Ghana: Post-election political and economic outlook

March 2021

For further insights on Ghana, or to understand how Africa Matters Ltd can support you, please email Associate Tiffany Wognaih on

Following a tight race between incumbent Nana Addo Dankwa Akufo-Addo and his old political rival John Dramani Mahama, Ghanaian voters re-elected Akufo-Addo for a second presidential term in the December poll. The Supreme Court upheld the result in early March despite a challenge lodged by Mahama, and the country is now looking to the future. As President Akufo-Addo stated when delivering his State of the Nation Address (SONA), “the court has spoken. It is time for all of us to move on, and, in a united manner, confront the problem of post-COVID Ghana.” The stakes are high after Ghana lost over USD 2.3 billion in revenue from the economic turmoil induced by the pandemic.

President Akufo-Addo expects to deliver his electoral promises with support from his recently appointed cabinet, which has largely remained the same; 16 out of the 25 nominated ministers, including Trade and Industry Minister Alan Kwadwo Kyeremanten and Finance Minister Ken Ofori-Atta, have retained their position. Former Minister of Education, Matthew Opoku Prempeh, has moved to the Ministry of Energy, where ensuring the financial viability of the sector is expected to be a key priority. Notable new entrants include Francis Asenso-Boakye and Samuel Abdulai Jinapor, who oversee the Ministry of Works and Housing and Ministry of Lands and Natural Resources, respectively.

Mitigating the impact of COVID-19 and revitalising the economy as key priorities for president’s second term

President Akufo-Addo will battle to deliver on first and second term campaign promises, within the context of the pandemic-induced low growth environment. According to the IMF, Ghana saw growth fall in 2020 to its lowest in three decades to 0.9 percent from 6.5 percent in 2019. Nonetheless, the government is confident that the ongoing vaccination programme, launched in early March, will help the economy rebound and grow to nearly five percent in 2021.

During his SONA delivered on 9 March, President Akufo-Addo promised to boost the economy by implementing the Ghana COVID-19 Alleviation and Revitalisation of Enterprises Support (CARES) “Obaatan Pa” programme, a three-year, two-phased USD 17 billion economy recovery programme focusing heavily on job creation, key infrastructure development, and financial stability. Phase one of the programme was launched in July 2020 and aimed at alleviating the pandemic’s daily impact on Ghanaians by reducing the costs of basic services, ensuring food security, and protecting jobs and businesses. Phase two aims at revitalising and transforming the economy over a three-year period (2021-2023) by incentivising investments in, and providing public financial support to, the private sector in targeted industries. Targeted sectors include supporting commercial farming; building Ghana’s light manufacturing sector and housing and construction industry; and developing ICT and digital economy industries. Up to 70 percent of the financing will be sought from the private sector, mainly through public-private partnerships (PPPs) and foreign direct investments (FDIs).

To this end, the government plans to pass two key investment laws in 2021 each dedicated to providing a more enabling framework for significant increases in FDI and PPP investments, respectively. It will also permanently grant tax exemptions on capital gains made on securities listed on the Ghana Stock Exchange, a critical move to encourage investors to actively participate in the local capital market. Given the current state of public finances (see below), Akufo-Addo is, however, unlikely to fully fulfil his 2016 campaign promise to cut tax rates, with the general corporate income tax rate likely to remain at 25 percent instead of the promised 20 percent.

Establishing Ghana as a regional hub

The government plans to use the CARES programme to establish Ghana as a regional hub, leveraging its position as host of the Secretariat of the African Continental Free Trade Area. With this ambition in mind, Akufo-Addo’s administration is expected to address several challenges that continue to hinder FDI flows into the country, including the transport infrastructure deficit, costly power supply and lack of skilled labour force.

President Akufo-Addo has committed to continuing with the rapid industrialisation agenda, started during his first term, which aims at moving to an economy less dependent on raw materials; and to fulfil some of his previous campaign promises, including improving education quality. The government has taken steps to improve the energy sector’s financial sustainability by settling half of the legacy debts totalling USD 1.5 billion and initiating talks with its independent power producers to reduce the cost of power. Although these efforts are expected to continue in Akufo-Addo’s second term, ensuring the sector’s financial viability remains a challenge. Energy Minister Prempeh has warned that, considering unpaid bills to fuel suppliers and legacy service costs, the sector’s debt could reach USD 12.5 billion by 2023 if left without measures to curb it.

Challenges ahead: rising debt burden and lack of majority in parliament

Two critical factors are likely to limit President Akufo-Addo’s ability to deliver on his campaign promises. Firstly, the president will be under pressure to contain government spending that has pushed the debt to GDP ratio above 70% and raised concerns over the risk of seeing Ghana classified as a high debt-distressed country. Secondly, the lack of a parliamentary majority will make it harder for President Akufo-Addo’s party to shape certain acts and regulations.

