Acute economic crisis dominates tight election race in debt ridden ghana

Acute economic crisis dominates tight election race in debt ridden ghana

Management of the economy will be a defining issue when Ghanaians vote on December 7 to replace President Akufo-Addo who steps down after two terms in office; analysts tip Opposition NDC candidate to emerge victorious, citing voter dissatisfaction over ruling NPP’s handling of economy.

Over the last year, retired Ghanaian school master Richard Tagoe watched his life savings evaporate as Ghana renegotiated its debt in an International Monetary Fund (IMF) deal and slashed the value of his bonds.

For many like Mr. Tagoe, the management of the economy will be key when they vote on December 7 to replace President Nana Akufo-Addo who steps down after two terms in office.

The ballot has shaped into a tight race between Mr. Akufo-Addo’s ruling New Patriotic Party (NPP) candidate and current Vice President Mahamudu Bawumia and former President and National Democratic Congress (NDC) candidate John Mahama.

Mr. Akufo-Addo’s second term was marked by an acute economic crisis, inflation, and weak currency that forced a $3 billion deal with the IMF to manage Ghana’s debt load.

Many are still feeling the fallout.

“I worked all my life and saved for my old age, but now, everything is virtually gone,” Mr. Tagoe, 82, said. “How can we trust the government after this?”

An oil, gold, and cocoa producer with a history of political stability, Ghana was an investor favourite. But the economic turmoil and a debt default dented the country’s appeal.

Heavy burden

Inflation peaked at 54.1% in 2022 before easing to 23.2% by late 2023, but many Ghanaians still struggle with high costs, triggering sporadic protests over government policies.

A depreciating cedi currency and mounting poverty have further strained public confidence in their leadership.

Government’s attempts to raise funds through treasury Bills have faltered, with investors shunning what they once considered a safe haven market.

“It will take time to rebuild public confidence in government securities,” Courage Boti, research lead at GCB Capital said, refering to the government bonds under restructure.

“The restructuring was necessary for fiscal space, but the damage to trust is profound.”

In September, Ghana reached an agreement with international bondholders, negotiating a 37% haircut — a discount — on $13 billion of debt.

While hailed as a milestone, it marked the largest restructuring of African debt to date, underscoring the depth of Ghana’s crisis.

Security is also an election issue. Ghana and coastal neighbours Benin, Togo, and Ivory Coast face spillover from jihadist conflicts over their northern borders in Burkina Faso and Niger.

Internal tensions have also been on the rise between NPP and NDC, especially over allegations of pro-government bias in key institutions like the Supreme Court and Electoral Commission.

But with the presidential election days away, economic management has become the defining issue.

NPP candidate Mr. Bawumia touts policies for stabilising the economy and growth in a bid for an unprecedented third term for his party. But he has struggled to separate himself from the government, with his track record as head of Mr. Akufo-Addo’s economic management team especially under scrutiny.

“The NPP cannot escape blame for the hardship,” said Mustapha Gbande, deputy general secretary of the NDC.

Former President Mr. Mahama, Mr. Bawumia’s main rival, promises a fresh approach.

Oxford Economics and other analysts have already tipped Mr. Mahama to win, citing voter dissatisfaction with the NPP’s handling of the crisis.

At a bustling market in Kaneshie, a suburb of Accra, traders are quick to express disappointment with the economy. “The price of onions has tripled, and customers just walk by without buying,” said Ama Asante, a vegetable seller.

Daniel Amateye Anim-Prempeh, an economist at Policy Initiative for Economic Development, said inflation was still having an impact on voters.

“The high cost of goods and services continues to burden households. Voters will factor this into their decisions,” he said.

Mr. Bawumia has highlighted improvements in macroeconomic stability, pointing to a rebound in growth to 5.8% in the first half of 2024.

“Ghana’s economy has come back to life after years of difficulty,” Finance Minister Mohammed Amin Adam told NPP supporters on the campaign trail.

But critics argue Mr. Bawumia’s policies lack innovation, dismissing them as repackaged old policies.

Opposition promises

Mr. Mahama has pledged to renegotiate aspects of the IMF deal to free up resources for development, emphasising youth employment, agriculture, and infrastructure.

“We cannot continue with business as usual,” Mr. Mahama said at a rally in the northern city of Tamale.

Recovery is still underway. Debt-to-GDP ratios remain at 84%, with the IMF projecting a reduction to 55% by 2028.

Growth is forecast at a modest 3.4% in 2024, and unemployment remains high.

For many Ghanaians, coming ballot is a test in the electorate’s faith in the system.

“I will vote for whoever can make life better,” market trader Mr. Serwaa said. “We have suffered enough”.