“The circumstances we find ourselves in are indeed dire, and even so, I’ll be decisive and swift in my actions. We’ll focus our initial efforts on four critical areas. The first is economic restoration and stabilization of the macroeconomic environment. The second is the improvement of the business and investment environment to ensure that Ghana is once again open for business. The third is governance and constitutional reforms. And the final, but not the least, is accountability and the fight against corruption”.

These were the words of the new president of Ghana, John Dramani Mahama, his recent inauguration following an eight-year hiatus from leadership. Former President John Dramani Mahama claimed a historic comeback victory in Ghana’s presidential election, which took place in December 2024, defeating the ruling New Patriotic Party (NPP) as voters punished the incumbent government for the way they handled the economic crisis.

One month into the constitutionally final term, the nation and the global investment community are watching closely to gauge the direction of the economy under his stewardship Ghana faced a surge in public debt due to fiscal measures taken in response to external shocks, which resulted in losing access to international financial markets. This led to debt distress, dwindling international reserves, and escalating inflation. To tackle these challenges, Ghana implemented substantial macroeconomic policy adjustments, including comprehensive debt restructuring and fiscal consolidation. Maintaining this recovery will require ongoing advancements in tax policy, revenue administration, public financial management reforms, and structural reforms in the energy and cocoa sectors.

The government’s program is supported by an IMF Extended Credit Facility, approved in May 2023 for approximately $3 billion, and by the World Bank’s Development Policy Operations. Weak economic growth, limited government spending, and high inflation—particularly in food prices—have worsened living standards, pushing more people into poverty and increasing the risk of food insecurity. Returning growth to its potential rate of 5% will require macroeconomic stability.

In the longer term, structural reforms aimed at promoting private sector development and increasing the attractiveness of foreign direct investment (FDI) are necessary to raise the country’s growth potential.

Cautious optimism for economic recovery.

Ghana’s economy entered 2025, grappling with several structural challenges. While key indicators such as inflation, debt-to-GDP ratio, and foreign exchange reserves reflect ongoing vulnerabilities, there is a cautious optimism for improvement under the new administration.

Investor confidence in Ghana has seen mixed sentiments in the first days of 2025. On the one hand, President Mahama’s return, who previously oversaw infrastructure development and energy sector reforms, reassures some stakeholders of a focus on continuity and long-term planning. His administration’s initial moves to engage international creditors and restore investor-friendly policies have been viewed positively.

President Mahama inherits an economy recovering from years of pandemic-induced disruption and global inflationary pressures, exacerbated by fluctuating commodity prices.

Despite its challenges, Ghana remains a global bright spot in Africa’s emerging markets. The country’s democratic stability and strategic location make it an attractive hub for regional trade and investment.

Steering the economy towards recovery.

While it is too early to draw definitive conclusions about President Mahama’s economic impact, the first days of his administration have set a tone of cautious optimism. Steps toward fiscal discipline, engagement with international partners, and a focus on infrastructure signal a government intent on steering the economy toward recovery and growth.

Investors, both local and international, are watching keenly. The coming months will reveal whether Ghana can regain its footing and position itself as a beacon of stability and opportunity in West Africa. For now, 2025 begins with a blend of challenges, hope, and the promise of a brighter future under renewed leadership. The current debt overhang and reduced creditworthiness remain hurdles for attracting foreign direct investment (FDI). Ghana’s Eurobond yields, a key indicator of investor sentiment, have shown marginal improvement but remain higher than pre-2020 levels, signaling caution among global investors.

Fast-tracking economy transformation.

To fast-track structural transformation, Ghana must enhance its competitiveness by easing infrastructure bottlenecks, accelerate agro industrialization by strengthening skills development, value addition, and private sector development, and create a policy framework for technology adoption and innovation.

Financing structural transformation in Ghana requires selective investments in value-added activities that can drive the desired transformation. It also requires building resilience against global shocks, including measures to enhance macroeconomic management and domestic resource mobilization.

