The president of resource-rich Ghana, seen as a beacon of democracy in a turbulent region, was set to unveil economic reforms today, as a free-falling currency sparks frustration over living costs.
John Dramani Mahama was to address the crisis in the once-buoyant west African economy in a state of the union speech from 1030 local time as a plunging cedi boosts the price of everything from eggs to fuel.
Ghana’s economy, backed by gold, cocoa and oil exports, has soared in recent years but the cedi currency has lost nearly a quarter of its value since last year.
Analysts put the drop down to high deficits, a 28-per cent decline in the gold price and the withdrawal of stimulus measures by the US Federal Reserve that has hit emerging market currencies worldwide.
And as the crisis hits the people on the street, experts warned that President Mahama’s reforms must tackle structural issues such as ballooning deficits if the country is to deliver on its promise as the star of West Africa.
Ms Razia Khan, head of Africa research at Standard Chartered Bank, said Ghana faces “a deeper underlying problem with fiscal management and that is the extent of the fiscal deficit.”
Debt levels may soar to such unsustainable levels that Accra may have to cut back on other spending “that has a meaningful impact of growth,” she warned.
Like many African countries, Ghana struggles with a bloated and inefficient public sector and the government has to shell out nearly 12 per cent of total economic output — 75 per cent of all oil revenue — on the wage bill.
And the currency crisis sparked a dramatic shortage in dollars, prompting the central bank to tighten outflows of foreign exchange and to insist local business be conducted in cedi — a measure Khan dismissed as a “short-term fix.”
Nevertheless, there are some bright spots on the horizon. Ghana has a young population and is eyeing a ramping-up of oil production above the current 100,000 barrel per day output once infrastructure improvements are made.
Many analysts forecast annual growth above six per cent over the next decade, despite the structural flaws in the economy.
The crisis in the currency is already having an impact on consumer behaviour as prices soar, Accra shopkeeper Eva Botchway told news wire AFP.
“When someone comes here and wants to buy something … because of the increase (in prices), he or she cannot,” she explained.
The falling cedi and rising fuel price has also hit lowly paid transport workers, said Benjamin Armah, who collects money for a union of drivers who ferry passengers from Accra’s suburbs to the centre on dilapidated buses.
Bus companies have been forced to hike ticket prices to combat the rise in the petrol price, he said.
“People used to travel from outside to Accra to come and do business. But now the fuel price is high,” he added, sitting next to a line of half-empty buses waiting for passengers.
“We are praying that the fuel price on the world market goes down.”