Just as the President John Dramani administration appears to be getting a firm handle on Ghana’s complex, multi-faceted macro-economic challenges, global political and economic forces are threatening to derail the gains that have been made in the past couple of months.
The cedi’s official exchange rate has more or less stabilized at just over GHc10 to one US$1 barely two-thirds of what it was at the beginning of the year. Interest rates are coming down despite the Bank of Ghana’s continued tight monetary stance with short term treasury bill rates having nearly halved since January and average lending rates having dropped too, albeit more slowly.
Inflation fell below 20% in May for the first time in well over two years. The public debt has fallen to barely 70% of Gross Domestic Product from a high of over 90% prior to debt restructuring and the recent appreciation of the cedi. And GDP growth has risen even further to 5.3% for the 12 months up to the end of the first quarter of 2025, up from 4.9% for the full calendar year 2024.
However recent global events are threatening to put Ghana’s economy under pressure again.
Oil prices have surged from US$65 per barrel to US$74 per barrel within one week as a result of Israel and Iran going to war. This is not a debilitating rise there is the real possibility of a wider conflagration expanding the conflict across the region where most of the world’s oil supplies come from.
Fortunately for Ghana, government has delayed the implementation of its controversial new GHc1 per litre energy levy but if oil prices rise much further – a real possibility if peace between the two countries is not quickly restored government will have to choose between scrapping the new levy at the risk of its energy sector debt spiraling completely out of control, or implementing it and seeing inflation surge again in response to rising transportation costs.
At the same time, the value of the US dollar is surging again putting pressure on the cedi’s exchange rate. This, in turn, has led to the emergence of a significant difference between the official exchange rate operated by the Bo G and the commercial banks and the rate at which the dollar is traded outside the banking sector which is now over GHc12 to the dollar.
To be sure there is little government can do about the underlying political and economic forces driving the latest threats to Ghana’s newly found macro-economic stability since it cannot stop the Israel – Iran was or reign in the dollar’s latest surge in value.
However, it can reign in the growing disparity between the official cedi exchange rate and the informal one , albeit at a cost to the economy. This is because it would require merging both rates by letting the official rate rise to meet the informal rate.
This would be a painful process when Nigeria’s President Bola Tinubu did a similar thing recently, his compatriots were up in arms.
However since then it has eased Nigeria’s well documented forex problems, especially the damage done by arbitration between the two different rates by those with the right connections.
If Ghana’s situation is further compounded by further global headwinds, it is a strategy that Ghana’s government will have to consider, before the country’s forex market becomes as dysfunctional as Nigeria’s was before decisive albeit unpopular action was taken.
