By Peter Asare-Nuamah
While recognizing the hardship Ghanaians faced in 2023, the President, Nana Akufo Addo, on 26 August 2023, rightly pointed out that “it is difficult, I am the first to admit but I have confidence that Ghanaians will reflect and select a leader who can best get us out of this difficulty and take us to the next stage.”
Without doubt, the next government will have a herculean task of putting Ghana on its right path to socioeconomic growth and development. In 2019, the World Bank described Ghana as the fastest growing economy in the world.
Ghana’s gross domestic product (GDP), which stood at US$68.3 billion in 2019 observed a significant increase of 2.5% in 2020, reaching US$79.16 billion in 2021, and representing a 13.01% increment.
Yet, by 2022, there was a sharp decline in Ghana’s GDP (US$72.84 billion) by a margin of 7.98%.
Numerous challenges, key among them: high government debt, galloping inflation and depreciation of the Ghana Cedi against the dollar, youth unemployment and rising poverty, have derailed the gains and eroded the recognition given to the West African nation as the fastest growing economy.
Today, Ghana is among African countries with the highest cost of living. The COVID-19 pandemic and the Russia-Ukraine, have had serious toll on Ghana’s growth and development, further worsening the hardship in the country.
Effective and sustainable management of Ghana’s economy will be crucial for enhancing its development. As such, electorates in the 2024 elections hope to elect a leader capable of ensuring a sound management of the country’s economy including its public debt.
The vulnerable
The public debt of the West African nation is ballooning and raises serious concerns for its current and future development.
The Ministry of Finance and Economic Planning in its 3rd quarter 2022 Public Debt Statistical Bulletin noted that Ghana’s gross public debt stood at US$48.87 billion (US$28.41 billion external debt and US$20.46 billion domestic debt), culminating into about 75.9% of the country’s GDP and indicating a 12% increase from 2022 2nd quarter public debt ratio of 63.9%.
Although, Ghana’s debt to GDP ratio fell within the (good) debt to GDP global threshold of 77% by the end of the 3rd quarter of 2022, it equally depicted the gradual reduction in the country’s ability to pay off its debt and enhance domestic economic growth.
This is evident in the African Development Bank’s (AfDB) Economic Outlook for Ghana, which shows that the country’s public debt to GDP ratio reached 93.5% by the end of 2022, surpassing the acceptable global threshold.
While the government managed to secure a three-year Extended Credit Facility deal of US$3 billion from the International Monetary Fund (IMF), there was a serious delay in putting pen to the agreement due to the concerns raised by international creditors regarding Ghana’s ability to pay its international debts.
However, upon receiving the first tranche of US$600 million of the deal in May 2023, the second tranche, which was supposed to be received in November 2023 has not materialised as at December 2023.
This delay is likely to continue into 2024 due to heightened concerns regarding Ghana’s ability to pay its external debts.
As 2024 marks Ghana’s general election, the failure of the government to secure the IMF fund will exert immense pressure on the government’s commitment to enhancing economic growth and development, which will erode its electoral fortunes.
Ghana has equally witnessed a sharp increase in inflation and depreciation of the Ghana Cedis against the Dollar in 2023. Inflation, driven mainly by energy and food prices coupled with depreciating Ghana Cedis, stood at 10% in 2021, but increased to 31.5% in 2022 with a projected 44.7% by the end of 2023.
Food imports
Ghana’s overdependence on imported food and energy indicates that rising inflation coupled with depreciating Ghana Cedis adversely affects individual’s purchasing power, thereby resulting in rising prices of such essential commodities.
For instance, in the last decade, Ghana imported about US$8 billion worth of rice, an essential and the second staple food in Ghana.
Although maize is the first staple food in Ghana, what Ghanaians spend annually on rice is up to 4 times the per capita expenditure on maize, mainly due to the fact that about 70% of the rice consumed in Ghana is imported and affected by the high depreciation of the Ghana Cedis against the dollar and other international currencies.
In fact, galloping inflation and high rise in the prices of imported food in Ghana negatively affects households’ purchasing power, and pushes many, particularly the poor and vulnerable into poverty and food insecurity.
While the AfDB estimates that inflation in Ghana will reduce to 20% in 2024, it is prudent for the next government to increase investment and build local capacities for the production of essential commodities locally.
This will greatly contribute towards tackling Ghana’s overdependence on imported commodities, enhance its food self-sufficiency, and address inflation and the associated depreciation of the local currency.
According to a Ghanaweb publication on 11 December 2023, data from Director General of the Nation Development Planning Commission Dr. Kodjo Mensah-Abrampa reveals that Ghana halved poverty in the last 20 years.
While this is a welcoming news, it is important to recognise that poverty levels in Ghana have risen sharply in recent times, particularly with the onset of the COVID-19 pandemic.
Boost agriculture
It is estimated that about 2.99 million Ghanaians live below US$1.90 per day poverty line in 2023, and the figure is way higher when US$2.15 is used as the benchmark.
In 2022, about 27% of the Ghanaian population was reported to be poor, depicting about 2.2% points increase from 2021. Addressing poverty, which is highly endemic in rural communities, requires boosting the major livelihood strategies in rural Ghana.
It is noteworthy that agriculture is both the backbone of the Ghanaian economy and the major livelihood strategy of the masses.
Hence, the sector is highly linked to Ghana’s poverty reduction strategies. Going into election in 2024, Ghanaians expects the next government to aggressively tackle poverty and its associated unemployment among the youth.
Robust investment in agriculture and strengthening the local agribusiness sub-sector can immensely contribute to addressing poverty and unemployment.
Serious investment in technology-driven and mechanised agriculture can boost interest of youth and encourage them to engage in the sector thereby tackling both poverty and unemployment.
Another equally important issue is the need for real political will to fight corruption in state and non-state institutions because it is one of the major problems hindering development in the country.
The author, Dr. Peter Asare-Nuamah is a lecturer at the School of Sustainable Development, University of Environment and Sustainable Development, Ghana, and a senior researcher at the Center for Development Research, University of Bonn, Germany.
Disclaimer: The views expressed by the author do not necessarily reflect the opinions, viewpoints and editorial policies of TRT Afrika.
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