Last week, the Ghana Statistical Service revealed that the national economy grew in size by 5.3% over the 12 month period up to the end of the first quarter of 2025.
This shows faster growth during the first quarter of this year than the 4.9% growth in Gross Domestic Product (GDP) achieved the full year, 2024, and just as importantly, it far outstripped government’s economic growth target of a minimum of 4.0% for this year.
This latest data suggests that indeed, the claim made (prematurely) a year ago that Ghana’s economy has turned the economy is proving to be true. Economic growth has accelerated to pre COVID levels on a sustained basis even as both inflation and interest rates have fallen significantly and the cedi stabilized at an exchange rate far below what last year.
Just as importantly, the public debt restructuring achieved last year and the fiscal discipline instituted so far this year have created a lot more fiscal space than the state has had since late 2022 and this is now being put to relatively efficient use by the incumbent government.
To be sure, there are still high hurdles to be overcome, particularly the huge indebtedness of government through several of its key public agencies, most notably those in the energy sector.
But now, the fiscal space created by the still ongoing economic turnaround is offering short term solutions to some of these challenges for instance the introduction of a GHc1 per litre levy on petroleum products which is made possible without worsening the circumstances of the already overburdened general populace by the cedi savings they are enjoying on petroleum prices.
But these are not permanent solutions. In the case of the energy levy its application without overburdening petroleum product users is dependent on the cedi retaining its exchange rate strength with is not guaranteed over the medium term. Indeed, oil prices could increase on the international market, a situation outside of Ghana’s influence.
Similarly, Ghana remains subject to the vagaries of international market pricing of both gold and cocoa, as well.
However, the current situation creates a window of opportunity for Ghana to engage in long overdue fundamental restructuring of its economy that have the potential to make the ongoing gains sustainable.
Key to exploiting the unfolding opportunity in this regard though is that Ghana does not go back to its old ways of using stronger economic growth, lower cost of capital and exchange rate appreciation to simply increase imports of unproductive goods and services.
Rather, government needs to take deliberate steps to guide the economy towards the importation of machinery and equipment that can enhance local productive capacity while substituting both imported production inputs and consumer goods with locally sourced and produced alternatives.
In this regard, productive enterprises should take advantage of the exchange rate gains and lower cost of capital to retool and restructure their production processes.
Furthermore, government, in collaboration with the domestic capital market institutions, such as the Ghana Stock Exchange, Securities & Exchange Commission and the Venture Capital Trust Fund as well as institutional investors on the market such as pension funds, insurance firms and private equity funds should strive to mobilize and deploy domestic long term capital to make up for Ghana’s forced lack of access to international capital markets.
Both business and consumer confidence are on the rise, going by recent surveys and this is the time to take advantage of the situation.
