Commodity exports and bailout pulling Ghana out of default

Since defaulting on its debt in 2022, Ghana’s economic growth has been timid. 2024 showed the first signs of a rebound, with GDP growth picking up to an estimated +4%, and in 2025 it is projected to reach +4.9%. In 2024, growth was powered by the extractive sector, growing at an annual rate of +7%, mainly driven by the simultaneous price rally of two of its most exported goods: gold and cocoa. Gold prices increased by +23%, while cocoa prices rose by +45%, though both commodities have slightly fallen since their peak in late 2024. Gold is Ghana’s main export, and Ghana is the second-largest producer of the commodity in the African continent. Oil, which is Ghana second-largest export and only a 15-year-old industry, has enjoyed a period of relatively high prices, but oil markets remain very vulnerable to geopolitics, which could bring further instability to the oil revenues that are highly beneficial to Ghana. Cocoa is Ghana’s third-largest export and crucial, given the large amount of employment it represents. Ghana is the world’s second-largest exporter of cocoa. However, in the most recent harvesting season, cocoa production reached the lowest level in decades due to temperature variations and tree diseases. Although dependence on multiple commodities serves as a hedge against potential price collapses, it also highlights Ghana’s ongoing vulnerabilities to fluctuations in global markets.

During 2024, Ghana experienced decreasing but high levels of inflation, an estimated annual average at 39% in 2024. It is expected to average 22% in 2025. With a policy rate at 27%, the Bank of Ghana (BoG) is expected to start easing in 2025. In parallel to the price crisis, the Ghanian cedi experienced a 27% depreciation in the first 11 months of 2024, but has since appreciated by almost 10%; as of 01 January 2025, the cedi stood at 0.068 USD. The depreciation path followed the political uncertainty of the December 2024 Presidential election that was won by former PM and main opposition leader John Mahama. The peaceful development of the elections and transition of power provided further confidence in the cedi. The elections took place amidst high levels of widespread public dissatisfaction, given the price and currency crisis and the IMF program that is reducing energy subsidies to consolidate public finances.

As a pre-IMF program requirement, the restructuring of Ghana’s foreign debt provided a sustainable repayment path. But 2025 will see an important increase of debt servicing to 14.3% of GDP, mainly due to the increase of repayments to external creditors from 3.2% to 5% of GDP. Under current IMF forecasting, Ghana is expected to reduce its public debt by 5% in 2025 to 74% of GDP, and an ambitious 9% to 63% of GDP in 2026. Ghana’s liquidity issues remain as the debt service-to-revenue ratio remains among the highest in the African continent and the financing gap remains at 2% of GDP.

The new administration has the potential to drive short-term grow by addressing two key issues: first, restructuring the Ghanian Cocoa Board to operate solely as a regulator, rather than a competitor to cocoa farmers. This could alleviate the strain on farmers due to low production. Second, fixing the country’s state power company is crucial. The company faces substantial power shortages and owes billions of dollars to private energy suppliers, partly due to unpaid bills from its clients. In spring 2024, the company even cut electricity to the Parliament building due to unpaid bills, highlighting the severity of the issue. Additionally, a significant boost to growth could arise as two new gold mines open up in the second half of 2025, expected to add 600,000 ounces of gold annually, increasing revenues to state coffers.  

In terms of reforms to boost non-commodity sectors, the new administration has yet to deliver an economic plan besides promises of job creation. Yet, given the depreciation of the Ghanian cedi and an improvement of trade perspectives under the recently ratified African Continental Free Trade Agreement, Ghanian companies could boost their growth by aiming to serve markets across Africa, as well as the EU and the UK, given the favorable trade arrangement in place between the partners. Finally, given strong commercial ties with Gulf countries, especially gold exports to the UAE, Ghana could benefit by opening its economy and use Gulf states’ high liquidity as a catalyst for strategic industry and agricultural investment.

Ghana’s performance in terms of civil liberties, rights and political stability exceeds that of most African peers. Independent poll observers generally deem general elections in Ghana to be free and fair. The high electoral turnout rate (60% in the 2024 presidential election) testifies to the state’s credibility and to the country’s democratic achievements. Ghana’s strong record of accomplishment in democracy and rule of law is expected to prevent any serious social disorder, although the post-pandemic rises in unemployment and poverty, along with rising food and energy prices, have spurred discontent in recent years. Poor working conditions in the public sector and a lack of economic possibilities for young people are eroding trust in institutions. Future demonstrations may be temporarily disruptive but mostly peaceful and concentrated in urban centers.