Global Economic Crises. The Way Forward For Ghana.


Ghana like many other countries has not been spared the current global economic crises. The last three months have been the most excruciating with unprecedented cedi depreciation and rising prices of goods not seen in our recent history.

The aim of this article is to offer some few recommendations for the way forward. But I am compelled by the misinformation in both the tradition and social media about the actual causes of the current economic crises, to provide some background and more and better particulars for the benefit of those interested in the truth.
The few causes discussed below are not exhaustive but those that come to mind:


The energy sector has been one of the major contributors to the drains in our national coffers since 2017 as also mentioned by the World Bank as a major contributor to Ghana’s rising debt. Because of our Dumsor past, contracts were signed to ramp up the country’s energy capacity to 5,083MW at the time the peak demand was about 2700MW. Unfortunately, most of these contracts were on ‘Take or Pay’ basis and most were also denominated in US dollars.
Hence, government had to pay for over 2000MW of energy we do not need since 2017 till date. They were those that were yet to come on stream and government has been renegotiating with some of the Independent Power Producers (IPPs) to defer the deployment of their plants. But there is a looming danger as recently, Ghana was slapped with a $170 million dollars judgement debt for cancelling the power purchase agreement (PPA) with Ghana Power Generation Company (GPGC). Excess capacity payments have costs Ghana about GH¢17 billion cedis.


The banking sector which was one of the IMF conditionalities is said to have consumed about GHC25 billion and still counting. Over 4.6 million Ghanaians would have lost their savings had government not taken that action. It is also important to mention that because it was a one-off event, it wasn’t considered as part of the public debt but has now been added. So, it is not true government was understating the public debt. It was part of the agreement to ensure Ghana exited the IMF after having met all other conditionalities.


The twin disasters of the Covid-19 pandemic and the ongoing Russian-Ukraine war have been the mothers of all current economic crises of the world and not only Ghana. They have thrown the world’s economy out of control as captured by Kristalina Georgieva, the IMF Managing Director in the recent World Bank/IMF meeting in Washington DC. She said and I quote:

“In less than three (3) years, the world has lived through shock, after shock, after shock. First, the Covid pandemic. Then Russia’s invasion of Ukraine and the ensuing cost-of-living crisis”

She said in other places that the world was facing serious economic challenges with growth trending downwards while inflation is trending upwards. In human terms, people’s incomes are down, and hardship is up. Economies facing downwards trend include net importers of food and fuel-in Africa, the Middle East, Asia and Europe.

This was concurred by former President John Mahama when he addressed the 24th Annual Africa Business Conference at Havard University earlier this year. He said and I quote: “The Pandemic has had a generally deleterious effects on the economies of Africa. Data from Economic Commission for Africa (ECA) indicates that the Covid-19 has created the worst recession in 50years in Africa with average GDP shrinking by 3% in 2020. It has dragged about 55 million people into poverty in Africa and exposed another 46 million to the risk of hunger and malnourishment.”

The effects of Covid-19 Pandemic on the Ghanaian Economy

When Covid-19 Pandemic strike. The President promised to save lives and rebuild the economy later. As a result, government ensured that public sector workers did not lose their jobs. Government also ensured that all the necessary PPEs were provided to allow all schools to return to their full session. It took more than a year for some countries to open their schools. Businesses were given support to keep operating and keep their workers on their payroll without sacking them. Electricity and water were provided for free or at subsidized rates. All these did not come cheap. Because of the lockdown, both international and domestic commerce were disrupted. As a result, government lost about GHc11.94 billion in revenue and had to cough out additional GHC14 billion to support the covid-19 fight in 2020 alone. In effect, about GHs25.94 billion was lost (or borrowed to fill the gap) in 2020 alone. The estimated loss of revenue in 2021 was about GHS18 billion. It is safe to say that the Covid-19 Pandemic fight could have cost Ghana about GHs40 billion.

The effects of Russian-Ukraine war on Ghana’s economy

Russia supplies cheap energy resources to most countries in Europe and Asia where most Ghanaians import from. With sanctions on Russian, the second biggest exporter of crude oil in the world, crude oil prices went up from about $62 dollars at the beginning of 2022 to over $130 dollars per barrel in March before dropping below the $100 recently. That meant that government had find twice the forex required by the fuel importers to bring in the fuel. This had the potential of depleting our international reserves to dangerous levels. This jump in crude oil prices caused the cost of production across Europe and Asia and the rest of the world to shoot up very high. Cost of freight also went up astronomically.
In Ghana, the effect of the Russian-Ukraine war caused fuel prices to jump from GH¢6.0 per litre at the beginning of 2022 to GH¢17.99 per litre of petrol and GH¢23.49 per litre of diesel as at 31st October, 2022. In addition, Russia and Ukraine export about 40% of world grain and sunflower oil. Also, Ghana is said to import most of our iron rods from Ukraine. All these increases are being felt here in Ghana.

