On Monday, March 9, Ghana and the International Monetary Fund made a deal to help stabilize the country’s struggling economy. The three-year plan was proposed after discussion of the government’s failure in reach targets for inflation, the budget deficit, and overall GDP growth. Members of the minority opposition “New Patriotic Party” believe that Ghana’s current economic state is the worst it’s been in over two decades.
This message was delivered by Minority Leader Osei Kyei-Mensa-Bonsu during the “True State of the Nation Address”. This discussion served as the minority party’s counterargument against President Mahama’s address delivered previously on February 26. Although GDP growth in the West Africa monetary zone was stated to be at 6.2%, Ghana’s rate of growth was only 4.2% with oil included. Kyei-Mensa-Bonsu also indicated that due to unsustainable debt levels in the country, it is extremely possible that Ghana might slip back into Highly Indebted Poor Country (HIPC) status.
GDP growth was at 8% the previous year due to gold, cocoa, and oil exports, but growth fell in 2014 as a result of falling commodity prices and currency depreciation. The economic crisis has also caused power shortages throughout the country, but President Mahama emphasized to parliament that he would work to fix them rather than “manage them”.
The last time Ghana saw harsh economic conditions was during the 1980’s under structural economic adjustment programs, but the IMF deal is necessary to restore investor confidence. Numerous austerity measures will have to be imposed and could cause fuel prices to rise due to a 17% petroleum tax, a freeze on hiring public sector workers, and an end to costly energy subsidies. The IMF is set to provide Ghana with loans amounting to $940 million in installments starting next month.
According to the head of the IMF’s Africa division, Joel Toujas-Bernate, the main short-term goal is to stabilize Ghana’s economy. Following the new deal, the IMF estimates that inflation in the country will fall to between 11 and 12% by the end of this year, with GDP growth to be about 3.5%, then rise to between 5 and 6% by 2017.