Economic Fundamentals Still Weak Despite Macroeconomic Gains and Recovery, Says Development Economist
Despite recent macroeconomic improvements, Ghana’s economy remains fundamentally weak, says Development Economist Nicholas Issaka Gbana.
Speaking during the NorvanReports and Economic Governance Platform (EGP) X Space discussion themed “Ghana’s Economy: Is The Sun Rising?”, Mr Gbana cautioned against over-optimism, stressing that the country is yet to address critical structural weaknesses—particularly in external debt negotiations.
“The fundamentals are still very, very weak. As we speak, we have not even concluded negotiations with foreign creditors on external debt. Remember that we had our domestic debt exchange programme concluded. We still are negotiating with external creditors,” he stated. “So yes, we have started some attempt to turn the corner. But the fundamentals are still weak.”
Ghana has seen notable improvements in key macroeconomic indicators in recent months. Inflation has declined to 21.2%, the Ghana cedi has appreciated against the US dollar, and the country’s sovereign credit rating has been upgraded from Selective Default to CCC+ by S&P. Additionally, foreign reserves and gold holdings have improved, while fiscal consolidation measures have led to a reduction in government expenditure.
Mr Gbana acknowledged these gains and praised the 2025 Budget presented by the Finance Minister, describing it as “bold.”
“The 2025 Budget is bold in three key respects. One, is a real concerted effort to cut down waste—not just expenditure, but wasteful expenditure. Some taxes have been eliminated and also, there’s higher allocation for capital expenditure, particularly infrastructure. The bottom line is to reduce the government’s fiscal deficit and borrowing,” he explained.
He noted that the most encouraging development was the significant reduction in yields on Government of Ghana treasury bills—from nearly 28% to about 15%—a 46% drop over a five-month period.
“If we’re able to sustain that, we should begin to see interest rates dropping. Inflation is still high at 21.2%, which is a concern. The monetary policy rate has increased slightly from around 27% to 28%, and interbank lending rates remain unchanged, hovering around 27%,” he noted.
Looking ahead, Mr Gbana expressed hope that ongoing fiscal reforms would be matched by complementary monetary policy interventions from the Bank of Ghana to support further reductions in interest rates and create a more enabling environment for business growth.
“Inclusive growth is very much tied to the ability of businesses to access finance at a reasonable cost. High cost of finance is a major barrier to business growth in Ghana,” he stressed.
He concluded by urging sustained fiscal discipline and policy consistency, cautioning that historically, successive governments have struggled to maintain early gains made.
“Since 1992, all new governments have started well but eventually retrogressed. My expectation is that the government led by President Mahama will remain disciplined and focused to ensure that over the next four years, we see real results,” he noted.
Very well said