John Dramani Mahama, Ghana’s former president, is on course to reclaim the nation’s highest political office, pending confirmation by the Electoral Commission.
However, he would be faced with the enormous challenge of turning around the Ghanaian economy which has faced significant challenges in recent times.
Current State of Ghana’s Economy
Rising Debt Profile
Ghana’s economy has been burdened by a rising debt profile. By the end of 2023, the country’s total debt stood at $43 billion, and projections indicate it will escalate to $52 billion by the close of 2024.
A substantial portion of this debt is external, including a $3 billion Extended Credit Facility (ECF) program with the International Monetary Fund (IMF), of which $600 million has been disbursed. Additionally, Ghana owes $5.4 billion in bilateral debt to institutions such as the Paris Club and China.
In December 2022, the country declared a sovereign default, suspending debt service payments on Eurobonds, commercial loans, and most bilateral debts, though it continued servicing multilateral obligations.
This default necessitated difficult negotiations with creditors and bondholders who were unwilling to restructure the terms of their bonds. The country’s weak revenue mobilization, typified by tax collection inefficiencies, has exacerbated the debt crisis.
A declining Ghanaian cedi has also increased the cost of servicing foreign debts, placing the country at risk of debt distress.
Debt-to-GDP Ratio
Ghana’s public debt-to-GDP ratio reached 79.2% in September 2024, edging close to the IMF’s 2024 projection of 83% for the country.
This ratio exceeds the sustainable threshold for developing economies, reflecting high indebtedness relative to the size of the economy. Consequently, a significant portion of government revenue is allocated to debt servicing, leaving fewer resources for critical sectors like health, education, and infrastructure which in turn negatively affects Ghanaians’ quality of lives.
Debt Restructuring Challenges
To manage its debt burden, Ghana has pursued restructuring initiatives, including renegotiating Eurobond terms and engaging with the IMF and bilateral creditors under the ECF program.
However, the process has faced setbacks, further straining the country’s economic stability.
Rising Inflation and Poverty
Ghana’s inflation rate, which peaked at 50% in January 2023, remains high at 23% as of late 2024. Persistent inflation, especially in food prices, has eroded purchasing power and exacerbated poverty levels.
According to the World Bank, Ghana’s poverty rate is projected to peak at 31.5% in 2025 before slightly declining.
Decline in Global Prices of Key Exports
Falling global prices for Ghana’s primary exports—gold, cocoa, and oil—have also reduced foreign exchange earnings, further constraining the country’s ability to address economic challenges effectively.
Mahama Has Work Cut out
If confirmed as Ghana’s next president, John Mahama will inherit a fragile economy marked by high debt, insufficient revenues, rising poverty, and inflation.
Mahama would therefore be relied upon to rescue the Ghanaian economy from its recent decline with an increasing need to diversify the nation’s economy from its three main exports, improve revenue mobilization, and implement structural reforms to ensure sustainable debt levels.
To address these issues, Mahama has outlined a multi-faceted strategy. He plans to renegotiate the terms of the IMF bailout, introduce tax reforms, simplify business regulations, and implement a 24-hour triple-shift work system to increase productivity. He has also pledged to invest $10 billion in modernizing infrastructure and diversify the economy beyond its reliance on gold, cocoa, and oil exports.
It is just a matter of hours before John Dramani Mahaman is declared Ghana’s new president for the second time, and immediately he is innaugurated on 7 January 2025, he would be expected to revive the nation’s economy as quickly as possible.
