Ghana, once a star, fights economic crises
The sachets of purified drinking water are being produced at full speed by the packaging machine at Nakobs’ Pac facility on the outskirts of Accra, the capital of Ghana. But things are not well at Nakobs’. Owner Daniel Tekyi is currently having difficulties, same like other small enterprises in Ghana. Ghana is going through its worst economic crisis in decades with inflation at over 50%, a currency worth half what it was last year, doubled fuel costs, and debt payments eating up more than half of the government’s earnings. In an effort to strengthen its public finances, Ghana inked a $3 billion rescue agreement with the International Monetary Fund on Tuesday, but economic stability is still a ways off.
Tekyi declared that closing the factory would be preferable. We are unsure of when the current situation will end. Ghana was once praised for its economic stability and security in a region rife with military coups and Islamist conflicts, but investor trust has slowly declined. Ghana slowly recovered from the epidemic, like much of the continent, only to deal with the consequences of the war in Ukraine and the rise in fuel and food prices. President Nana Akufo-Addo this year altered course from his “Ghana Beyond Aid” plan and initiated discussions with the IMF for a bailout due to financial difficulties. To assist reduce spending, the administration has already proposed a 2.5 percent hike in VAT and a block on hiring new public employees.
Finance Minister Kenneth Ofori-Atta stated the credit agreement, debt swap, and reform package would boost investor confidence and lead the economy out of “grave difficulties” when an IMF delegation was in Accra. However, many Ghanaians are preparing for probable austerity with the effect of higher taxes and expenditure reductions before any stability arrives.
Political repercussions might result from how Ghana’s government forms. With Akufo-Addo stepping down and friends of the ruling New Patriotic Party (NPP) vying for positions ahead of primaries in early 2023, elections are just two years away. According to economist Daniel Anim Amarteye, the government must find measures to lessen the effects of reforms, particularly on public sector jobs and high taxation. If it isn’t done, he said, “it might be politically deadly.”
A few years ago, Ghana’s economic situation was more promising. The West African nation was a rising star before the epidemic, with rapid growth rates, rising oil output, and keen investment interest. But the issue of its substantial debt was looming. Its cedi currency has lost half of its value since the beginning of the year, which has contributed to a rise in its debt load of $6 billion and warnings that Ghana threatened default.
Restructuring the country’s debt and asking investors to swap out current bonds for new ones with later maturities are two key components of the IMF accord. Success will determine if the $3 billion loan is approved by the IMF. Authorities claim to have the resources to lessen any effects on regional banks or pension funds, two significant holders of domestic bonds. The Trades Union Congress, Ghana’s largest labor union, is already raising concerns about the deal’s possible effect on pensions for employees.
The administration of Akufo-Addo invested a lot of money in social programs like free high schools. However, according to his government’s New Patriotic Party, the conflict is solely the result of outside shocks like Covid and Russia’s conflict in Ukraine. “What would our narrative be if Covid didn’t happen?” Richard Ahiagbah, head of NPP communications, told AFP. daily battle Ofori-Atta apologized to Ghanaians at a testimony before parliament last month, but authorities rejected NDC claims of poor management. But Patience Tesonkeh cannot afford the luxury of political considerations.