Once a star, Ghana struggles with economic crisis

The bottling machine at the Pac factory in Nakobs, on the outskirts of Ghana’s capital, Accra, is running at full speed, producing sachets of treated drinking water.

But all is not well in Nakobs. Like other small businesses in Ghana these days, owner Daniel Tekyi is struggling.

With inflation above 50 percent, the currency worth half of what it was last year, fuel prices doubling and debt payments gobbling up more than half of government revenue, Ghana is struggling its worst economic crisis in decades.

Ghana signed a $3 billion bailout deal with the International Monetary Fund on Tuesday in a bid to shore up public finances, but economic stability is still a long way off.

“It would be better if we shut down the factory,” Tekyi said. “We really don’t know when this crisis will end.”

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Once hailed as a touchstone of stability and economic security in a region plagued by coups and jihadist wars, Ghana has steadily lost investor confidence.

Like much of the continent, Ghana slowly emerged from the pandemic only to face the fallout from the war in Ukraine and rising fuel and food costs.

Faced with a payments crisis, President Nana Akufo-Addo this year reversed course on his “Ghana Beyond Aid” concept and began talks with the IMF for a bailout.

The government has already announced a 2.5 percent increase in VAT and a hiring freeze for public workers to help cut costs and raise revenue. A debt restructuring is underway.

With an IMF team in Accra, Finance Minister Kenneth Ofori-Atta promised the credit deal, debt swap and a package of reforms would restore investor confidence and steer the country’s economy “serious times”.

But many Ghanaians are bracing for possible austerity before stability returns, with the impact of new taxes and spending cuts.

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The emergence of the Ghanaian government may also have political consequences. Elections are two years away, with Akufo-Addo sidelined and ruling New Patriotic Party or NPP allies already jockeying for position for primaries in early 2023.

The government must find ways to mitigate any impact of the reforms, especially on public sector employment and high taxes, said economist Daniel Anim Amarteye.

“If this is not done, it could be politically fatal,” he said.

– Dark Star –

Ghana’s economic story was brighter a few years ago. Before the pandemic, the West African state was a star with rapid growth rates, rising oil production and strong investor interest.

But its high level of debt was a looming problem.

Since the beginning of the year, its cedi currency has lost half its value, helping to increase its debt burden by $6 billion, with warnings that Ghana was at risk of default.

A major part of the IMF deal is returning the country to debt sustainability through restructuring, asking investors to swap bonds for later maturing bonds.

The IMF’s approval of the $3 billion loan will depend on its success. Officials say they have the means to help offset any impact on local banks or pension funds, the main holders of national bonds.

But Ghana’s main labor movement, the Congress of Trade Unions, is already talking about the deal’s potential impact on workers’ pensions.

The opposition National Democratic Congress has been quick to blame the Akufo-Addo government for increasing the debt, even trying not to censure the finance minister.

ALSO READ: Shops, traders in Ghana close to protest inflation

“No matter how the IMF program turns out and how they turn the corner, the records will show that they took us to 40 percent inflation, the records will show that the market was closed to us, the markets will show that the cedi depreciated by 54 percent..,” said NDC lawmaker Isaac Adongo.

The Akufo-Addo government spent heavily on social programs such as free secondary schools. But its ruling New Patriotic Party says the crisis is about external shocks: Covid and Russia’s war in Ukraine.

“Assuming that Covid didn’t happen, what would our story be?” NPP Director of Communications Richard Ahiagbah told AFP.

– Daily Struggle –

Testifying before parliament last month, Ofori-Atta apologized to Ghanaians for their pain, but officials dismissed allegations of NDC mismanagement.

But political calculations are not a luxury Patience Tesonkeh can afford.

Stung by the rising price of cooking gas, the single mother switched to cheaper charcoal for cooking. Your usual weekly shopping budget no longer extends to all of your family’s needs.

“I withdrew 300 cedis ($20) thinking I would get everything I needed, but I couldn’t,” he said on a recent trip to buy rice, fish and yams at a market in his Accra neighborhood.

Unionized traders and shopkeepers in the capital also closed their businesses last month in a three-day protest over the rising cost of living.

For factory owner Tekyi, the numbers just don’t add up. Production and transport now add up to 5.8 cedis per bag of water. But he can only sell them for five.

“We have planned to close our factory because we are not making any profit,” he said.

“But we thought for a second that if we close and fire our workers, how can they survive too? So, for now, we are producing and making a loss.”

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