Can Ghana's 2021 budget balance the heavy spending during Covid-19?

As Africa’s largest miner of gold, the world’s second-largest producer of cocoa and one of the continent’s most promising hydrocarbons players, Ghana has seen healthy growth in recent years. The country weathered the Covid-19 pandemic better than many of its regional and income-level peers, and is forecast to record significant GDP growth in 2022, in part because Ghana’s political stability continues to make it a safe haven for foreign investment.

The pandemic did not come without a cost, however, both in terms of individuals’ health and national economic performance in 2020 and 2021. Government measures to ameliorate the effects of the global crisis helped ordinary Ghanaians enormously but inevitably added to public debt. Efforts to bring the debt back under control by boosting public revenue via new tax schemes and other measures remain controversial yet promise a sustainable path forwards.

At the same time, fresh investment in job creation and infrastructure bodes well for longer-term economic growth, as does a recent campaign to secure more foreign direct investment (FDI). Meanwhile, the adoption of ICT solutions is enabling Ghana to leapfrog development barriers in finance and commerce.


Some 44.7% of the 30m-strong population worked in agriculture prior to the pandemic, making it the country’s largest employer, although the sector’s share of GDP was 18.6% in 2019, according to the Ghana Statistical Service (GSS). The largest proportion of GDP that year came from services, at 47.2%, followed by industry, at 34.2%.

Looking to the performance of the agriculture sector, the most recent figures from the GSS show that cocoa was the most important product, responsible for 7.3% of the sector’s GDP contribution. Other commodities contributed a combined 67.2%, livestock 13.3%, forestry 7.2% and fisheries 5% (see Agriculture chapter).

Mining and quarrying is the largest industrial segment, with GSS data for 2019 showing it was responsible for 43.4% of the sector’s contribution to GDP. Within this, gold accounted for 20.8% of industry’s total GDP contribution, and oil and gas 13.3%. Manufacturing accounted for 32.6% of industrial output, construction 18.8%, and electricity, water and sewage 5.2%.

General trade represented 32.9% of the service sector’s GDP contribution in 2019, followed by transport and storage, with 15.1%. Financial and insurance activities accounted for 8.3%, and hotels and restaurants 7.3%. Information and communications contributed 6.3% – an absolute value five times higher than in 2013. The remaining 30% of the service sector’s GDP was derived from real estate, professional and administrative activities, education, health, public administration and defence, and other activities.


Responsibility for the economy ultimately belongs to the government, currently led by President Nana Akufo-Addo, who was re-elected for another four years in December 2020. Key ministries include the Ministry of Finance (MoF), headed by Ken Ofori-Atta. The Securities and Exchanges Commission, the Ghana Infrastructure Investment Fund (GIIF), the Public Procurement Authority and the Ghana Revenue Authority are all under the purview of the MoF.

Other ministries that have heavy economic influence are the Ministry of Trade and Industry, which is also Ghana’s coordinating secretariat for the African Continental Free Trade Area and headed by Alan Kyerematen; the Ministry of Energy and Petroleum, led by Matthew Opoku Prempeh; and the Ministry of Communications and Digitalisation, headed by Ursula Owusu-Ekuful. The ministries overseeing land and natural resources, food and agriculture, rural development, and roads and motorways also have important responsibilities that are relevant to the economy.

The National Development Planning Commission prepares the country’s short-, medium- and long-term strategies at the national, regional and sector level, aligning plans with Ghana’s sustainable development goals. The Medium-Term National Development Policy Framework 2018-21 was succeeded by a 2022-25 version, updated in light of the pandemic. In response to the health crisis, the GHS100bn ($17.1bn) Ghana Covid-19 Alleviation and Revitalisation of Enterprises Support (CARES) programme was launched in November 2020.

Under the Office of the President, the Ghana Investment Promotion Centre is the first point of contact for foreign investors looking to do business in the country, while related agencies include the Ghana Free Zones Authority, the Ghana Export Promotion Authority, the Ghana Enterprises Agency and the Ghana Shippers’ Authority. Ghana is a member of ECOWAS and the African Union, and works closely with the African Development Bank, the Word Bank and the IMF.

