One of the strongest economies in West Africa, Ghana is facing a major economic and social crisis. The country's soaring inflation, which reached 30% in June, its highest level in 18 years, is not expected to fall much, as the Finance minister expects it to reach 28.5% by the end of the year. Its public debt is expected to continue to rise, with the debt-to-GDP ratio reaching 84.5% in 2023, according to Fitch Solutions. In addition, the Ghanaian currency, the cedi, has depreciated rapidly, losing 30% of its value against the U.S. dollar in six months. According to the Ghanaian government, the economic situation is due to external shocks, namely the Covid-19 pandemic and the Ukrainian crisis. Yet, an article from a very reputable British newspaper, The Economist , does great damage to Ghana’s reputation. The article states that the poor management of the current government has greatly weakened the country's economy, while other sub-regional markets have been more resilient to the pandemic.
Financial mismanagement at the core of Ghana’s economic downturn
In The Economist, Finance minister Ofori-Atta declared that Ghana “was on a very positive trajectory before the pandemic” and that “the Russian invasion of Ukraine and the subsequent surge in global inflation compounded the harm”. However, recent reports by Ghana's auditor general indicate otherwise. The documents point out that irregularities in public finances have exploded since President Akufo-Addo came to power. While in 2016, the auditor listed only 112 irregularities, he counted nearly 1,900 in 2017, i.e., before the pandemic (the year of the president's election) and nearly 2,000 more recently in 2020, i.e., before the Ukrainian war. Thus, while these crises undoubtedly had an impact on the country's economic situation, they are not its main factors. The crisis has more to do with the government's economic policy.
According to IMF reports, one of the mismanagement measures of the Ghanaian government is excessive borrowing. In its 2019 report on Ghana’s debt sustainability, the IMF rated the overall risk of debt distress as high. Another international organization, the World Bank has continuously warned the government about the risk of debt distress. However, Ghana continued to borrow and accumulate new loans. According to the Economist article, when Covid-19 hit, Ghana's budget deficit of 16% was the second highest in sub-Saharan Africa, well above the regional average of 6%.
The country's fiscal and economic news has also been dominated by accusations and corruption scandals highlighting mismanagement. The Ghana Statistical Service revealed in its 2021 Public Service Integrity Survey that 26.7% of public sector officials were involved in corruption. The Ghana Revenue Authority recorded 33.6% of corruption cases. With respect to the private sector, an opinion survey conducted by the anti-corruption resource center among owners and managers of small and medium-sized businesses in Ghana indicated that many felt pressure to use corruption as a survival strategy. But large companies are also concerned, often in the context of scandals related to public procurement. In 2019, the Chief Executive Officer of Ghana’s Public Procurement Authority was suspended after being accused of selling contracts.
Economic measures mitigating the debt crisis but increasing the impoverishment of the population
To address the debt crisis and prevent the country from falling into recession, the government implemented a series of fiscal measures that put undue economic pressure on Ghanaians. Among the most restrictive and burdensome measures are the Covid-19 health recovery tax, the E-levy and more broadly the E-Vat policy. These measures, at a time when inflation is reaching record levels, only worsen the economic situation of Ghanaian households by reducing their purchasing power. In addition, national solidarity programs such as free education for all are experiencing tangible difficulties, including food shortages in high schools. The failure of such programs demonstrates a real incompetence in resource management and distribution. Completely overwhelmed, the government is trying to extract money from foreign companies. In order not to damage its business-friendly reputation, no new official taxes are being raised. The process is more pernicious. The Ghana Revenue Authority conducts numerous abusive audits to extort money from foreign companies and replenish the public treasury. While these measures might help in the very short term, in the medium to long term they risk penalizing the country's economy, which depends heavily on foreign direct investment.
Widespread disillusionment and growing distrust of national authorities
“I can tell you, we are not going back to the IMF, whatever we do we are not going back”, said Finance minister, Ofori-Atta in February this year. On 01 July, President Akufo-Addo announced that Ghana was going to seek financial assistance from the international organization. This decision caused outrage among the population, which did not understand this radical change, especially after having suffered from the imposition of new taxes that were supposed to be sufficient for economic re-stabilization. The return to the IMF also questions the Ghana Beyond Aid plan, which was supposed to create an independent and resilient Ghana. The president's announcement on 01 July put an end to any hope of a quick resolution to the crisis, especially since IMF assistance is not expected to arrive until the first quarter of 2023. Ghanaians are emerging from this crisis all the more depressed and disillusioned. Confidence in the institutions and actions of the government continues to decline. The recent Afrobarometer undertaken by the Ghana Center for Democratic Development supports this statement. According to the survey, the Office of the President is perceived as very corrupt, coming in second most corrupt with 55%, just behind the police. Members of the Parliament come into third position and tax officials into fifth. The current economic situation has also damaged the reputation of the Ministry of Finance and its head, Ken Ofori-Atta, who is seen as responsible for the economic crisis and mismanagement. Calls for his resignation, especially from the opposition, have been repeated.