GHA | Mar 26, 2023

Current economic crisis among Ghana’s worst in decades

/ Our Today

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Inflation soaring as IMF bail-out deal drags on

Ghana is currently facing one of its worst economic crises in decades with soaring inflation compounding the suffering in the West African nation.

Ghanaians are being forced to dig deeper into their pockets to afford essential goods because of soaring inflation. The inflation rate for February stood at 52.8 per cent, according to the Ghana statistical service.

That means prices of items have more than doubled compared to last year. Runaway prices of food items and other commodities mean families are in constant distress.

Commodity prices have been increasing for months in Ghana, gnawing away people’s purchasing power. There has been some slight stability in fuel prices but they still are high compared to early last year.

Little progress in the IMF bailout deal

Ghana is seeking $3 billion from the Internatonal Monetary Fund (IMF) to shore up its economy. Not much progress has occurred since Ghana announced it was returning to the IMF to secure a bailout and restore some level of confidence in the economy.

Financial analyst, Professor John Gatsi told DW that Ghana was facing its worst run of poor economic conditions in decades.

“We are in a high inflation regime right now and this affects food items and imported items all together,” he said.

According to Gatsi, Ghana’s over-dependency on imported goods also increases prices. He added that there is no way around the inflation crisis. For him, “the food items under the inflation basket are primarily items that we could produce ourselves, so it is important for us to awaken and commit our resources and energy to ensuring that we get into the production arena”. 

The Ghanaian economist also blamed the current high inflation figures on poor economic decisions by managers of Ghana’s economy. Excessive lending to the central government by the Bank of Ghana to finance government activities was a key reason for the crisis, Gatsi stressed.

Impact of Ukraine war and pandemic

Ghana’s government has consistently argued that the COVID-19 pandemic and Russia’s invasion of Ukraine negatively affected the economy and triggered higher inflation. However, Gatsi disagrees.

“We are importing tomatoes from the Sahel region worth millions of dollars. This was not done by the Ukraine-Russia war,” Gatsi advised. Ghana’s debt levels have been unsustainable for years and the government had to renegotiate its debts with local creditors in a debt exchange programme.

It is yet to restructure its debts with external creditors to secure a $3 billion (€2.7 billion) bailout from the IMF. Much of the anticipated loans over three years are to stabilise the country’s balance of payments.

The government set a timeline in March to finalise a deal but that goal seems unlikely. In the meantime, citizens are bracing for more economic hardship.


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