As Ghanaians vote in 2024, economic hardship, driven by inflation, high interest rates, and cedi depreciation, overshadows political loyalty, making stability crucial.
As Ghanaians cast their votes in the 2024 general election, one issue has overshadowed all others—the economy. Years of economic turbulence marked by soaring inflation, high interest rates, and a rapidly depreciating currency have left many voters grappling with financial hardship.
For most, the decision at the ballot box is not about political loyalty but about who can steer the country toward stability and prosperity.
Inflation: A Persistent Struggle
Inflation in Ghana began rising steadily in 2021, largely driven by global supply chain disruptions and a surge in energy prices. The annual inflation rate stood at 12.6% in December 2021, reflecting the post-pandemic economic recovery pressures.
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By the end of 2022, inflation skyrocketed to 54.1% in December, one of the highest rates in decades. Food prices were a major driver, with staples such as maize and plantains seeing price increases of over 80%. The government’s fiscal deficits and reliance on external borrowing added fuel to the inflationary fire.
Inflation moderated in 2023, declining to 23.2% in December, as the Bank of Ghana’s aggressive monetary tightening took effect. However, by November 2024, inflation climbed again to 23.0% year-on-year, marking the third consecutive monthly increase. Rising food prices, including vegetables and tubers, were once again at the center of the issue, alongside a weakening cedi.
Interest Rates: Taming Inflation at a Cost
To combat inflation, the Bank of Ghana began hiking interest rates in 2021. The policy rate rose from 14.5% in early 2021 to 24.5% by December 2022, reflecting one of the most aggressive monetary tightening cycles in the country’s history.
The high-interest environment had ripple effects on businesses and consumers, increasing borrowing costs and slowing down private sector growth. However, the central bank justified the hikes as necessary to contain inflation and stabilize the currency.
The central bank maintained its hawkish stance throughout 2023, keeping the policy rate at 29.5% for most of the year. By September 2024, the Bank of Ghana made its first rate cut in nearly two years, reducing the rate by 200 basis points to 27.0% and maintained it for November, citing improvements in inflationary pressures.
Despite the cut, businesses continued to grapple with high borrowing costs, which limited their ability to expand and invest. The tight monetary policy underscored the central bank’s focus on curbing inflation at the expense of economic growth.
Exchange Rate: A Currency Under Pressure
The Ghanaian cedi faced relentless depreciation from 2021 to 2022. In 2021, the cedi depreciated by 4.1% against the US dollar, a manageable level compared to historical trends. However, the situation worsened significantly in 2022, with the cedi losing over 60% of its value by December.
By the end of 2022, the exchange rate stood at approximately GHS 13.1 per USD, a sharp rise from GHS 6.0 per USD at the start of 2021. The depreciation was driven by high external debt, reduced foreign exchange reserves, and investor concerns over fiscal sustainability.
In 2023, the cedi stabilized somewhat after Ghana secured a $3 billion bailout from the International Monetary Fund (IMF). The bailout provided a temporary boost to foreign reserves and investor confidence, with the exchange rate settling around GHS 12.0 per USD for much of the year.
However, by October 2024, the cedi began depreciating again, averaging GHS 15.99 per USD, up from GHS 15.55 per USD in September. The depreciation reflected ongoing fiscal challenges, high import dependency, and reduced foreign inflows.
Key Factors Driving Trends
- Global Economic Shocks: The COVID-19 pandemic and the Russia-Ukraine war disrupted global supply chains, leading to higher import costs for Ghana, particularly for fuel and food.
- Debt and Fiscal Challenges: Ghana’s public debt exceeded 100% of GDP in 2022, forcing the government to implement the Domestic Debt Exchange Programme (DDEP) to restructure unsustainable debt levels. This contributed to reduced investor confidence and capital flight.
- Dependence on Imports: With a high import dependency, particularly for essential goods, the depreciating cedi significantly impacted inflation and economic stability.
- Policy Responses: The Bank of Ghana’s aggressive monetary policy played a crucial role in controlling inflation but at the cost of economic growth and private sector activity.
The Human Cost of Economic Challenges
Behind the economic statistics are the lived realities of Ghanaians. The cost of food, fuel, and rent has skyrocketed, leaving many unable to make ends meet. Parents are pulling children out of school to save on fees, while businesses are scaling down operations or shutting their doors entirely.
For young voters, who make up a significant portion of the electorate, the lack of job opportunities has bred frustration and disillusionment.
Why the Economy Matters Most in This Election
For the average Ghanaian voter, the stakes in this election couldn’t be higher. The persistent economic hardships have turned the election into a referendum on leadership that can deliver immediate relief and long-term stability. Voters are not just choosing a leader; they are seeking a solution to rising prices, unaffordable credit, and the eroding value of their earnings.
As the nation awaits the results, one thing is clear: the next administration must prioritize stabilizing the economy. From controlling inflation and reducing interest rates to stabilizing the cedi and boosting local production, the economic agenda will be critical in determining the future of Ghana.
