The major problem for Ghana now is rising debt, which stands above 80 per cent of GDP and is projected to reach 104 per cent by the end of 2022.
To achieve macroeconomic stability, the government has applied for a US$3 billion IMF bailout programme starting in the first quarter of 2023. However, Ghana has a very vibrant consumer and industrial products and services sector. This hastens economic transition.
Ghana’s economy has suffered significantly since early 2022, plunging the country into a full-blown economic recession. According to the Ghana Statistical Service, inflation rose from 13.9 per cent in January to 37.2 per cent in September.
- The major problem for Ghana now is rising debt, which stands above 80 per cent of GDP and is projected to reach 104 per cent by the end of 2022.
- To achieve macroeconomic stability, the government has applied for a US$3 billion IMF bailout programme starting in the first quarter of 2023.
- However, Ghana has a very vibrant consumer and industrial products and services sector. This hastens economic transition.
Some analysts believe the actual level is more than twice the official rate – possibly as high as 98 per cent. Petrol and diesel prices have jumped by 88.6 per cent and 128.6 per cent respectively. Most public transport fares have increased by over 100 per cent since January.
Likewise, water and electricity tariffs have risen by 27.2 per cent and 21.6 per cent respectively this year. According to the World Bank, Ghana has the highest food prices in sub-Saharan Africa, with prices soaring by 122 per cent since January.
The country’s interest rate of 30 per cent and lending rate of 35 per cent is the highest in Africa. Bloomberg says the Ghana cedi is now the worst-performing currency globally. The IMF revised Ghana’s projected growth rate for 2022 from 5.2 per cent to 3.2 per cent.
As Ghana seeks support from the International Monetary Fund (IMF) for the 17th time, its economic woes continue. After the newly introduced electronic transaction levy (e-levy) failed to yield the expected results, a bailout became necessary.
Ghana’s macroeconomic stability has been improved by previous IMF programmes. Due to the rarity of self-imposed controls in the country, fiscal discipline is often dependent on these programmes.
Problems began when international credit rating agencies downgraded the country to junk status due to its unsustainable and growing debt. The relegation denied access to global capital markets, and prevented the raising of the US$2-3 billion Eurobond required to service its debts and support the Ghana cedi, which then plunged into freefall.
The major problem now is rising debt, which stands above 80 per cent of GDP and is projected to reach 104 per cent by the end of 2022. Ghana has been thrust into debt distress as 70 per cent of its total revenue must be allocated towards debt servicing. This leaves no room for other statutory obligations or investment in education, health and infrastructure.
To achieve macroeconomic stability, the government has applied for a US$3 billion IMF bailout programme starting in the first quarter of 2023. During the discussions, the government was given the opportunity to restructure its debt in order to expand its fiscal space.
However, Ghana needs a national industrialisation plan anchored in its strong manufacturing sector with links to agriculture. Ghana has a very vibrant consumer and industrial products and services sector. The country can also establish import-substitution and export-driven industries based on its comparative advantages.
Manufacturing has the ability to revolutionize Ghana’s economy by broadening the country’s production and export base while also increasing employment, income, and export revenues. Cocoa processing, food and agro-processing, textiles and garments, and medicines are some of the industries that might promote manufacturing in Ghana.
Ghana’s most important manufacturing industries include aluminium smelting, oil refining, chemicals and cement, processing of metals, pharmaceutical manufacturing, wood processing, as well as textile and garment manufacturing.
According to the African Development Bank (AfDB), Ghana’s industrial sector was a major driver of growth of the economy from 2017 to 2019, with an average annual growth of the industry sector exceeding 10 per cent. The AfDB further noted that with the African Continental Free Trade Agreement (AfCFTA), Ghana’s industry will absorb increasing raw materials from the region, scale up manufacturing, and trade in processed and light manufactured products.
Emerging and ongoing initiatives that may have a significant impact on the manufacturing sector include the development of value chains for some local raw materials, the impending implementation of GCAP to ensure that goods imported into Ghana meet certain standards, and the elimination of minimum capital requirements for foreign investors entering the manufacturing sector.
Ghana competes in the global economy primarily using natural resources. Other than the usual exports of cocoa, gold, lumber, and crude oil, Ghana has a competitive advantage in numerous product categories. Increasing the proportion of high-income commodities in the export basket hastens economic transition.
The opportunity is providing better, economically advantageous items to regional and worldwide markets. Cocoa processing, wood processing, aluminium products, palm oil, food and agro-processing, and fish processing are examples of manufacturing sub-sectors that fit these two requirements.
Manufacturing subsectors that capture considerable proportions of manufacturing value-added, such as food and drinks, chemicals, and textiles, have significant technology, knowledge, and skills inherent in them. These assets can be used to produce additional goods within the sub-sector or even outside of it. It is also easier to go up the value chain after you have mastered relevant technologies and markets.
The One District One Factory industrialisation agenda should be reviewed and better implemented. These measures can improve the country’s trade balance and government revenue.
The “One District, One Factory” Initiative is a crucial component of the Ghanaian Government’s Industrial Transformation Agenda. The Ministry of Trade, Industry, and Presidential Special Initiatives pioneered the concept as part of an integrated programme for Accelerated Growth and Industrial Development.
Initially known as the Rural Enterprises Development Programme, it was eventually renamed the District Industrialisation Programme (DIP). It was intended to be a comprehensive rural industrialization initiative including the establishment of at least one medium to large-scale industry in each of Ghana’s administrative districts.
The project aspires to do this through a huge private-sector-led state-wide industrialization effort that will equip and empower communities to use their natural resources to manufacture items that are in great demand both locally and globally.
This would enable the country to realize the benefits of modernization by increasing agricultural and manufacturing output, lowering dependency on imports, and increasing food availability.