDP for that particular year. Section 3 (1) & (3), however, allows for exceptions, stipulating the government may suspend Section 2 in the event of force majeure or unforeseen economic circumstances or both, subject to parliamentary approval.
Prior to the promulgation of the Fiscal Responsibility Act in 2018, Ghana was historically recording high budget deficits. For instance, since 2007, except in 2015 and 2017, the country has been recording budget deficits of more than 5% of its GDP, an indication of how high the country’s spending has been in relation to its expenditure. The advent of the Act has, nonetheless, done little to change the narrative.
In an attempt to prove the point that the government had been reckless with spending over and above the 5% threshold, Mr Gyamfi claimed “the budget deficit had hit 7.5% in 2018 and 7% in 2019 even though [the] government dubiously tried to conceal it from the people by claiming it was 4.8%. It’s instructive to note that the 2019 budget deficit of 7% was above the fiscal responsibility threshold of 5%.”
In verifying this claim, Dubawa used official data from the Bank of Ghana, which is a statutory agency charged with the mandate to, among other things, provide data and statistics on the country’s economy, as well as from budget statements by the Ministry of Finance. According to the Bank of Ghana Annual Report for 2019 (page 12, paragraph 5 ), Ghana recorded a budget deficit of 4.8% of its GDP for 2019, and not 7% as claimed by the National Communication Officer of the NDC. Again, according to the same report, the 2019 deficit of 4.8% was an increase from the previous year (2018), which it reported as 3.9% of the GDP for that year.
The 3.9% budget deficit reported by the Bank of Ghana is not different from that of the Ministry of Finance. According to page 14, paragraph 62 of the 2019 Mid-year Review and supplementary Estimate, “the overall budget balance registered a deficit of 11.7 billion cedis or 3.9% of GDP.” Similarly, page 14 of the 2020 Mid-year Review and Supplementary Estimate, reports a 3.9% deficit for 2018 and a 4.8% deficit for 2019, as shown in the figure below:
Conclusion: Based on the official data from the Bank of Ghana and the Ministry of Finance, the country’s deficit increased from 3.9% of GDP in 2018 to 4.8% of GDP in 2019, and did not decrease from 7.5% in 2018 to 7% in 2019, as claimed by the National Communication Officer, Mr Sammy Gyamfi.
Claim: The cedi depreciated by 12.9% in 2019 before the Pandemic, but by 9.6 in 2016 under NDC despite unfavourable factors. (Paragraph 69, myjoyonline.com; 44 minutes, 33 seconds to 45 minutes, 8 seconds of the video)
Verdict: True; statistics from The Bank of Ghana and the Ministry of Finance show that the cedi depreciated by 9.6% in 2016 and by 12.9% in 2019.
By: Michael Aidoo
Verification: Depreciation of a currency is a fall in the value of that currency in relation to other currencies, especially the dollar. If orderly and gradual, cedi depreciation helps to improve export competitiveness and trade deficit. On the other hand, abrupt and sizable cedi depreciation may scare away foreign investors who fear the currency may fall further.
The depreciation of a currency could potentially have an impact on the cost of import and export, as well as on inflation and the general performance of an economy. According to the Central Bank, Ghana practices a flexible or floating exchange rate regime. This means the performance of the currency is largely determined by the supply and demand of other currencies with the government playing little or no role in fixing prices. These prices are largely determined officially by interbank rates and unofficially by those of the forex bureau.
According to Mr Gyamfi, “the Ghana Cedi in 2019 saw depreciation of 12.9%. This was before COVID-19. It is worthy of note that the cedi depreciated by 9.6% in 2016 despite the serious challenges the country was confronted with.”
The Bank of Ghana and the Ministry of Finance are two sources of reliable data on macroeconomic and macroeconomic indicators for analysing Ghana’s economy.
These statistics by the Bank of Ghana are corroborated by those by the Ministry of Finance. Paragraph 11, page 5 of the budget highlights for the 2017 financial year reports the Ghana cedi recorded a cumulative depreciation of 9.6% against the US dollar in the interbank market in 2016.
Again, according to paragraph 41, page 11 of the Ministry of Finance 2019 Macroeconomic Performance Report, “Overall, in the year to December 2019, the Ghana cedi cumulatively depreciated by 13.0% against the US dollar,” which statistically is no different from Mr Gyamfi’s 12.9% when the latter is rounded up in one decimal place to a whole number.
Conclusion: Therefore, based on the statistics by the Bank of Ghana and the Ministry of Finance, Dubawa Ghana concludes Mr Gyamfi’s claims that the Ghana cedi depreciated by 9.6% in 2016 and by 12.9% in 2019 are absolutely true.
Verdict: True; Ghana recorded 8.4% and a 13.4% unemployment rates respectively in 2016 and 2021, according to Ghana Statistical Service.
By: Michael Aidoo
Verification: The Ghana Statistical Service basically defines an unemployed person as a person 15 years or older who, seven days before the Census Night, was available to work but did not work or did not have any work to do. Unemployment rate is the percentage of a country’s labour force without jobs but that are available to work and are actively seeking employment. That is, Ghana’s unemployment rate is calculated by the number of people who are unemployed in Ghana divided by the total labour force of Ghana, multiplied by 100%.