The Bank of Ghana (BoG) is the country’s independent central bank, which is responsible for formulating and implementing monetary policy. Its Monetary Policy Committee (MPC) meets bi-monthly to carry out this responsibility. The MPC pursues an inflation-targeting policy of 8%, plus or minus two percentage points. For almost all purposes Ghana has a floating exchange rate for its currency, the cedi, although there are some limitations for cocoa and in relation to the registration of past foreign exchange transactions by importers.


In the years preceding the pandemic, Ghana showed robust GDP growth, which jumped from 2.1% in 2015 to a high of 8.1% in 2017 at constant 2013 prices. According to GSS data, growth moderated to 6.1% in 2018 and 6.5% in 2019. In current prices, GDP stood at GHS180.4bn ($30.8bn) in 2015, GHS256.7bn ($43.9bn) in 2017 and GHS349.5bn ($59.8bn) in 2019.

In March 2019 Ghana completed its IMF extended credit facility programme, with the fund commending the Ghanaian authorities for a “strong economic performance” that is laying the groundwork for sustainable future growth. A key move in this regard was the implementation of the 2018 Fiscal Responsibility Act, which led to stronger regulation and supervision in the banking and financial sector. Ghana’s full cooperation with the Financial Action Task Force (FATF) against money-laundering and terrorism financing was also praised. This resulted in Ghana being removed from the FATF’s “grey list” in June 2021.

Ghana was on track to continue on this path of robust economic output in 2020 before the global scale of the pandemic became apparent towards the end of the first quarter. The impact of this was reflected in GDP growth, which dropped to 0.7% in 2020. Still, Ghana avoided the contraction experienced in many other countries around the world. In line with global performance, data from the GSS shows that hotels and restaurants were most severely impacted that year, with the segment shrinking by 34.8%, while oil and gas, gold, and forestry and logging activities were also negatively affected. Many countries imposed lockdowns that disrupted international supply chains, hurting Ghanaian businesses that rely on imported inputs.

Other economic areas performed better, however, with agriculture growing by 7.4%, and information and communications up 22.5% as remote working, shopping and learning accelerated an already rapidly expanding ICT sector (see ICT chapter). IMF figures show that the data used per person per month in Ghana rose from just under 1.5 GB in 2019 to slightly more than 2 GB in 2020.

The wider economy rebounded in 2021, with the GSS recording quarter-on-quarter GDP growth of 3.5% in the first three months of the year and 3.9% in the second quarter. The IMF expected 4.7% growth for 2021 as a whole, while in November of that year the MoF set a goal of 5.8% expansion for 2022.

Fiscal Policy

The government’s response to the pandemic included an increase in fiscal support, by around 1.8% of GDP, to cover water and electricity bills, repatriate Ghanaians from abroad, provide soft loans and bridge other payments for those badly affected by the crisis. Recipients of aid under the Livelihood Empowerment Against Poverty (LEAP) programme were also given food support. Health spending, for its part, increased by some 0.5% of GDP.

The GHS100bn ($17.1bn) Ghana CARES programme was also unveiled in late 2020, set to span three years and two phases. The first – stabilisation – targeted pandemic relief, and the second focuses on revitalisation and transformation from end-2021. A number of programmes are contained within the scheme, including establishing the Development Bank Ghana; the One Million Jobs initiative, which is an enterprise and youth support fund targeting the creation of 100,000 jobs for young people; and the GIIF, which targets motorway and electricity development in particular. Ghana CARES also included a bond-issuance programme to raise $2bn by November 2021. This saw a successful $3bn eurobond issuance in March of that year, though another $1bn issuance planned for October was called off as global market conditions deteriorated.

While such measures were necessary to both combat the spread of the virus and ameliorate some of its worst effects on residents, they inevitably added to Ghana’s public debt burden. IMF figures show that the level of gross public debt rose from 62.6% of GDP in 2019 to 78.9% in 2020, while the fiscal deficit increased from 7.5% of GDP to 15.2%. The current account deficit – which grew from 2.7% of GDP to 3.1% – was impacted less than many had feared, however, given that gold prices rose and offset the fall in oil exports.

