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11.10.2019 Feature Article

The Irony Of Ghana’s Economy; Living Conditions Worsening But Economy Is Growing

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Ghana’s economic growth is projected to hit 7.6% by the end of Dec.2019 with strong macroeconomic indicators and fiscal gains. Consistently, the country has seen some significant economic growth even though on the other hand cost of living of the ordinary Ghanaian has since been surging which of course makes it very worrying. Whereas there is a direct correlation between economic/GDP growth/fiscal gains and living standard or cost of living of the people, it’s unfortunate that it is the opposite in the case of Ghana.


The ordinary Ghanaian is told macroeconomic indicators are stable, within target and fiscal gains are sustainable yet the cost of living continuously keeps surging up, people are losing their jobs, government is increasing tariffs, transportation and recently some significant increment in talk tax. Ideally the stable macroeconomic indicators, fiscal gains and the significant economic growth in GDP should generally guarantee or better still create a favorable economic environment for sustainable and affordable living standard for Ghanaians without limiting it to increase in their income levels, purchasing power, job security, safe accommodation, education, healthcare and financial security but it’s not the case for Ghanaians and this is why I write to find out what is accounting for these high cost of living.

This article would try provide some reasons why although there is economic growth but yet there is hikes in cost of living and there is no money in people’s pocket.


The recent financial sector clean-up has led to some significant job losses in the service sector of the economy not forgetting the huge job losses in the mining sector as a result of the campaign against illegal small scale mining in the country (The Operation Vanguard).All these coupled with the persistent overflow of unemployment both in the formal and informal sector of the economy can only put more pressure on families as the purchasing power of their money falls. Records also shows that about 35% of the employed workforce in Ghana earn less than GHS1, 000.00 each month and this can’t match the cost of living. With the recent upward adjustment in water and electricity tariffs as announced by the government, it is very obvious that the already difficult and expensive cost of living standard of the ordinary Ghanaian would be worsen by this action of the government, these would generally translate into increase in prices of goods & services and this is what is called inflation.

Fig 1; Ghana’s Inflation


Source: BoG

Inflation has direct impact on standard of living of people in terms of expenses on food and non-food items, income, savings, loan and recreation over the period. fortunately, Ghana’s inflation has seen decline since 2015 till date with a single digit of 7.8 but after remaining relatively low for all these months, the cost of living of citizens is surging up reason being that inflation does not on its own pressure the macroeconomic indicators but other factors also contribute to the happenings. Although inflation is single digits, interest rates are still very high and the local currency continues to depreciate in value which of course makes cost of doing business still expensive especially when the business is funded by loans. Businesses have to always battle with a depreciating cedi to buy dollars for their importation and finally transfer the cost to the consumer.

On the other hand of the coin, there is mostly a current account deficit because the economy is an import driven one and the narrative must change to an export driven if we want to reduce inflation and the rate at which our cedi is depreciation or better still to appreciate against other currencies. I therefore recommend that government should pay attention to the agric sector of the economy in order to increase the supply of households’ essentials and lower the cost of living.

Interest rate & Exchange rate

The cost of doing business in Ghana is still very high due to the high interest rates and persistent depreciation of the cedi even though the Bank of Ghana monetary policy rate has seen some decline over the last three years and its currently maintained at 16%.It is very worrying that commercial banks’ lending rates are still very high with an average rate of 22% to 30%, making cost of borrowing high, access to funds less available and businesses finding it very difficult to repay back loans. Fundamentally, this is one of the key reasons why cost of living in Ghana is very high. This is because the overhead cost for these commercial banks are very high, looking at it from the perspective of utility bills, staff renumeration,non-performing loan provisioning, stationary cost and cost of funds (borrowed foreign funds)for their operations which must be paid back in foreign exchange. The banks have no option than to transfer all these overhead cost to their customers.

Moreover, it’s evident that 85% of the things we use in Ghana are imported and these importers mostly borrow from the banks to import their goods and services, pay huge taxes at the port before adding their profit margins and eventually pass on all these cost to the final user, making it expensive to purchase. Note that cost of living automatically becomes high since the purchasing power of the ordinary Ghanaian reduces and it is even worse when income levels of households are not increased over the same period.

Sadly, the bank of Ghana report shows that loans and advances in the banking sector available for the sector that employs majority of Ghanaian i.e. Agriculture. Fisheries and Forestry is just 4.2%, which even justifies the reason why majority of Ghanaians are poor and can’t afford basic economic things like food and non-food items, transportation and utility, no doubt financial freedom is more than absent in the lives of majority of Ghanaians.

Gross Domestic Product, GDP

Gross Domestic Product gives an idea of the total contribution of all sectors of the economy of Ghana into one basket and this obviously has a direct relationship with living standard of the people as it indicates how each of these sectors are performing. With this in mind, it is very clear why majority of the population in Ghana are trapped in the poverty web because the total contribution of the sector (into the GDP basket) that employs majority of the people which is Agriculture is very low.

Ghana’s economic growth outlook is bright as it is projected to hit 7.6% by end of 2019.Fortunately or unfortunately, non-oil growth is expected to significantly increase to 5.5% with the hope that agriculture and service sector would experience a substantial growth. Agriculture and the service sector by far employs (about 85%) majority of the Ghanaian workforce but its contribution to GDP is about 4.6% and this reveals why majority of the population are poor and standard of living very low. Most people in these sectors especially the agric sector do not really gain much and a large percentage of their earnings go into food and non-food items, utility and most importantly transportation.

It is important to emphasis the fact that wealth distribution is very much concentrated in the oil & gas, mining, industry and manufacturing and politics and one would realize that these are individuals with specialized skill and knowledge.

Indeed, need I say more that economic growth in Ghana is for just a specific few whilst the majority of the workforce are left with very small portion of the GDP gain to share? This explains why even though the economic growth outlook of Ghana is projected to hit 7.6% in a single calendar year and yet still the majority of her population do not have money in their pocket and thousands of families are living in abject penury in Ghana.


Ghana’s economic growth outlook on paper is fairly stable and very impressive but does not benefit the majority of her citizens as most of them are living in penury. One would have expected that these projected economic growth pattern and momentum ideally would translate into the pockets of the people and put the country on the right path to reducing poverty, making living standard affordable and guaranteeing financial freedom but it’s rather the opposite. High level of youth umemployment,low productivity, high and continues increase in utilities, high talk tax and to worsen it all, high appetite for corruption that permeate through all the sectors of the economy especially government appointees.

Government is recommended to begin a stakeholder engagement with all leaders in all sectors of the economy to amend where necessary and enhance where need be, the policies, change the narrative with respect to productivity, profitability and ownership of responsibility.Again,policy direction should be towards marginalized sectors to improve them and budget allocation should be focused especially on agriculture, production and manufacturing to make these sectors more growth oriented, to be able to employ the theming youth workforce of our country.

©Jerry.J.AFOLABI is a Financial & Economic expert who believes that ordinary people can do extraordinary things when given opportunity. He is a Change Maker with the ability of easily getting people to get things done for the good of humanity.Email;[email protected]/0541238987

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