Infrastructure investment will boost Ghana economy

Posted on October 17, 2015 12:00 am

Ghana’s short-term stimulus package will help boost the economic sentiment, but the economy would be boosted in a “sustainable” fashion only when the country can kick off long-delayed mega projects, according to a researcher working in the country, the economist for a leading international bank with offices in Accra, in a note that he foresaw limited impact from the delayed loan from international lenders on the economy. Meanwhile, the package of short-term stimulus measures appears promising because most can be implemented immediately to help low-income households and SMEs. Nevertheless, Ghanian technocrats expect that a timely implementation of the long-awaited infrastructure spending remains key to lifting business sentiment and growth momentum in a sustainable fashion.The Finance Ministry expects the package, worth hundreds of millions of dollars, to boost the economy based on the multiplier effect.Researcher noted that optimism should be exercised with caution since several measures, such as subsidised loans and enhanced credit guarantee measures, had been previously applied since January 2013.

Boosting growth has not been easy so far, given sluggish exports, weakening of the local currency against International denominations like dollar, sterling pound and Euro, weak business confidence, and high household leverage. Furthermore, Ghanian Central Bank survey released recently showed that the expected demand for credit in the third quarter was weaker than the previous two quarters, in line with its business sentiment survey that showed lower expectation for both domestic and export order books. Thus, a gradual recovery is more likely than a quick rebound over the coming months. She added that only a timely implementation of the infrastructure investment would effectively lift business sentiment and growth momentum. Once public investment gathers momentum, private investment will likely follow one obvious example is the increase of condominiums construction along the new mass transit routes. We have also noted in earlier reports that risks on the fiscal front is limited in the medium term with public debt-to-GDP which is currently 70 per cent projected to remain above the government’s self-imposed fiscal sustainability framework at 50 per cent in 2020. Thus, it remains crucial for the government to continue to streamline regulatory processes and speed up its disbursement, researcher told your blogger.

Contador Harrison