Ghana has recently undergone a change in administration, ushering in the return of the National Democratic Congress party led by John Mahama. Assuming office as Ghana’s 14th president, Mahama has returned to the position he formerly held, after eight years of Nana Akufo-Addo’s leadership with his New Patriotic Party leading the government. The change could not come at a more critical time for Ghana, as its economy, which was once hailed as the shining star of African economies and a model example, has yet to shake off the slowdown caused by the global challenges over the last five years, mainly COVID-19, the war in Ukraine, as well as accusations of gross mismanagement by the previous administration.
The previous Akufo-Addo administration’s economic performance started off extremely strong in 2017, implementing the Free Secondary High School policy and lifting an immense financial burden off the backs of parents and caregivers alike, as well as clamping down on the excuses for youth not attending secondary school. This policy, as well as the One District, One Factory (1D1F) initiative, which aimed to increase Ghana’s industrialization capacity by having at least one industry and factory in every district, greatly contributed to the outlook of Ghana’s pre-COVID economy. The policies were part of a much wider seven-year-long coordination of economic and social development reform planned by the Akufo-Addo administration, which Akufo-Addo said was based on “five pillars of growth and development, namely revitalizing the economy; transforming agriculture and industry; revamping economic and social infrastructure; strengthening social protection and inclusion; and reforming the delivery system of public services institutions”. The policies no doubt contributed to the incredible feat of elevating Ghana’s economy to the fastest growing economy in the world by 2019 at a growth rate of 8.8%, up from 2018’s rate of 5.6%, according to the IMF, and pushing Ghana to the ninth largest economy in Africa by overall GDP. The rates, while impressive, were not expected to hold steady or be sustainable in the long term, even before the COVID-19 pandemic. The rates did however help Ghana secure the final portion, about $185.2 million from the IMF in 2019. IMF Deputy Managing Director Tao Zhang noted rather ominously at the time that, “Debt management has improved, though reliance on foreign investors has increased Ghana’s exposure to market sentiment and exchange rate risk. While achieving single-digit inflation is commendable, monetary policy should remain vigilant to guard against upside risks to inflation, also stemming from exchange rate developments.”
The global shutdown due to the COVID pandemic hit Ghana especially hard. Ghana is primarily an export economy with the largest industries being oil, gold and cocoa beans for foreign chocolate production, something which makes it particularly vulnerable to shortages of foreign currency reserves. Despite the earlier IMF warnings of high-risk debt, the Akufo-Addo administration, like most developing African economies, had no choice but to keep borrowing to make up for the losses. Public debt right before the pandemic already sat at an uncomfortably high 63%, a rise from the 56% the Akufo-Addo administration started with back in 2017. Ghana borrowed considerably more than its neighbours, and by June of 2022, Ghana’s annual inflation had hit 30%, the highest in 18 years. That same year, then-Finance Minister Ken Ofori-Atta, facing calls to restructure the government’s debt and ask for assistance, insisted that “we are not going to the IMF, whatever we do, we are not. We are a proud nation”. By July, the government had caved and asked the IMF for assistance, with nearly 44% of the country’s revenue at that point being used to pay off foreign loans. By the end of 2022, inflation had risen from 30% to a new record high of 54%. Coupled with an enormous budget deficit, high rate of borrowing, rising cost of living and no shortage of global external pressures, Ghana’s once exemplary economic model had hit a brick wall and was in danger of collapsing entirely.
The hole the Akufo-Addo administration had dug itself was steep— even steeper for the average citizen trying to adjust to global pressures and government measures. Every month that went by, Ghana’s currency, the Cedi, became worth less and less. Stories of citizens unable to buy basic food items for their families became commonplace. “I give them 2 cedis [35p] every day to buy kenkey and bread for lunch. But with the prices in Ghana now, the money was buying them less and less food every month,” wrote one woman. Many did not hold back their frustration, with another woman, a yam seller, writing, “the finance minister, if I catch him, me, I will beat him”.
The government decided in December 2022 to launch a debt restructuring program, with the IMF noting, “this includes a domestic debt voluntary exchange, which has been successfully concluded, and two external debt operations— one with official bilateral creditors and the other with commercial creditors. Under the G20’s Common Framework, the Ghanaian authorities have recently reached agreement in principle with their official creditors on a debt treatment consistent with the program parameters. They are also engaging their external commercial creditors to seek their support”. By the end of the Akufo- Addo administration, the program seemed to be making progress, albeit slowly. The World Bank reported that “in 2024, Ghana's GDP growth exceeded expectations, reaching 5.7%, a significant improvement from the 3.1% recorded in 2023”. Inflation, while not down to pre-pandemic levels, had also tapered down, though the currency still remained in a weak position against the dollar. The World Bank reported that “inflation reached 23.8% by year-end, driven by food prices and currency depreciation. The Cedi depreciated by 19.0% against the US dollar by end-2024 versus the previous year”.
When John Mahama won the 2024 Ghanaian General Election, he found himself immediately under pressure to combat the economic hardships experienced by Ghanaians at the tail of the previous administration. In his inaugural speech, he declared that “we are a people battered by economic crises and hardships. But there's hope on the horizon". The focus of the new administration seems to be that of easing the cost and burden of living on the Ghanian population, with a particular focus on food prices and security through new agriculture and agribusiness programs, similar to the previous administration’s 1D1F program aimed at improving manufacturing output for each district.
One of the very first actions taken by the new administration, as laid out in the National Economic Dialogue Conference held this March, was scrapping several taxes levied on the people during COVID to help assist the previous administration secure a $3 billion IMF bailout. Newly appointed Finance Minister Cassiel Ato Forson has been brutally honest about the position the country and new administration finds themselves in. “The state of the economy ... does not reflect an economy that has turned the corner," Forson said during his first budget speech to the Parliament. "It reflects an economy in severe distress, burdened by debt repayment humps, mismanagement and a lack of accountability." Forson has called for what he terms “shock therapy” to the economy, which includes spending cuts meant to be offset by scrapping consumer taxes and COVID-era regulations. These measures, coupled with advancing the previous administration’s debt restructuring program, are meant to ease the burden on paying back debt. Ghana is obligated to repay $8.7 billion in the next four years, accounting for about 10.9% of the GDP. So far this year, consumer inflation slowed for the second consecutive month in February, to 23.1% from 23.5% in January, but remains well above the Bank of Ghana's 8% target.
