Ghana has a long history with the International Monetary Fund (IMF). When Ghana gained independence from colonial rule in 1957, the country contained important natural resources such as gold and cocoa, and its political and economic futures were hopeful. Yet 60 years later, in April 2019, Ghana had completed its 16th liaison with the IMF after borrowing USD 918 million to stabilize its struggling economy in 2015. According to the IMF’s assessment, Ghana has been able to decrease its trade and budget deficiencies and boost its economic growth rate since 2015, reaching a staggering 8.8% and becoming the world’s fastest-growing economy in 2019. While the sub-Saharan African country’s economic performance gives reason for optimism, forecasts recommend caution as Ghana heads into its next presidential election in 2020 and runs the risk of overspending again.
Under President John Mahama, who was in office from 2012 to 2017, Ghana’s economy progressively disintegrated. In 2011, Ghana had hauled in vast profits from the discovery of oil fields, achieving an 11% economic growth rate, but under Mahama’s presidency, the country faced soaring inflation and mounting public debt. When incumbent President Nana Akufo-Addo entered office in 2017, he began turning the tables by introducing a reform program called Ghana Beyond Aid, promising Ghanaian citizens independence from aid packages from international financial institutions such as the IMF and the World Bank.
Reducing the inflation rate from 17% in 2016 to about 9% in 2019 and introducing more rigorous government spending regulations, President Akufo-Addo appears to have led the country down a better path. Budget deficits are projected to slowly fall from 3.2% in 2018 to 2.9% in 2020, and in cooperation with IMF advisers, Ghana’s government developed structural reforms based on three key goals when it was granted the IMF bail-out in 2015: reformation of the banking system to meet underwriting and credit evaluation standards, revision of Ghana’s monetary policy to mitigate inflation risks, and the establishment of debt sustainability by modifying tax management policies and raising revenues. Additionally, Ghana’s government passed a new law called the Fiscal Responsibility Act in early 2019 in order to control the government’s budget deficits and debt ceiling.
Despite such ambitious endeavors, Ghana appears to still struggle with the implementation of these policies. Since Akufo-Addo assumed office in 2017, the number of governmental ministers has increased to 125, rising by 42%. Each of these ministers is granted considerable funds for cars, guards, and a home paid by taxpayers. Moreover, poverty remains a salient issue in Ghana in spite of economic improvements. A 2018 assessment of poverty in Ghana by the United Nations Human Rights Council (UNHRC) reports that about 20% of the population lives in poverty with a daily budget of 80 cents, and about 12.5% of all Ghanaians live in extreme poverty, surviving on 48 cents per day. Poverty among children and those in rural areas is a particularly critical issue, and education and literacy rates also require improvement. While a difficult undertaking, significant development in areas such as poverty reduction and access to education could boost employment rates in key industries, such as agriculture or oil and gas, and foster long-term economic growth.
Ghana’s future may promise both positive outlooks as well as forthcoming uncertainties. While the country is one of Africa’s model democracies, enforcing regular changes in leadership since 1992, the political and economic stakes are high in the 2020 presidential election. Ghana’s former president Mahama has won the bid as presidential candidate for the National Democratic Congress, the main opposition party. This will be the third time that Mahama runs for president against Akufo-Addo, as they previously faced off in the 2012 and 2016 elections. Although Mahama is a popular candidate among voters, Ghana’s economy fell into a critical recession and power outages were frequent occurrences under his administration. Investors remain uncertain as to whether Ghana can adhere to its new economic regulations and avoid overspending during the 2020 election. Factors such as financial discipline during the election campaign and the election results will influence whether Ghana must turn to the IMF for a 17th time.
