The current economic challenges in the country could derail the plans of the New Patriotic Party (NPP) to break the eight-year jinx in Ghana’s politics, the Economic Intelligence Unit (EIU) has said.
Ghana has a history of voting out political parties after two consecutive terms, and the London-based analyst has advised the government to solve present economic challenges to gain a chance for another term.
In its latest five-year outlook for Ghana, released on April 13, EIU said: “Our baseline forecast is that ongoing public dissatisfaction with the slow pace of improvements in governance—such as infrastructure development, job creation and easing of corruption—will trigger anti-incumbency factors and push the electorate to seek a change”.
Because of that, they said, “the NDC, therefore, stands a reasonable chance of winning the 2024 elections”.
As part of its suggestions, the EIU advised the government to consider another IMF programme to boost investor confidence.
“Ghana would benefit from an IMF programme, given investor concerns about fiscal sustainability due to high debt, but the government will prioritise policy independence,” the report stated.
However, the government is not considering that option in preference to home-grown solutions such as taxation and up to 12 expenditure cutting measures to address the hardships.
EIU was optimistic that the recovery programme by the government under Ghana CARES Obaatanpa initiative would boost agricultural sector growth between 2022 and 2026 by supporting increases in cocoa output and agro-processing.
“The sector will register growth, benefiting from government investment to improve cocoa yields and from moves towards self-sufficiency for staples such as rice. This will be reflected in a rise in agriculture as a percentage of GDP, from an estimated 22.2 per cent in 2021 to 24.3 per cent in 2026,” it outlined.
The EIU expects real GDP growth to rise to 5.2% in 2022.
“We expect gold production and processing to strengthen in 2022, driven by the recommissioning of the Bibiani gold mine in western Ghana, with the first gold pour expected in the second half of 2022,” the report added.
What is the economic condition in Ghana?
The Ghanaian economy has seen many challenges that the government has blamed on the COVID-19 pandemic and the Russia-Ukraine conflict.
There is pressure on the government due to rising public debt, expenditure management, revenue generation constraints and a rise in the cost of living.
According to central bank figures, Ghana’s total public debt stands at $50.8 billion, about 80% of the country’s gross domestic product.
Many analysts consider this a concern due to the distress level.
The situation is compounded by the annual inflation, which accelerated to 19.4% — the highest since August 2009 — from 15.7% in February, according to Government Statistician Samuel Kobina Annim.
The depreciation of the Ghana Cedi has not helped matters, with the EIC projecting that the Cedi is likely to end 2022 at a GH¢7.87 rate against the United States dollar.
It highlighted that this would largely be influenced by the import-driven structure of Ghana’s economy and offshore investor sentiments in Ghana’s bonds on the international capital market.
At the moment, major rating agencies such as Fitch and Moody’s, have downgraded Ghana over the high debt and low revenue, which makes bonds and other government securities unattractive to investors.
Fuel prices have also been soaring since the beginning of the year, with the prices of petrol and diesel hitting nearly GH¢10.00 per litre, affecting transport fares and exacerbating prices of general goods and services.
To address revenue shortfalls, the government is implementing a 1.5% electronic transaction levy which it says will help the country self-finance its development.
The E-Levy is expected to generate an estimated amount of GH¢ 6,96 billion in 2022, GH¢7.89 billion in 2023, GH¢8.92 billion in 2024 and GH¢10.09 billion in 2025.
It is also one of the measures to increase the country’s tax to Gross Domestic Product (GDP) ratio from 13 per cent to 16 per cent.