Ghana’s national debt, a ticking time bomb

Ghana’s public debt has increased by approximately 58% over the past five years and stood at USD 50.8 billion in December 2020, representing 76.1% of GDP. Although the major public costs incurred in 2020 from the COVID-19 pandemic have exacerbated Ghana’s poor public debt situation, the IMF had warned of the country’s rising debt burden in 2018.

The government plans to finance its 2021 budget and manage its debt by borrowing over USD 5 billion from international capital markets. As one of the most stable African investment destinations, investor appetite for Ghana’s debt will be high. Last year, the government raised a total of USD 3 billion in Eurobond issuance, which was nearly five times oversubscribed. Nonetheless, ongoing concerns surrounding Ghana’s rising debt, of which more than half is external loans, is likely to increase the cost of sovereign borrowing, making it more expensive for the state to refinance its existing debt.

According to one of our sources, an Accra-based economist, Ghana is unlikely to default on its debt in the short-term. The economist noted that the government has often pro-actively borrowed money on international markets to service maturing debts. Ghana is also eligible for the G20 Debt Service Suspension Initiative, a temporary suspension of debt-service payments owed to bilateral creditors, to which it has not yet agreed to join. However, our economist source warns, “the fraction of total revenue allocated to debt servicing is concerning, since 44 percent of tax revenues will be needed to service debt in 2021.”

This – limited access to public finances and the need to improve and increase fiscal collection to cover debt servicing costs – will ultimately constrain President Akufo-Addo’s ambitious industrial and infrastructural project developments and delay his plans to establish Ghana as the premier regional investment hub.  

Hung parliament increases risk of political stalemate

The ruling New Patriotic Party (NPP) incurred a significant loss in parliamentary elections due to inroads made by the opposition National Democratic Congress (NDC). Each party won 137 of the 275 total parliamentary seats, with the remaining seat going to an independent candidate. The implications of a hung parliament, at a time when decisive action is needed, looms large.

One of the issues we expect to dominate the parliamentary agenda is the controversial Agyapa Royalties Transactions – a proposed NPP initiative that involves monetising the country’s gold resources to secure future revenue, which the NDC had vowed to reverse if they had won the 2020 presidential election. President Akufo-Addo has committed to engage parliament to boost transparency and confidence around the Agyapa deal. This will be one of the most closely watched parliamentary debates in Ghana this year.

Controversy around the deal started in August 2020 when, despite a walk-out by the opposition, lawmakers approved a series of agreements under which the government assigned over 76% of its future gold mining royalties to Agyapa Royalties Limited, an offshore company that would ultimately list 49% of its shares on the Ghanaian and London Stock Exchanges, with the government retaining a 51% majority stake.

Opposition and civil society raised concerns about the deal, citing a lack of transparency and public consultation and called on parliament to overturn the deal. The then Special Prosecutor Martin Amidu later found that the transaction process raised suspicions of bid-rigging, corruption, and nepotism. Amidu established connections between the transaction advisor appointed to the project and a Ghanaian company co-founded by Finance Minister Ofori-Atta, who denied any wrongdoing. The president thus instructed Ofori-Atta to re-submit the project to parliament.

The Agyapa deal and its long-term implications will be a lightning rod for Akufo-Addo’s administration, and political consensus is expected to remain elusive in the near term. Our Accra-based economist source explained, “the number of parliamentary seats per se is irrelevant, it is the issue at stake that matters. Unless Ghanaians have a negative opinion about specific policies, such as the Agyapa deal, the opposition is likely to support the agenda of the government.” Shifting public sentiment towards the deal, demonstrating transparency and consultation with civil society members and opposition parliamentarians will be key if the president wants to get this over the line before the end of the year.

Managing expectations while realising aspirations

While President Akufo-Addo begins his second presidential term in a more challenging environment, several factors are likely to help him realise his ambition of returning Ghana to a sustained growth path. History shows that Ghana is more resilient in times of economic crisis than its regional neighbours. Although COVID-19 induced economic and social pressures will remain until 2022 at the earliest, Ghana has strong macroeconomic fundamentals and established “bounce-back” capabilities. Additionally, Ghana remains an attractive destination for foreign investors. It overtook neighbouring Nigeria as the largest FDI recipient for West Africa in 2019 and has been ranked among the top five most attractive African countries for investment in 2020. This strong investor sentiment will be strengthened by investment incentives and a clear and largely predictable regulatory environment under an Akufo-Addo second term.

Attracting and retaining investment, particularly for infrastructure projects, will allow President Akufo-Addo to stave off the type of public dissatisfaction and anti-government sentiment that prompts public protests. In a 2019 public attitude survey, a majority of Ghanaians described the government as performing “fairly badly” or “very badly” in narrowing income gaps (66%), improving living standards of the poor (56%), and creating jobs (54%).  A key determinant for the success of Akufo-Addo’s second term will therefore be his ability to manage public expectations about service delivery, while ensuring a steady stream of investment, particularly into labour-intensive sectors in the short term, if “Ghana beyond aid” is to become a reality. 

AML March 2021 Insight
AML March 2021 Insight