Experts weigh in on road to economic recovery

Two economic experts have said that lowering the cost of living and job creation should be the key priorities of the incoming President from next year.

They recommended the focus on agriculture and manufacturing as the key sectors to drive down the cost of living and address the employment “hunchback” affecting the economy.

They were optimistic that these two key areas could drive growth, create jobs and bring down the cost of living generally in the country.

Renowned economists George Haldane-Lutterodt and Dr Richmond Atuahene, in two separate interviews with Graphic Business, also called on the government to take a hard look at the bureaucracies that created fertile grounds for corruption and waste of resources.

Mr Haldane-Lutterodt entreated the incoming administration to also take a second look at the previous government’s popular marquee programme, the Free Senior High Education Policy, adding that the policy was such a huge drain on the country’s financial coffers.

"The new government should not shy away at taking a critical look at the Free SHS on whether the country can afford this in its present form without a radical review of this policy," he noted.
 

Economic reform

He stressed the importance of making the country work again through sound economic policies.

"In fact, the election has shown that it is obvious, in its present form, the free SHS Policy has been abused and has proved to be a huge financial drain on the economy, which Ghana cannot afford. Even advanced countries, far richer than us, cannot afford this kind of populist social engineering," he told the Graphic Business.

According to him, these were some of the hard decisions the new government would have to make, which, he said, was a reality of the chronic economic situation in Ghana.

He called on the new administration to institute an urgent need for economic reform to set the fundamentals of an economic revival in the country.

“With the right policies and strategies in place, Ghana can revitalise its economy, create jobs and improve living standards for its citizens,” he noted.

He called for fiscal discipline in the management of the country's finances, which, he said, was critical for economic stability, growth and development.

“This election was about the economy and nothing more, bread and butter and not sloganeering; the government must endeavour to reset the fundamentals of the economy,” he stated. 

Ghana’s economy

The country's economic woes can be attributed to a combination of factors, including the failure of the government to benefit from the current high commodity prices, a significant increase in public debt and a lack of diversification in the economy.

Once hailed as one of Africa's most promising economies, Ghana’s economy has struggled to maintain growth momentum in recent years. The country's GDP growth rate has slowed, and inflation has remained stubbornly high.

Furthermore, Ghana's public debt has increased significantly, reaching alarming levels. The country's debt-to-GDP ratio has risen to 82.52 per cent, making it challenging for the government to meet its financial obligations.

According to a 2024 World Bank Report published in October, the country faced a surge in public debt due to fiscal measures taken in response to external shocks, which resulted in losing access to international financial markets. 

This led to debt distress, dwindling international reserves, and escalating inflation.

A subsequent rise in poverty levels since 2020, coupled with weak economic growth, limited government spending, and high inflation—particularly in food prices—have worsened living standards, pushing more people into poverty, and increasing the risk of food insecurity. Returning to growth, according to the report, to its potential rate of five per cent would require macroeconomic stability.

A debt restructuring after an IMF Extended Credit Facility, approved in May 2023, for approximately $3 billion appears to stabilise the country’s macroeconomic indicators.

Poverty rates are projected to rise until 2026, peaking at 31.5 per cent in 2025 before slightly declining to 30.6 per cent, with rates at the Low and Middle-Income Countries (LMIC) line potentially reaching 55.1 per cent by 2026 due to limited growth in services and agriculture and rising prices outpacing income growth for the poorest.

Addressing challenges

To address these challenges, Mr Lutterodt recommended that the President-Elect prioritised economic diversification, investing in key sectors such as agriculture, manufacturing and tourism. He also emphasised the need for fiscal discipline, urging the government to implement measures to reduce the budget deficit and stabilise 
the economy.

“The government must take the bull by the horns and invest in agriculture to bring down food inflation and also tackle the bottle-necks which affect the manufacturing sector," he stated.

In addition, he suggested that the government explore innovative financing options, such as public-private partnerships, to support key infrastructure projects. 

He also recommended investing in human capital, particularly in education and skills development, to ensure that Ghana's workforce was equipped to compete in the global economy.

Avoiding wastage

For his part, banking and finance analyst, Dr Richmond Atuahene, urged the new government to cut wastage in government expenditure.

Dr Atuahene also appealed to the incoming government to organise an economic dialogue to understand and appreciate the full extent of the country’s economic challenges and how to overcome them.

“Any economic dialogue will unearth the gravity of Ghana’s economic problem, and the President-elect must acknowledge and appreciate the enormous financial tragedy we find ourselves in to be able to dig for solutions,” he stated.

Inflation

He predicted a peak in inflation during the yuletide and into the next year, tasking the incoming government to liaise with financial experts to advise him on how to carve out a mechanism to reduce inflation in the coming year.

“The economy has been ravaged and we must all swallow the bitter pill of getting it aground, which doesn’t come with ease to be able to have a sustained developed 
economy,” he stated.

Food dialogue

He advocated a food dialogue involving stakeholders to tackle the menace of food inflation and scarcity of food in the markets.

“We must investigate why an amount of $12 million was wasted on the non-existent Pwalugu Dam and why it has not been realised,” he said.