Explainer: What Are the Key Issues for Investors in Ghana’s Election?
Ghanaians go to the polls on Dec. 7 to choose a new president and parliament in an election investors are watching closely to determine how the winner will steer an economy emerging from debt default.
The leading contenders to replace 80-year-old President Nana Akufo-Addo, who is stepping down after two terms at the helm of the gold and cocoa-producing country, are former president John Dramani Mahama and current Vice President Mahamudu Bawumia. There are 11 other candidates.
The West African nation is at the tail end of a long debt restructuring process in which the government overhauled $13 billion in international bonds in a broader rework aimed at cutting debt by $4.7 billion and providing cash flow relief of $4.4 billion during the current IMF programme running to 2026.
While the only outstanding step is a deal with non-Eurobond commercial creditors, investors are already casting their eyes beyond the election to assess whether the winner will sustain the economic reforms required to restore debt sustainability.
Mahama, 65, who is leading in a number of polls, has pledged to try and renegotiate the terms of the IMF deal to secure more financing. He has promised to amend the law to introduce a public debt ceiling of 60-70% of GDP to prevent over-borrowing.
But under his previous presidency in 2012-17, the government increased borrowing to invest in the construction of infrastructure projects like roads. He also faced criticism for electricity shortages and high inflation.
Bawumia has campaigned on modernizing the economy with digitization, low taxes, and fiscal discipline to lift annual growth to an average of 6%.
The 61-year-old has also pledged to cap public spending at 105% of the previous year’s tax revenue, introduce a flat rate tax scheme, and redirect 3% of GDP of public spending into private hands for the provision of public infrastructure.
CAN THE WINNER RENEGOTIATE THE IMF PROGRAMME?
It is fairly common for leaders coming into office to reach out to the IMF and talk about existing programmes – as was just the case in Sri Lanka.
The IMF, lender of last resort to Ghana as it restructures its debt under the G20’s Common Framework initiative, says its primary focus is to support the government in restoring macroeconomic stability while enabling debt sustainability and inclusive growth.
It has so far approved Ghana’s economic performance under the current $3 billion loan programme.
