Dr. John Kwakye: Inflation, Debt, and Cedi Depreciation in Ghana Deteriorated Under NPP

Dr. John Kwakye, the Director of Research at the Institute of Economic Affairs (IEA), has expressed strong criticism of the New Patriotic Party (NPP) administration’s management of Ghana’s economy, asserting that the government has failed to make substantial progress over its eight years in power. During an appearance on The Big Issue on Channel One TV on Saturday, February 8, 2025, Dr. Kwakye spoke with host Selorm Adonoo, offering a detailed analysis of key economic indicators and emphasizing that the NPP-led government has struggled to bring about meaningful stability and sustainable growth in the nation’s economy.

According to Dr. Kwakye, the NPP inherited an economy that was already in a precarious state despite claims by the previous administration that the country had “turned the corner.” He noted that although Ghana had made some improvements before the NPP took office, the economy remained far from being in a solid position for growth. The economist pointed to the IMF’s growth projection for 2024, which was only 4%, a modest increase from the 3.6% growth rate of 2016. He described this as “marginal growth,” which he believes does not reflect the level of development needed to propel the country forward.

One of Dr. Kwakye’s main concerns is the sharp increase in Ghana’s inflation rate. The Ghana Statistical Service reported that inflation for January 2024 stood at 23.5%, a significant jump from 15.2% in 2016. This rise in inflation has caused serious concern, particularly for the average Ghanaian, as it contributes to the increased cost of living. Dr. Kwakye attributed this inflationary pressure to several factors, including the depreciation of the cedi, increased government borrowing, and disruptions in supply chains both domestically and internationally. He highlighted that these issues have compounded over time, leading to persistent inflation that continues to undermine the purchasing power of the Ghanaian populace.

Dr. Kwakye also raised alarms about the growing public debt in relation to the country’s GDP. As of November 2024, public debt had surged to 72% of GDP, up from 58% in 2016. This increasing debt burden, according to Dr. Kwakye, is a result of unchecked borrowing, which has become a major contributor to the country’s economic struggles. Alongside rising debt, the cedi has experienced significant depreciation, with the exchange rate now hovering around GH¢15 to the US dollar, a sharp decline from GH¢4.2 in 2016. This depreciation has made imports more expensive, contributing further to inflation and placing additional strain on businesses and households.

Dr. Kwakye argued that these troubling economic indicators are a clear sign that the NPP administration has not effectively addressed the key issues facing the Ghanaian economy. Despite various promises and efforts to stabilize the economy, the data suggests that the situation has worsened in many critical areas, including inflation, public debt, and currency stability. “The economy has not improved over the eight-year period,” he remarked, underscoring the lack of tangible progress in addressing the underlying issues.

His remarks are part of a growing chorus of concerns regarding the country’s economic trajectory, as the NPP government continues to face significant challenges in managing inflation, debt levels, and the depreciating cedi. The ongoing economic difficulties are particularly concerning for businesses that rely on stable currency exchange rates and affordable credit to operate efficiently. Ordinary Ghanaians also feel the impact through higher living costs, particularly in areas such as food prices, fuel, and imported goods.

The increase in debt, inflation, and the weakening of the cedi have left many questioning the government’s ability to effectively manage the economy. Dr. Kwakye’s analysis highlights the need for more targeted and effective economic policies that can address these persistent challenges. While the NPP administration may point to certain areas of progress, the evidence suggests that the country’s economy has struggled to achieve the stability and growth that it desperately needs.

As Ghana continues to face these economic headwinds, Dr. Kwakye’s critique serves as a stark reminder of the urgent need for comprehensive reforms to address inflation, manage public debt, and stabilize the cedi. Without significant changes in policy and economic strategy, the country may continue to struggle with the same challenges for years to come.