Finance expert calls for comprehensive reforms to stabilise economy - Dr Philip Takyi

The Senior Research Fellow at the Forum for Development and Accountable Governance (FDAG), Dr. Philip Takyi, has issued a stark warning about Ghana’s economic trajectory, highlighting severe inflation, currency depreciation, and an overwhelming national debt burden.

He urged immediate and comprehensive reforms to stabilize the economy and prevent further economic decline.

“In recent years, inflation in Ghana has reached unprecedented levels, recording as high as 40.3% before stabilizing around 21.5%. Though there has been some reduction, it is still at a level that heavily impacts the household budgets of Ghanaians,” Dr. Takyi stated, expressing concerns about inflation’s impact on the cost of living.

He added, “Inflation at these levels is unsustainable, and its ripple effects are being felt in every sector of the economy, from the price of basic goods to public services.”

He noted that a key factor in this inflationary pressure is the Ghanaian cedi’s sharp depreciation. The currency has dropped nearly 19.5% against the US dollar, now valued at approximately GH¢15.60 to $1.

“This devaluation is not just affecting the cost of imports but also impacting the prices of essential commodities,” Dr. Takyi explained, emphasizing how currency instability has intensified the cost-of-living crisis for both consumers and businesses.

He also expressed grave concerns over Ghana’s surging debt, which has now crossed 80% of GDP.

“The country’s debt situation has become a matter of national concern, significantly affecting the government’s capacity to fund crucial services like health, education, and infrastructure. Our extensive borrowing, initially intended for development and pandemic response, is now choking our fiscal flexibility,” he stated.

The policy analyst pointed to the government’s Domestic Debt Exchange Program as an additional strain on Ghanaian finances.

“The debt restructuring exercise, which saw over GH¢60 billion – including significant pension funds – being redirected to tackle debt, has caused widespread dissatisfaction. The plan was meant to provide some fiscal relief, but it has also severely impacted the savings and pensions of many citizens,” he noted. He warned that the government’s reliance on external funding, such as the recent $3 billion IMF bailout, is a temporary fix rather than a sustainable solution.

“Unless we initiate structural reforms, we risk falling into a perpetual debt trap,” Dr. Takyi cautioned.

He also critiqued the country’s limited success in digitalization efforts, noting, “Despite our investments in digital infrastructure, the expected transformative impact on sectors like agriculture, education, and job creation has not materialized.”

Highlighting the persistent issue of youth unemployment, he added, “Our youth remain largely unemployed, and we have yet to see digitalization contributing to meaningful economic growth in the way it was envisioned.”

In light of these challenges, FDAG’s Senior Research Fellow endorsed the National Democratic Congress’s (NDC) 24-hour economic policy as a potentially effective response. Describing it as “an innovative approach to real-time economic monitoring and timely interventions,” he argued that the policy would strengthen economic management and foster job creation.

“The NDC’s proposed policy can help stabilize the cedi, combat inflation, and instil greater investor confidence in the Ghanaian economy,” he observed.

Dr. Takyi concluded by underscoring the urgent need for decisive economic action.

“A robust, responsive strategy is necessary to steer Ghana through these economic challenges and address the immediate needs of our people. The NDC’s 24-hour policy approach could be the critical tool to help us weather this economic storm,” he stated.