Home Business Global Factors Drove Ghana’s Economic Challenges, Economist Says

Global Factors Drove Ghana’s Economic Challenges, Economist Says

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Dr George Domfeh
Dr. George Domfeh

Development economist Dr. George Domfe has attributed Ghana’s recent economic difficulties primarily to external shocks rather than domestic policy decisions under President Akufo-Addo.

Speaking on Peace FM’s Kokrokoo program Monday, the Africa Policy Lens founder presented data showing how international events significantly impacted Ghana’s economy.

“The Russia-Ukraine war created unprecedented global economic disruptions that particularly affected commodity-dependent nations like Ghana,” Domfe stated. He noted that before the conflict, Russia supplied 10 million barrels of oil daily to global markets. The war reduced this supply, driving crude prices from $72 to $121 per barrel in 2022. This price surge increased Ghana’s monthly oil import costs from $250 million to $400 million, putting pressure on foreign reserves and the cedi.

The economist emphasized that Ghana’s experience mirrored global trends, with over 50 countries seeking IMF assistance in 2022 as inflation spiked worldwide. “Freight costs increased by 300% during this period, contributing significantly to local price hikes,” Domfe added. While acknowledging domestic policy impacts, he argued the external shocks represented the primary challenge.

Ghana entered a $3 billion IMF program in 2023 to address its economic crisis. Recent indicators show some stabilization, with inflation moderating from its 2022 peak of 54.1% to 23.1% as of May 2024. The cedi has also recovered somewhat after losing about 30% of its value against the dollar in 2022.

The discussion comes as Ghana prepares for elections in December 2024, with economic management expected to be a key campaign issue. Analysts note that while global factors played a major role, domestic fiscal decisions also contributed to the country’s debt challenges.

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