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 stabilize 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 program 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 programs and rising taxes have created tensions between the government and citizens, fueling 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% of its value against major currencies in 2022 alone. While 2024 saw some stabilisation 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% in 2023, creating a cost-of-living crisis. While inflation has de­clined, it remains high at 31% as of September 2024. The Bank of Ghana has attempted to man­age inflation through aggressive monetary policy, including raising interest rates to 30mper centin 2023 before reducing them to 27% 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% 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%, 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 per cent in 2024 and 4.3 per cent 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 per cent in 2024 and 11.1 per cent 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.

BY PROF. SAMUEL LARTEY