Ghana’s economic crossroads: Facing the 2024 elections

Introduction

On December 7, 2024, Ghana will hold its highly antici­pated general elections amidst one of its most challenging eco­nomic periods in recent history. The stakes are particularly high as the financial, currency, and broad­er economic landscape continue to exert pressure on businesses and livelihoods. For a country celebrated as one of Africa’s most stable democracies, these elections will not only determine the next political administration but also shape the economic policies and strategies for years to come.

This feature explores Ghana’s current economic situation, the role of fiscal and monetary poli­cies, and the implications of these challenges on the livelihoods of Ghanaians. Additionally, it analy­ses the political promises made by candidates and their potential to provide the economic transforma­tion the country urgently needs.

The economic landscape: Growth amidst challenges

In 2024, Ghana’s economy showed mixed signals of recovery and underlying vulnerabilities. During the first half of the year, GDP grew by 5.9 per cent, a com­mendable improvement from the 2.8 per cent recorded in the same period of 2023. This growth was primarily driven by an 8.1 per cent expansion in the industry sector, particularly oil and gas produc­tion, while agriculture grew by 5.1 per cent. However, challenges in the cocoa subsector highlighted persistent structural issues in Gha­na’s agricultural economy, which remains a significant employer and contributor to GDP.

Despite these growth indicators, Ghana’s economic foundation has been severely tested in recent years. The twin effects of the COVID-19 pandemic and the war in Ukraine disrupted supply chains and escalated global commodity prices, particularly food and ener­gy costs. This, coupled with years of excessive public borrowing, pushed Ghana’s debt levels from 63 per cent of GDP in 2019 to nearly 93 per cent in 2022, placing significant strain on the nation’s finances.

Public Debt and IMF Inter­vention

In May 2023, Ghana secured a $3 billion bailout from the Inter­national Monetary Fund (IMF) as part of efforts to stabilise the economy. The agreement was predicated on a comprehensive debt restructuring plan, including domestic and external bondhold­ers. By January 2023, Ghana had restructured $4.7 billion in debt, providing a reprieve but also leav­ing a trail of dissatisfaction among private and institutional investors.

The IMF programme, running until 2026, aims to restore mac­roeconomic stability and address Ghana’s debt vulnerabilities. How­ever, the programme has not been without controversy. Critics argue that the conditions attached to the bailout, including austerity mea­sures, have exacerbated hardships for ordinary Ghanaians. Budget cuts to social programmes and rising taxes have created tensions between the government and citi­zens, fuelling public discontent.

Currency and inflation dy­namics

One of the most pressing issues in Ghana’s economy is the performance of its currency, the cedi. Over the past two years, the cedi has experienced significant depreciation, losing over 40 per cent of its value against major cur­rencies in 2022 alone. While 2024 saw some stabilization efforts by the Bank of Ghana, the currency remains volatile, posing challeng­es for businesses and consumers alike.

Inflation, driven by currency depreciation and rising global prices, peaked at over 50 per cent in 2023, creating a cost-of-living crisis. While inflation has declined, it remains high at 31 per cent as of September 2024. The Bank of Ghana has attempted to man­age inflation through aggressive monetary policy, including raising interest rates to 30 per cent in 2023 before reducing them to 27 per cent in September 2024. How­ever, these measures have made borrowing costly, stifling private sector growth and investment.

Impacts on Businesses and Livelihoods

The economic instability has had profound implications for Ghanaian businesses. Small and medium enterprises (SMEs), which form the backbone of the economy, have been a particularly hard hit. High inflation and cur­rency depreciation have increased the cost of imports, eroded profit margins, and reduced consumer purchasing power. Many busi­nesses have reported difficulties in accessing affordable credit due to high interest rates, further con­straining their growth potential.

Livelihoods have also been deeply affected. Rising food and fuel prices have stretched household budgets, forcing many Ghanaians to cut back on essential spending. According to the Ghana Statistical Service, food inflation reached 35 per cent in mid-2024, disproportionately affecting low-income families who spend a larger share of their income on food.

Unemployment remains a press­ing concern, particularly among the youth. The World Bank esti­mates that Ghana’s youth unem­ployment rate exceeds 12 per cent, reflecting a mismatch between education and labor market needs. This has created a growing sense of frustration among young Gha­naians, who face limited opportu­nities for economic advancement.

Political Stakes and Policy Proposals

The 2024 elections present Ghanaians with stark choices between two leading candidates: Vice-President Mahamudu Bawumia of the ruling New Patriotic Party (NPP) and former President John Dramani Mahama of the opposition National Dem­ocratic Congress (NDC). Both candidates have placed economic recovery at the center of their campaigns but offer differing ap­proaches to addressing the nation’s challenges.

Vice-President Bawumia has touted the government’s achieve­ments in infrastructure develop­ment and digitalisation, arguing that continuity is essential to com­plete ongoing reforms. He empha­sizes the need to maintain fiscal discipline and leverage technology to improve revenue collection and service delivery.

Former President Mahama, on the other hand, has been critical of the government’s handling of the economy. He has proposed re­negotiating the IMF bailout terms to allow greater flexibility and enhance local ownership of nat­ural resource projects. Mahama’s campaign has focused on reducing inequality and expanding social protection programs to cushion vulnerable populations.

The outcome of the election will significantly influence Ghana’s economic trajectory, determining whether the country will continue its current path or adopt a new approach.

The Role of External Factors

Ghana’s economic challenges cannot be divorced from broader global trends. High global interest rates have made borrowing more expensive for emerging markets like Ghana, while geopolitical tensions have disrupted trade flows and commodity markets. As a resource-dependent economy, Ghana is particularly vulnerable to fluctuations in oil and gold prices, which account for a significant portion of its export earnings.

Climate change is another criti­cal factor affecting Ghana’s econo­my. Erratic rainfall patterns and rising temperatures have disrupted agricultural productivity, particu­larly in the cocoa sector. Address­ing these environmental challenges will require significant investment in climate resilience and sustain­able farming practices.

Looking Ahead: Opportuni­ties and Risks

Despite the challenges, Gha­na’s economic prospects are not without hope. The medium-term outlook projects GDP growth of 3.4% in 2024 and 4.3% in 2025, driven by the industrial and ser­vices sectors. Key sectors such as oil and gas, fintech, and renewable energy present opportunities for investment and job creation.

However, risks remain. Infla­tion is expected to stay outside the Bank of Ghana’s target range, with projections of 20.9% in 2024 and 11.1% in 2025. Public debt levels, while expected to decline gradually, will continue to lim­it fiscal space for development spending. Addressing these issues will require bold and innovative policy measures, as well as effec­tive implementation.

Conclusion

Ghana stands at a crossroads as it prepares for the 2024 elections. The financial, currency, and eco­nomic challenges facing the coun­try have tested the resilience of businesses and households, high­lighting the urgent need for effec­tive leadership and comprehensive reforms. As Ghanaians head to the polls, they will be choosing not just a government but a vision for the country’s future.

The decisions made in the com­ing months will have far-reaching implications, shaping the trajec­tory of Ghana’s economy and its ability to provide opportunities for its citizens. Whether through continuity or change, the nation must prioritise policies that foster stability, inclusivity, and long-term growth. For Ghana, the 2024 elections are not just a political event, they are a defining moment in its journey toward economic resilience and prosperity.

Email: sammylaatey@yahoo.com

• BY PROF. SAMUEL LARTEY