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Can Ghana's Economy Recover?

FILE - Ghana labor unions want the government to act to halt depreciation of Ghana's currency, the cedi. Taken July 3, 2007
FILE - Ghana labor unions want the government to act to halt depreciation of Ghana's currency, the cedi. Taken July 3, 2007

Economic analysts say Ghana’s current economic woes is largely due to "aggressive management" by the government as it sought to cushion the population at the height of the Covid-19 pandemic, coupled with excessive domestic and foreign borrowing.

The Ghanaian economy has been reeling under intense pressure following months of the local currency’s fast depreciation against the U.S dollar, as the country faces its worst crisis in a generation.

Ghana’s total public debt stands at $48.9 billion as at the end of September. Of this figure, $28.4 billion came from foreign partners according to government figures.

In October, the cedi had one of its worst months on record, losing around half its value against the dollar in 2022. The World Bank said the cedi has been Africa’s worst performing currency this year.

Lord Mensah, a professor of finance at the University of Ghana Business School in Accra told VOA that "inefficient allocations of our expenditures" particularly during the 2020 electioneering period has returned to bite the economy.

"Government’s intention to spend increased in 2020 even as Covid-19 hit. They went about providing some freebies to college (students), absorbing electricity bills, and giving out free water somewhere in June/July," he said.

"I thought they would have ended it in September, but I knew very well that there’s no way the government could stop because it would have been just a few months into the election (in December), because they would want to win the hearts of the electorates."

He said what happened afterward confirmed their projections.

"Indeed, they continued. We know very well (that) in economics, there's no free lunch, because whatever you get free would be paid for in the long run."

"In the 2023 budget there’s a policy that will finance start-ups. We’ve an economy that’s in distress which the finance minister has admitted. So, how do you go and start a policy that will be financing startups - targeting new businesses, innovative businesses?" Professor Mensah queried adding that "these are risky businesses."

"Why don’t you channel it to existing businesses? Because old businesses have stood the test of time, and can solve employment problems."

In mid-November, Ghana’s Finance Minister, Ken Ofori Attah apologized for the hardships Ghanaians are enduring while bipartisan calls for his dismissal fell on deaf ears.

Delivering the West African nation’s 2023 budget before parliament later that month, he said the country was at high risk of debt distress, forcing the central government to freeze hiring of public and civil servants, while clamping down on government car purchases and non-essential travel to apprehend the skyrocketing debt crisis.

Professor Peter Quartey, a research fellow at the Institute of Statistical, Social and Economic Research (ISSER) Ghana told VOA that some social intervention programs by the government have perhaps done more harm than good.

"In the case of the free senior high school program for instance, we all agree that an educated population is much better than an uneducated one. However, making it free for everyone, including those who can afford, are asking to pay and yet they are told is going to be free... I think it's not the best of options," he said adding "I support free SHS but not in its current form."

He continued "government could be a bit more proactive in dealing with some of the challenges by being swift and decisive with the policies - and to implement laws to regulate the exchange rate market."

The ISSER analyst said despite ongoing talks with the International Monetary Fund (IMF) to help the country out of its debts distress, the oil, cocoa and gold producing powerhouse is not yet out of the woods.

Quartey also said "we expect the IMF program to happen in the first quarter of 2023. That gives some hope though that at least things would be better managed than previously. If we don’t do the right thing we’ll continue to go back to the IMF,'' he said.

"Until the fundamental structure of the economy changes, I don't think we're out of the woods."

He added that the government’s youth-centered programs, as well as macro-economic stability for the private sector to flourish can offer some hope.

On Wednesday, the Bretton Woods Institution said a team will visit Accra from December 1-13 for further talks to help the country cut its debt distress. The IMF has yet to remark on timelines for a program.