Ghana’s economy is showing new signs of life after a turbulent year in which its gross domestic product plummeted and the value of its currency almost halved.
Investor confidence has been boosted in recent months by stabilisation of Ghana’s national currency, the cedi, and ongoing talks with the International Monetary Fund (IMF) about a loan package, according to Ekwow Spio-Garbrah, the trade minister.
Ghana, which posted an average of 6 percent annual GDP growth over the past six years, has been dubbed ‘a model for democracy’ by the US president Barack Obama. But heavy borrowing and a rapidly depreciating currency have sparked concerns that the economy could tumble as it gears up for a spike in oil production.
‘Ghana’s economy used to be red hot – it’s now probably orange hot,’ Spio-Garbrah told the Guardian newspaper in London recently. ‘The economy is already rebounding through the stabilisation of the cedi, which had depreciated quite a bit in the early part of the year, but within the last one month it has become stable and has been gaining strength against the dollar, against the pound.’
An overreliance on imports has also contributed to the country’s economic woes, according to President John Mahama. ‘Ghana imports almost everything our population consumes, from televisions to toothpicks. We even import goods and products that we are more than capable of producing locally, like rice, sugar, wheat, poultry and flour.’
Spio-Garbrah said Accra is trying to increase government revenues while reducing expenditures. In the past few months, Ghana has sold $1.7bn (£1.07bn) of cocoa and banked another $1bn through a Eurobond government bond, boosting investor confidence in the country’s ability to weather its economic crisis.
Ghana is expected to double its oil output to 200,000 barrels a day by the end of 2016, according to Razia Khan, head of economics for Africa at Standard Chartered. ‘The big problem that Ghana faces right now is the amount that it spends on debt service, which is well ahead of the amount that has been budgeted.’
An IMF spokesperson said: ‘The cedi has stabilised and appreciated against the dollar recently. Nevertheless, it remains significantly depreciated from a year ago.
‘An IMF team is in Accra to continue discussions on a possible programme. The mission will build on the progress made during the discussions that took place in Washington in October.’
‘Ghana’s medium-term growth prospects are favourable but are now put at risk by considerable short-term vulnerabilities. Ghana’s large twin deficits will need to be reduced to stem the depreciation of the cedi, reduce inflation, and bring the public debt to a more sustainable level.’
Khan added: ‘Ghana has long been seen as a place that is relatively business-friendly in terms of having a very easy operating environment – especially compared to other economies in the region – and that hasn’t necessarily changed dramatically.’