The rise in the cost of energy resources cause serious inflationary havoc across the globe prompting Central Banks across the world to increase their monetary policy rates. The increase of US interest rate also brought in its wake serious currency depreciations across the world as a result of currency flight from the emerging markets to the US.

Many countries across the world had record breaking inflation rates. For instance, the UK inflation figure of 10.1 in September, 2022 was the highest in 40years. The Eurozone inflation of 10% in September, 2022 was the highest since the creation of the Eurozone in 1999. US inflation of 9.1% in June, 2022 was the highest in 41 years. Ghana’s inflation of 37.2% in September was the highest since 2001.

The world’s economic problems were compounded by the rising interest rates in the US triggering currency flights out of the emerging markets to the US. This has resulted in the depreciation of many currencies across the world probably except the Russian Rouble. The reason is that the US dollar is the most utilized convertible currency in the world and the US is seen as the safest heaven in the world for investors. So, it is only when the US interest rate is at its lowest that most investors move their investments outside the US to other markets. However, when the US interest rate begins to rise (as in recent times from 0.08% in January to 3.08% in September, 2022), most investors began to disinvest in other markets and convert them to dollars in order to move it to the US. The rush for dollars from emerging markets usual results in currency depreciations as seen in recent times. In Ghana, the cedi has depreciated by about 40% since the beginning of the year.

Another major issue that has exacerbated our crises is the rising public debt. It is important to recall that at the end of 2016, Ghana’s public debt to GDP was 73%. It was the rebasing of the economy that revised the figure to 56% of GDP. Ghana did not pay down its debt neither was it forgiving any debt. The rebasing was done to create a fiscal space for the new government to go to the capital markets to raise funds to finance its budget.

It is important to note that the NPP government’s debt management strategy since 2017 until recently had been to substitute more expensive Bonds with lower expensive Bonds and the savings accrued used to either support the budget or finance other programs. Only few Bonds raised such as the GETFUND to front load infrastructure development (initiate close to 2000 educational infrastructure) for Free SHS policy and others and the ESLA Bonds just to mention two, were few of the new borrowings.

It is also important to note that the increment in the nominal value of the public debt does not necessarily mean additional borrowing. The external component of the public debt automatically increases in cedi terms by same percentage as that of the percentage with which the cedi has depreciated. For instance, at the end of 2021, Ghana’s external debt position in terms of US dollars was $28,339.22 million equivalent to GH¢ 172,869.24 million cedis (about GH¢ 173 billion) at an exchange rate of $1/GH¢6.1. Without taking new loans, the original $28,339.22 at an exchange rate of $1/GH¢13.0091 as at 31st October,2022 is now GH¢ 368,667.75 (about GH¢369 billion). A difference of about GH¢195 billion due to cedi depreciation and not due to additional or reckless borrowing.

A conservative estimate from Covid-19 Pandemic (GH¢40billion), Financial Sector Cleanup (GH¢25 billion), Excess capacity payments from the energy sector (GH¢17 billion) and portion of public debt due to cedi depreciation in 2022 alone (GH¢195 billion), indicates that about GH¢277 billion of the current nominal figure of the public debt has nothing to do with reckless borrowing as we are made to believe. If we are to extend this analysis retrospectively from 2017 till date, your guess will be as good as mine.


In a partisan-charged political landscape we find ourselves, where competition for political power can take any form including sabotaging the entire economy, the greatest disservice any government can do to itself is to allow speculators and saboteurs precede it in providing speculative information to the market. For instance, people were on both the traditional and social media speculating daily rates of the dollar and misinforming people about the form of government’s debt restructuring when government had not provided details. Others were speculating about Ghana import of tomatoes worth over $400 million dollars from Burkina Faso when even the 10th largest exporter of tomatoes in the world, Belgium only earned $302 million dollars in 2021.

It is therefore important for the government and its Ministries, Departments and Agencies to lead in providing the necessary information to the public ahead of the speculators whose aim is to run down the economy for their selfish reasons.

In several earlier articles, I made some recommendations on what could improve the Ghanaian economy. So, I will not repeat most of them. I will only pick few in addition to some new ones recommended below:

Halting the cedi depreciation

• There is a perception that some bank staff both from the Bank of Ghana (BOG) and the commercial banks have been complicit in the black-market trade. To cure this perception, the BOG must begin to audit all foreign denominated transactions from the BOG to the commercial banks and from the commercial banks to their customers.

