Following the macroeconomic crises experienced in 2022, Ghana witnessed some improvements in its economic conditions throughout 2023. However, persistent challenges remain, notably characterized by elevated inflation, subdued growth, and substantial pressure on public finances and debt sustainability.
The country encountered significant external shocks that exacerbated existing fiscal and debt vulnerabilities, resulting in a constrained access to international markets, limited domestic financing options, and an increased reliance on monetary measures to support government expenditures.
Ghana is in debt distress and public debt is unsustainable. In response, the Government has embarked on a comprehensive debt restructuring, a significant fiscal consolidation program, and the implementation of reforms to foster economic stability and resilience. The authorities’ stabilization efforts are being supported by an Extended Credit Facility (ECF) program of the IMF for approximately $3 billion.
The crisis has taken a toll on the pace of economic growth – which decelerated to an estimated 2.9% in 2023 and is projected to remain weak in 2024. Returning growth to its potential rate of 5% will require macroeconomic stability. Over the longer term, structural reforms aimed at promoting private sector development and increasing FDI attractiveness are necessary to raise country’s growth potential. Critical reforms include strengthening the insolvency regime, access to finance, the energy sector, and the legal and regulatory environment faced by foreign direct investors. Accelerating digitalization and harnessing the opportunities offered by the Africa Continental Free Trade Agreement (ACFTA) through integration with global value chains will also be important in this regard.
Fiscal consolidation is broadly on track with estimated deficit of 4.6% of GDP at the end of 2023, significantly lower than the 10.7% deficit in 2022. At 15.7 % of GDP in 2023, revenues and grants reached the same level as 2022 despite lower oil revenues.
Year-on-year inflation fell from 53.4% in January 2023 to 23.2% in December 2023, reflecting more stable exchange rates and the effects of monetary policy tightening in 2022-23. Over the first months of 2024, the deceleration of inflation has stalled due to pass-through of the depreciation on prices of imported goods, on non-food inflation while food inflation marginally fell.
The immediate implications of the macroeconomic crises and debt distress in the country are worsening the poverty levels and living standards of the population. The “international poverty” rate is estimated at 31.4% in 2023, a worsening of 4 percentage points since 2022.
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