Provisional MoF statistics for 2020 show GHS53.7bn ($9.2bn) in total government revenue and GHS96.3bn ($16.5bn) in expenditure. Ghana’s ongoing efforts to widen the tax base, facilitated by stronger financial sector regulation and the broader digitalisation agenda, should help to ease budget deficits in the future. According to the MoF, less than 10% of the population was registered as taxpayers in August 2021, in addition to 45,109 corporations. “With so much of the economy informal, registering people by using digital systems to track properties and establish who lives where helps create a pool of taxpayers,” John Asafu-Adjaye, senior fellow at the African Centre for Economic Transformation, told OBG. The budget deficit improved from 6.4% of GDP in June 2020 to 5.1% in June 2021, according to the mid-year budget review, but had widened to 9.4% as of September 2021, per a review published in the 2022 budget statement.

Monetary Policy

Monetary policy was loosened to assist citizens and businesses with the financial burdens that came with the pandemic. In both March 2020 and May 2021 the BoG cut the policy rate – from 16.5% to 14.5%, and from 14.5% to 13.5%, respectively – while also lowering banks’ reserve requirement from 10% to 8%. The BoG increased its lending to the government by around 4.4% of GDP in 2020 and relaxed prudential requirements. A moratorium on debts was also enacted and has been voluntarily extended by certain banks.

Inflation, for its part, had been falling steadily prior to the pandemic, from 17.45% in 2016 to 7.18% in 2019. After April 2020, however, the consumer price index returned to the double digits, before easing to 7.5% in May 2021. With inflation at 11% year-on-year in October 2021 – driven by higher prices for housing, electricity, water and gas – in November the BoG raised its benchmark monetary policy rate to 14.5%.

Ghana’s currency depreciated only slightly during 2020-21, moving from $1:GHS5.53 at the start of January 2020 to $1:GHS5.92 in December 2021.

Trade & Investment

As Africa’s largest gold producer – a title it took from South Africa in 2019, when it produced 142.5 tonnes – and with robust oil and gas reserves, Ghana enjoyed a trade surplus prior to the pandemic, at $2.3bn in 2019. These two commodities have helped balance recent fluctuations in the price of cocoa – Ghana’s third-largest export – and they had countervailing influences on trade during the pandemic. Indeed, Ghana’s trade basket is advantageous in that downturns in oil prices tend to lead to higher demand for gold, which is seen as a safe investment. While a troy oz averaged $1392.50 in 2019, this jumped to $1770.25 in 2020 and moderated to around $1700 over the course of 2021.

Oil prices, for their part, rebounded from an April 2020 low of $26.63 per barrel for West Texas Intermediate crude to $69.49 in early December 2021. From January to September 2021 Ghana’s petroleum receipts totalled $618.46m, up from $387m in the same period of 2020. The oil and gas sector has been expanding since commercial quantities started being extracted in 2007, and new offshore projects are scheduled. Plans to boost refinery capacity should also start to address Ghana’s import dependence for petroleum products, with local production covering 5% of demand in 2018 (see Energy & Utilities chapter).

The 2020/21 season saw the biggest cocoa harvest in years – up 30% to more than 1m tonnes. Global demand rose above pre-pandemic levels that season, with cocoa prices subsequently trending upwards during the summer of 2021 (see Agriculture chapter).

With global FDI flows affected by the onset of the pandemic, Ghana saw a slowdown in inward investment. World Bank figures show FDI climbing from $3bn in 2018 to $3.9bn in 2019, but this declined to $2.6bn in 2020 – still a healthy figure, given the conditions – with $829.9m recorded in the first half of 2021, up 32.15% over the first six months of 2020. Taken together, the IMF expected Ghana’s current account deficit to fall from the 3.1% of GDP seen in 2020 to 2.2% in 2021, with gross international reserves picking up from $6.9bn to $7.4bn to cover around three months of imports.