• The government together with BOG and Ministry of Trade and Industry must introduce the Import Declaration Form for importers which should reconcile with their Customs Declaration Forms to ensure that all transfers are accounted for. In addition, introduction of electronic cards for importers to carry when travelling out should be introduced with quarterly fix rates to be applied. Importers may be incentivized with favorably exchange rates for those opting for the electronic cards for import. This will reduce the demand for dollars by importers.

• The BOG must begin to close down forex bureaus that violate their guidelines. Any forex bureau that advances foreign currencies to people without a proper ID or above their daily maximum should be sanctioned.

• Total outlaw of all the black-market spots. Those caught in the art should be liable for prison term of up to 5years

• The pricing of goods and services in foreign denominated currencies should be outlawed and enforced. A prison term of 10years should be enforced.

• Foreigners must be banned totally from our retail sector to cure the distortions in the financial services sector where foreigners take loans at lower rates from their home countries, buys goods and come and compete with the Ghanaian traders who take loans at higher rates.

A second look at Ghana’s trade policy.
Government should take advantage of the current economic challenges to review the trade policies such as import and tax exemption policies.

• Government must review its import sector policies by ensuring that in this current situation, only essential goods and those that are neither produced or lack the capacity to be produced here should be allowed to be imported into the country. Taxes for import of input of certain products should be waved.

• Government must redirect the 1D 1F policy to concentrate on the top 10 products on Ghana’s import data that we are capable of producing here and put in incentive measures for the private sector to import the necessary equipment to take up the challenge.

• There should be a trade-off between tax exemption grant and reduced corporate tax allowance. Companies should not be granted both. At best, no company should benefit both for more than 3years.

• Government should have a quarterly fix rate for the dollar for the purpose of port clearing. This will also reduce the incidence of panic purchases ahead of arrival of goods for clearing.

• Government must establish a Commodity Price Board/Authority or the use of existing institutions to regularly collate and publish prices of foodstuffs and goods from the major market Centres on weekly or monthly basis. This is to ensure that the rational market Queens do not profiteer unreasonably from the current challenges.
Other Recommendations worth considering:

• Government must offload the cost of the banking sector cleanups from its books to the balance sheet of the Central Bank. This is necessary to allow government some fiscal space on its debt management strategy and also, because the Central Bank has been managing the process and the recoveries should accrue to them. In addition, portion of the profits the Central Bank makes in recent times could be used to start defraying the cost.

• Once the policies listed above to halt the cedi depreciation are in full operation, the BOG must begin revise its monetary policy downwards as well as ease the capital adequacy ratio of the commercial banks immediately after the festive season when demand for imports would have reduced significantly, to allow free flow of loanable funds to the market to boost economic activities and engender growth of the economy.

• Revise the Free SHS Policy to allow for those capable to pay fees. Government can provide resources for all in the first term to ensure no one is disadvantaged. Profiling students within the first term could be done to know those who can afford, and they will begin paying from the following term. Anytime a student circumstances changes where they can no longer pay fees, they can write to the school formally for consideration. The alternative is to reintroduce school farms for SHS and Colleges of Education and Nursing to start farming to supplement whatever government provides. The objective of this policy should not only be for the students to feed themselves, but to also learn the art of farming before graduating which can serve as alternative source of livelihood in the future.
• Re-introduce a more acceptable form of Agyapa policy to raise the needed funds to develop our mineral deposits and other infrastructure.

• Introduce the high engine capacity vehicle policy to control importation of high consuming vehicles for private use.
The issues discussed above should provide a mental picture of how the Covid-1p Pandemic and the ongoing Russian-Ukraine war has affected not only Ghana but the rest of the world. The BBC on October 17, 2022 reported that over 90 countries across the world have hit the streets protesting against rising cost of food and energy prices. So, it is democratic for anyone to criticize or even demonstrate against the current economic difficulties. However, it must be done on truth and not for personal aggrandizement or pack of lies. Only the ignoramus or those wearing partisan hearts and lenses will say both the Pandemic and the war have no effect on our current economic situation.

It is important to recognize as the President admitted that we are indeed in difficult times, and everybody must be on board to get out of the current economic difficulties.

I have just offered my little suggestions. You can do same rather than hit the streets which solves nothing but may incur additional cost to the state. Anyway, it is everybody’s democratic right to demonstrate if they choose to do so.

Assallamu Allaikum!

Habibu Adam
Senior Economist
Office of the Senior Presidential Advisor.


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