Ghana's Economy
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
Photo: Pexels

Ghana's EconomyA new report by the United Nations concluded that widespread child under-nutrition has taken a toll on Ghana’s economy. The report, The Cost of Hunger in Africa: Social and Economic Impact of Child Undernutrition in Ghana, found that the effects of hunger and stunting cost Ghana $2.6 billion dollars per year.

The report argues that Ghana’s government must make nutrition more of a priority in national development planning in order to improve food security.

Chronic malnutrition and stunting afflicts 19 percent of Ghana’s population and is responsible for 24 percent of all child mortality cases. Some areas face more hunger than others as 30 percent of children under five in Ghana’s northern region are stunted. Stunting occurs when adolescents are severely deprived of critical nutrients, such as proteins and minerals, while in the womb or during the first two years of life. According to the report, 37 percent of Ghana’s adult population suffered from stunting as children.

Malnutrition and stunting have significant long-term consequences on individual development and Ghana’s economy. Chronic health and food insecurity have resulted in higher health care expenses, additional burdens on the national education system and lower productivity by Ghana’s workforce.

The effects of stunting are also felt in Ghana’s educational system. Children who are underfed are more likely to miss, repeat classes and drop out of school. The report estimates that of the current working population aged 20 to 64, 72 percent of people who were stunted as a child completed primary school compared to 80 percent of those who were not stunted.

The report further says that repeating grades “increases the demand that the education system must meet, with the resulting costs in infrastructure, equipment, human resources and educational input.” In 2012, the 19,720 students who repeated a grade cost Ghana’s education system approximately $12.85 million.

Malnutrition also limits adults’ ability to work and contribute to Ghana’s economy. In manual work, such as agriculture, people affected by stunting lack the strength necessary to match the production and efficiency of individuals who are healthier. Non-manual workers who are stunted also produce less output because they received fewer years of schooling than people who were adequately nourished as children.

The U.N. recommends that the government invest more in nutrition policies and interventions to boost the overall health of Ghanaians. Better coordination among national agencies is necessary to create a more concerted approach to providing citizens with better nourishment.

The report notes that forging partnerships with private organizations and non-state actors will help the government “accelerate the development and implementation of malnutrition prevention strategies.”

Health officials can also raise more awareness about ways that people can improve their nutrition and health.

Sam Turken

Photo: Flickr