Ghana is a western African country situated on the coast of the Gulf of Guinea. More than half of the country’s GDP comes from the services sector, one-fifth comes from agriculture, and about one-fourth lies in industry. Though the nation possesses many major resources, like coal and gold, Ghana’s economy is suffering from a high debt burden and inflation. Thus, working-class individuals and those in poverty suffer as the prices of common goods rise, making it difficult for people to purchase necessities. According to the World Bank, “Simulations suggest that, in 2022, nearly 850,000 Ghanaians were pushed into poverty due to rising prices and the loss in purchasing power.”
Inflation in Ghana
In July 2023, Ghana experienced a significant inflation rate of 43.1%, marking an increase from the previous four months. The primary driver of this inflation was the soaring food prices, with food inflation rising from 54.2% to 55%. Additionally, non-food prices also saw an increase.
Furthermore, Ghana is grappling with a historically high level of public debt, nearly equivalent to the country’s Gross Domestic Product (GDP). In response to these pressing economic challenges, Ghana sought and secured a $3 billion bailout loan from the International Monetary Fund (IMF) in December 2022.
Despite Ghana’s economic struggles, inflation has improved slightly since last year’s peak. In 2022, the cedi, Ghana’s local currency, lost more than half its value compared to the U.S. dollar. To cope with inflation, the Bank of Ghana increased interest rates, which hurt businesses and households that relied on borrowed funds. Consumers and businesses are still suffering from the ramifications of last year’s economic catastrophe.
Impact on Civilians
Citizens are facing heightened financial challenges as essential commodity prices continue to rise. Lower-income families grapple with the increasing costs of rent, school fees and food. Businesses, too, encounter difficulties as fluctuating prices for goods make investments more uncertain. This economic instability impacts various aspects of people’s lives.
Poor government spending has also resulted in mounds of debt. Government entities now owe thousands of contractors money, which puts those workers at a loss. For example, many teachers face months of back pay, making it even more difficult to purchase everyday goods. Inflation has also diminished consumers’ purchasing power, shown through the prices of goods like maize: 159 kg cost 300 cedis in 2021, compared with the current price of 650 cedis. Maize is a prime example of a staple grain in Ghana that has increased significantly in price.
Causes of Economic Struggles
There are many contributing factors to Ghana’s economy, but the nation was not always struggling. When President Nana Akufo took power in 2017, inflation decreased significantly from 15.4% to 7.9%. By 2019, Ghana had the world’s fastest-growing economy and was described by the World Bank as “Africa’s shining star.” That same year, Ghana’s budget deficit was reduced to 5% of the GDP.
Some argue that the COVID-19 pandemic and Russia’s invasion of Ukraine drove inflation. However, many economists attribute much of the issue to poor government decisions, including excessive borrowing from the Bank of Ghana.
Hope for the Future
Numerous organizations are actively engaged in addressing Ghana’s economic challenges. More than 24 aid groups, which include Oxfam, Christian Aid, Caritas Ghana, ActionAid and Debt Justice, have collaboratively called on international creditors to reduce a portion of Ghana’s debt. In a joint letter signed by these organizations, they highlight the direct impact of the debt crisis on the people of Ghana. Ghana’s substantial debt burden has led to inflated prices, which, in turn, have made it increasingly challenging for many families to meet their basic needs.
The U.S. is also doing its part to assist Ghana. In March 2023, Kamala Harris announced that the U.S. pledged $100 million in assistance. The government has also requested another $139 million from Congress for aid to Ghanaians. The aim is to put these donations into efforts to lower some of the costs of commodities like food and fuel.
While Ghana’s economy is still suffering, the fact that inflation is lower this year than last gives hope for the future.
– Lindsey Osit