Ghana, known for its production of gold and cocoa, is currently facing its worst economic crisis in a generation. The country has just signed a new relief program worth $3 billion over three years with the International Monetary Fund (IMF) to ease the issue. However, the severity of the problem is still unclear, and the rate of inflation is at an all-time high of 41%.
The economy of Ghana has been struggling due to the combined effects of the new coronavirus pandemic and the war in Ukraine. Opposition parties are blaming the crisis on a “grave misstep” in the economy, which the government denies. The size of Ghana’s debt is now equal to the annual total of its economy. The government defaulted on loans, leading to the restructuring of debts with creditors to receive IMF relief.
One of Ghana’s underlying problems is the lack of imports, as there isn’t enough export income to cover everything. The balance of payments deficit is part of what IMF loans are designed to help. The program is expected to significantly reduce inflation and ensure a stable local currency. Ordinary Ghanaians will benefit from price stability of basic commodities, including imports. However, the injection of funds from the IMF will not necessarily solve the country’s long-term economic problems.
Many Ghanaians doubt that the new relief program will last for up to three years, and some believe the bailout will only address current challenges. The biggest challenge in implementing the IMF program will come next year when Ghana will go to the polls. Ghana’s government has a history of significantly increasing spending before elections – showing voters what a good job they are doing, even if they don’t always have the money.
The situation is not impossible to solve. Development partners, including the World Bank, have pledged to help the country get out of the economic quagmire. If the country can control spending and make the most of the new relief program, they may be able to overcome their economic troubles.