Key reforms should include improving the coordination and sequencing of public sector development initiatives in line with the country’s fiscal position; fast-tracking the ongoing debt restructuring, enhancing the scope for concessional finance, and deepening financial markets to increase access to affordable credit; and strengthening stakeholder engagement and coordination of development assistance to maximize synergies and impact.

Bold steps to be taken.

Analysing this situation, Theophilus Acheampong a Ghanaian economist and political risk analyst at Aberdeen University said:” To address the current economic crisis and achieve true independence, Ghana must take bold steps, including nationalizing its mineral resources, strengthening financial regulations, promoting financial inclusion, adopting international best practices, and encouraging the establishment and support of local banks and financial institutions”.

“The major contributory factor was the poor management of its public finances, which meant the country did not have enough buffers to withstand these external shocks. Fiscal policy in Ghana is notably procyclical, with a clear bias towards overspending during good times. This is related to commodity and electoral cycles. That is, fiscal deficits tend to increase sharply in election years and have been even more so following the commercial discovery of offshore oil in 2007”, Acheampong added.

And for him, the key concern remains whether “Ghana will be able to live within its means going forward by reducing corruption and waste in government spending. This will avoid the procyclical boom-bust behavior especially tied to the electoral cycle”.

In short, the new government of John Mahama will have very little fiscal space to meet several promises, including infrastructure provisions and tax breaks, announced in the National Democratic Congress’ pre-election manifestos. As per Rabah Arezki, who is a former chief economist and vice president at the African Development Bank and former chief economist of the World Bank’s Middle East and North Africa region, a more expedient debt resolution for Ghana is a necessary condition for an economic reset. “One key objective for Ghana is to rebalance its structure of external capital away from external debt and toward foreign direct investment. This would shift the international investment position away from debt and toward equity. That accrued foreign direct investment would bring much more stability to its external financing, a needed boost to productivity, economic growth, and job creation that Ghanaians have been longing for. But Ghana must also achieve a radical governance shift in key sectors to deliver that economic growth,” Areski commented.

Looking at commodities to reset the economy.

Ghana’s export structure is dominated by three commodities—gold, oil, and cocoa—constituting 47.7%, 26.1%, and about 10% of its total merchandise exports. The country is also the world’s second-largest producer of cocoa, and the cocoa sector employs millions of workers, apart from having a Cocoa Board. This state-controlled organization supports the production, processing, and marketing of cocoa. Yet, the African nation has been structurally unable to develop efficient production and move up the value chain by transforming cocoa beans.

In spite of skyrocketing cocoa prices, expected to last until 2026, the cocoa industry has been unable to attract financing, and investment has plummeted. This sector may immediately require policy support from Mahama to become an accurate growth engine.

Investors have been wary of Ghana’s oil sector’s business climate.

The gold sector, on the other hand, also enjoys rising prices and is mostly controlled by private operators. “The government is eager to boost production and attract more investment, but the gold sector throughout the continent is faced with major transparency challenges, with gold smuggling leading to significant losses in government revenues. What’s more, illegal mining is causing environmental and health challenges, including river pollution. To reset its economy, Ghana needs to inject radical transparency into these key sectors to maximize government revenues and benefits to its citizens.

Ghana also needs to achieve a better balance between the need for private sector investment and the state’s role in regulating investment in these sectors,” Arezki continued. Mahama will need to work toward achieving macroeconomic stability while boosting the competitiveness of the country’s economy. Yet, poverty is already rampant, with inflation further eroding the purchasing power of the country’s impoverished population. Therefore, the sequencing of reforms must account for that social context. The new administration will need to focus on increasing transparency and removing corporate subsidies—whether public or private—rather than removing household subsidies, which many rely on for subsistence. However, for its reform agenda to work, Mahama’s administration must receive all the support it can get from the international community to expedite its debt restructuring.

Sources: ModernGhana.com – Internationalfinance.com – UNDP – WordPress.com