Labour Market

With the pandemic seeing many businesses close or reduce the hours or wages of employees, labour earnings fell during 2020-21. The April 2020 lockdown was particularly arduous, with around 46% of firms cutting wages during that time, affecting around 25% of all employed workers, according to the IMF. Schools were also closed for in-person learning for much of 2020, impacting not only employees and students, but also social programmes that were being delivered through these channels.

While Ghana has made major inroads against poverty in recent times – halving the poverty rate between 1991 and 2016 – the pandemic represented a step backwards. “Many people in Ghana live hand to mouth,” Terry Afram, managing director of Accra-based consultancy Bridge Partners, told OBG. “Buying and selling foodstuffs and maintaining small retail operations is their life blood, so as much as the lockdown was necessary, it was a major strain on them.” Public programmes to assist such people that were rolled out during the pandemic largely continue under the 2022 budget, which was approved by the Parliament on December 1, 2021 after lengthy debate, highlighting the political risk presented by the evenly split Parliament at the time.

2022 Budget

The work to finalise the 2022 budget illustrates the challenges facing Ghana’s economy. With financing the public debt a rising concern – Fitch estimated that general government interest payments on debt would take up 47% of government revenue in 2022 – the leadership is under pressure to raise income, while also maintaining and even expanding programmes in welfare, infrastructure and job creation. And it must balance these priorities in a world that is not quite past the pandemic.

The 2021 budget began a process of fiscal consolidation with increases in the National Health Insurance Levy and the value-added tax rate of 1 percentage point each. Other levies were imposed on polluters, fuel and financial sector profits. The budget deficit began to shrink as a result, from 6.4% of GDP in June 2020 to 5.1% in June 2021. Domestic and external debt, however, continued to rise – the former from GHS122.1bn ($20.9bn) to GHS172.7bn ($29.5bn), and the latter from GHS136.3bn ($23.3bn) to GHS161.8bn ($27.7bn).

The 2022 budget therefore set out plans for further consolidation. It introduced a 1.75% tax on electronic financial transactions to support infrastructure and transport projects. After much criticism, however, the rate was lowered to 1.5% in late January 2022 and remained under review by Parliament as of February. At the same time, certain discounts on import fees are to be removed, motorway tolls are slated to end, small-scale mining taxes will be reduced and tax-free thresholds hiked to encourage economic activity.

The projected expansion in the tax base due to the national ID programme and other digitalisation initiatives, will – by government estimates – help secure a minimum of 3% of GDP in extra revenue. By November 2021 the National Identification Authority had enrolled some 15.7m Ghanaians on the National Identity Register, with 11.6m of those also issued ID cards.


The country’s economic health in the coming years depends greatly on the ability of the government to implement further fiscal consolidation, with targets for 2022 including a primary surplus of 0.1% of GDP and a fiscal deficit of 7.4% of GDP. The government is aiming for positive primary surpluses in 2022-25, with the fiscal deficit returning to the threshold outlined in the Fiscal Responsibility Act – suspended during the pandemic – of not more than 5% of GDP by 2024.

The pandemic has demonstrated the importance of social protection and strong governance mechanisms, while environmental sustainability has come to the fore in recent years. Private companies can harness their focus on these concepts to build resiliency. “We must continue to remind companies that the best way to do business is to be compliant with environmental, social and good governance principles,” Ernest Akonor, partner at Mazars Ghana, told OBG.

Achieving the country’s fiscal goals will require discipline, but Ghana has repeatedly demonstrated its ability to navigate major economic and financial challenges. Its young population provides ample dynamism, and GDP growth is well positioned to accelerate in the short to medium term thanks to a raft of structural reforms. The country’s experience capitalising on its variety of natural resources, coupled with its growing e-finance and commerce sectors, also stand it in good stead as the pandemic continues into 2022. Despite ongoing uncertainty at the global level, a budding confidence is present in Ghana that is starting to be reflected in domestic and international investment levels.

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The Report: Ghana 2022

Economy chapter from The Report: Ghana 2022

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