Mr Gyamfi cited the Ghana Statistical Service to make his claim.
“It is instructive to note that the rate of unemployment has increased from 8.4% in 2016/2017 according to the Ghana Living Standards Survey 7 (GLSS7) to 13.4% in 2021, according to the latest Population and Housing Census conducted by the Ghana Statistical Service,” he said.
The Ghana Statistical Service (GSS) is tasked with the mandate to collect and disseminate statistical information in Ghana. Since 1891, GSS has been conducting population and housing censuses, mostly every ten years. It collects data on many variables, including Ghana’s unemployment rate.
The last time GSS conducted a census was in 2021. According to page 27 of the Ghana 2021 Population and Housing Census General Report on Economic Activity (Volume 3E), The country’s labour force (which is the economically active population of 15 years and older) was 11, 541, 335. Out of this number 1,551,118 were unemployed. By way of calculation, dividing 1, 551, 118 by 11, 541, 335 and multiplying the product (0.134) by 100%, gives you the unemployment rate of 13.4%. Thus, the country’s unemployment rate in 2021 was 13.4%, per the 2021 Population and Housing Census of 2021.
In between censuses, however, GSS also conducts a number of surveys such as the Ghana Living Standards Survey (GLSS). The GLSS was first conducted in 1987. Subsequently, there have been six other rounds of the survey: 1988, 1991/1992, 1998/1999, 2005/2006, 2012/2013, and 2016/2017.
The latest survey, GLSS 7, was conducted between October 2016 and October 2017. According to page 66 of the Ghana Living standards Survey (GLSS) 7 Report, while the number of people employed in the country was 11, 216, 724, that of the unemployed was 1,027,596. This means that Ghana’s labour force was 12,244, 318, putting together the number of people employed and the number of people unemployed. Therefore, by applying the formula for calculating unemployment rate, dividing 1, 027, 596 by 12,244,318 and multiplying the result (0.0839) by 100%, the unemployment rate for 2016/2017 would be 8.39% or 8.4%, after rounding it up to a decimal place.
Conclusion: Based on the statistics published by the Ghana Statistics Service, it is absolutely true that Ghana’s unemployment rate was 8.4% in 2016 and 13.4% in 2021, as claimed by the National Communication Officer of the NDC, Sammy Gyamfi.
Claim: Benin, Togo, Ivory Coast, Burkina Faso, and Nigeria recorded a budget deficit of below 8% and debt to GDP ratios of below 65% in 2020 (48:40 to 49:30)
Verdict: After analysing documents from the World Bank, African Development Bank, and the International Monetary Fund, we found the claim to be true.
By Jeffery Nyabor
A budget deficit occurs when the government expends more than it receives within a fiscal year.
Because of COVID-19-related expenditure and lower tax revenues in 2020, several governments recorded an increase in their budget deficits, which, in some cases, were financed by borrowing, thereby increasing public debt.
There are several authorities that give an overview of the fiscal actions of countries and in investigating Sammy Gyamfi’s claim, we relied on documents from those outfits.
These include data from country-specific reports from the World Bank and the African Development Bank and the April 2021 Fiscal Monitor report from the International Monetary Fund. We also analysed data from a German-based data organisation, Statista, and an American credit rating agency, Fitch Ratings.
Ghana’s budget deficit for 2020 hit double digits against an initial target of -4.7% which was later revised to -11.4%. The situation, according to the Finance Minister, is to be blamed on the country’s revenue and expenditure performance due to COVID-19. (2021 budget – Par. 105-112)
The Finance Ministry quoted 11.7% as the deficit for 2020 but reports from the World Bank and the IMF quote a higher figure.
The World Bank’s October 2021 update on Ghana’s Economic Outlook mentioned that the country’s fiscal deficit was 15.2% of GDP for 2020.
“The fiscal deficit including energy and financial sector costs worsened to 15.2% of GDP, with a further 2.1% of GDP in additional spending financed through the accumulation of domestic arrears,” the IMF reported.
Regarding the 2020 budget deficit situations in Benin, Togo, Ivory Coast, Burkina Faso and Nigeria, we found the following:
|Country||Statista||African Dev’t Bank||IMF||Other sources|
|Benin||N/A||N/A||-4.9%||-4.7% (Fitch ratings)|
|Ivory Coast||N/A||5.6%||-5.9%||–5.9% (World Bank)|
|Burkina Faso||-5.7%||N/A||-5.2%||5.2% (World Bank)|
|Nigeria||-5.66%||5.4%||-5.8%||5.8% (World Bank)|
We also observed the following in our investigation of the 2020 debt-to-GDP ratios of Benin, Togo, Ivory Coast, Burkina Faso, and Nigeria.
|Country||World Bank||Other sources|
|Benin||N/A||46.1% (African Development Bank)|
|Ivory Coast||45.8%||47.03% (Statista)|
|Burkina Faso||47.6%||46.54% (Statista)|
Evidently, Sammy Gyamfi was right about the 2020 budget deficit and debt-to-GDP ratios in Benin, Togo, Ivory Coast, Burkina Faso, and Nigeria.