Finally, Ghana’s crucial and fiercely contested 2024 general elections have been held. As at the time this edition of Economy Times was going to press, voting had closed, but the votes were still being counted and collated.
Both presidential candidates of the leading contenders – the incumbent New Patriotic Party and the biggest opposition party, the National Democratic Congress –have made various promises, that would resonate with voters and thus influence their voting decisions in their favour. But the next President and his government – whoever it is – will have to face tasks that go beyond populism and address the fundamental structures underpinning the economy, and which have resulted in Ghana’s repeated recourse to International Monetary Fund bail out programmes every few years.
This does not necessarily mean reneging on the promises of various people-oriented social interventions that have been made that are meant to address issues such as education and health that are critical to both living standards and the human capacity to take Ghana’s development to the next level. But it does mean that before allocating resources to implement them, an economic reality check needs to be done, to assess how much they will cost and how they are to be funded.
To be sure, while the most recent data suggests that the macro-economy may indeed have turned the corner – inflation is barely half of its 54% peak the cedi has stopped depreciating sharply, gross foreign reserves are being rebuilt and the fiscal deficit is being reeled in from the double digits it rose to during COVID 19 and its aftermath. But instructively, little of this is yet sustainable beyond the short and medium terms.
The cedi’s recent appreciation against the United States dollar can be attributed to foreign exchange market interventions by the Bank of Ghana, at the unsustainable expense of Ghana’s international reserves, as well as the temporary positive effects of the recently concluded external debt restructuring. This, and the restructuring of domestic debt as well has given government the fiscal space to lower the fiscal deficit, spurred on by the fiscal discipline insisted on by the IMF in exchange for its ongoing financial bail out. The mopping up of excess liquidity by the central bank, to curb inflation has already started to be negated by the effects of electoral campaign spending.
But most importantly of all, the rebound of the macroeconomy, fragile as it is, has not been accompanied by a similar rebound of the household economies of the average Ghanaian households. While the upper middle and upper classes have recovered somewhat from the recent economic challenges, the rising incidence of income inequality has left the lower class and the poor, struggling to make ends meet. Interestingly, the various presidential candidates have campaigned on the inferred promise of returning economic conditions to where they were before the end of 2022, a promise which any knowledgeable economist would dismiss as impossible to achieve; the new price levels and foreign exchange rates represent Ghana’s new paradigm which the populace will have to get used to.
It is instructive that the emphasis by the political parties on increased socio-economic interventions is a tacit admission of this. But what is needed now is a reset of the economy’s structure towards sustained better performance, in order to afford increased social interventions on a sustainable basis, without them sending us back to the IMF shortly.
Simply put this means increased import substitution and production for exports, accompanied by increased local content and participation in economic activities. These are what are required to reduce Ghana’s dependence on foreign exchange which it does not have enough of and the generation of direly needed jobs at home rather than abroad through unbridled importation and consumption of foreign goods and locally manufactured goods that primarily use imported inputs.
This should be the primary task of the next government. The only way to sustain the expanded social interventions being promised to win votes is to put the economy on a more self sufficient footing.
