In case of reply the

Number and date of this MINISTRY OF FINANCE &

Letter should be quoted ECONOMIC PLANNING
P. O. BOX M 40
Our Ref.: PR/558/SF.5/Vol 2 ACCRA
Your Ref.:
Tel. No: 665132/686151 REPUBLIC OF GHANA

24th June, 2010

REJOINDER: GHANA RANKED 9TH WORST ECONOMY IN THE

WORLD

On 10th June, 2010, Forbes Magazine issued a report on Ghana,

titled “Ghana Ranked 9th Worst Economy in the World”.

We believe that the report is being done with 2008 and 2009 as
the reference years. If this is the case, then most of the data and
information used have a lot of factual inaccuracies.

The Ghanaian economy was faced with serious difficulties in 2008

as a result of huge domestic spending and coupled with the food
and fuel crises, as well as the global financial crises, the economy,
like many other economies including the most advanced ones,
encountered a number of challenges, registering high inflation as
well as high fiscal and current account deficits.

Consequently, the Government was faced with serious economic

challenges particularly in 2009. It was against this background
that the Government was committed to pursuing measures that
will ensure the attainment of macroeconomic stability and
significant progress has been made in this respect.
The report fails to acknowledge the progress made in the last
fifteen months. Real GDP growth in Ghana for 2009 slowed down,
but it was higher than what pertained in most sub-Saharan
African countries and exceeded the average growth rate for sub-
Saharan Africa. Consumer price inflation fell to 16.0 percent in
December 2009 and further to 10.68 percent in May 2010, after
peaking at 20.7 percent in June 2009. The fiscal and current
account deficits were reduced from 14.5 percent and 18.7 percent
to 9.5 percent and 5.1 percent, respectively. Gross International
Reserves increased from US$2 billion in 2008 to US$3.2 billion in
2009 and is projected to increase to US$3.7 billion in 2010.

With all these achievements in a year Ghana cannot be said to be

a typical example of the World’s worst-managed economies.
We wish to further comment on some specific issues.

Per Capita GDP

Per capita GDP in Ghana increased by 20 percent from GH¢768 in
2008 to GH¢924 in 2009. The Forbes report quoted the per capita
GDP in US dollars without making reference to what happened to
the exchange rate during the year. The amount in US dollars
shows a decline because in 2009, there was about a 15 percent
depreciation of the Ghana Cedi to the US dollar. In real terms,
Ghana’s per capita GDP increased from GH¢347 in 2008 to GH
¢355 in 2009. The exchange rate of the Ghana Cedi has stabilized
against the US dollar, and since the beginning of 2010, the Ghana
Cedi has appreciated against the US dollar by about 7 percent.
This is part of the evidence that good fiscal and monetary policies
are holding.

Trade Deficit
Ghana’s trade deficit in 2009 was US$2.2 billion and not US$3
billion as reported by the Forbes Magazine. There was a reduction
in the trade deficit from about US$5 billion in 2008 to the US$2.2
billion that was recorded in 2009.

Settlement of Bills
It is not true that Ghana is struggling to pay its bills. Ghana has
serviced its external and domestic debts regularly and on
schedule without any default. Delayed payments to domestic
providers of some services and contractors have sometimes been
part of cash management challenges that are common in
economic management strategies. This is one of the key issues
that the Government is addressing in its Public Financial
Management Reforms.

Shortages in Energy
The power supply to the Volta Aluminium Company (VALCO) has
not, as it were, been “diverted” anywhere. The fact of the matter
is that Ghana already has substantial electricity supply deficit
which is still being addressed. This is as a result of the low level of
water in the Volta Lake which is due to natural causes and not
mismanagement. The shutdown of the smelter has allowed
conservation of water in the Volta Lake as against the risk of
running down of the water in the dam which generates energy
and sells at ridiculously low rates to the Smelter when it operates
(lower than what the lowest paid residential consumer pays).
Furthermore, with the very low prices for aluminum and world
market conditions, the smelter had no option but to shut down. In
fact, the original managers of the smelter, Kaiser of the USA,
divested its interests in the smelter when it became unprofitable.
Thermal power generation which is very costly, considering the
high international market price of crude oil, is being used to
supplement hydro power generation. It is expected that with the
coming on stream of gas from the West Africa Gas Pipeline and
Ghana’s own gas production, power generation will become less
costly.

Private Investment
The Forbes report indicates that “the Government is discouraging
private investment – economic growth – through policies of crony
capitalism, expropriation or arbitrary enforcement of the laws”.

It is unfortunate that the report does not explain this assertion

and how it relates to Ghana, but we wish to state without
reservation that Ghana is one country where the rule of law is
respected, especially, when it comes to matters of foreign
investment. There are so many incentives and concessions that
are available to private investors. Government, through the
appropriate laws of the land will protect all genuine and law-
abiding foreign and local investors, but will not allow for
fraudulent foreign investors to rape the country’s natural
resources. Government is accountable to the citizens of Ghana,
subscribes to the Extractive Industries Transparency Initiative
(EITI), and will ensure that revenues from the country’s non-
replaceable natural resources are accounted for in a very
transparent manner.

The increase in foreign direct and portfolio investments attests to

the conducive investment climate that exists in Ghana. Over the
last two years, the country continues to receive countless
proposals from foreign financial institutions which are ready to
provide financing for projects in Ghana. The confidence that the
markets have in the Ghanaian economy is attested by the fact
that Ghana’s sovereign bond currently trades at a premium on
the international capital markets.

We believe these comments will correct the factual inaccuracies

and set right the wrong perceptions that the report may have
induced.

ISSUED BY ABDUL HAKIM AHMED,

 MEDIA LIAISON
MINISTRY OF FINANCE & ECONOMIC PLANNING

THE NEWS EDITOR