Economy Shows Signs of Stability, but Challenges Remain

Although the economy has shown signs of stability after years of turbulence with a sharp cedi rebound, improved fiscal balances and easing inflation, analysts caution gains could be short-lived without tackling deeper structural weaknesses.

Recent Economic Developments

A mid-year economic review by Emerging Markets (EM) Advisory described the cedi’s 42.6 percent appreciation against the US dollar in first-half 2025 as “genuinely unprecedented” in sub-Saharan Africa.

The rally has almost reversed depreciation suffered between 2022 and 2024 – driven by IMF disbursements, surging gold prices and exports, rising remittances and central bank intervention.

Underlying Weaknesses Remain

This notwithstanding, EM Advisory cautions that underlying weaknesses – including productivity gaps, import dependence and fiscal pressures – remain unresolved.

The report notes that currency rallies can be fleeting, as questions linger about how the economy will cope once gold prices normalise or the IMF programme ends.

Capacity Constraints and Fiscal Pressures

Additionally, the report highlighted capacity constraints in project delivery, citing cases of contractors drawing loans without completing works and persistent under-budgeting in the energy sector.

These issues, it said, point to “a deeper capacity deficit” in the public service.

Government’s GH₵2.45billion recapitalisation of the National Investment Bank lifted its capital adequacy ratio from negative 53 percent to positive 23 percent, safeguarding deposits and jobs – but concerns remain about non-performing loans across the wider banking sector.

Near-term Risks and Medium-term Challenges

Near-term risks include commodity price swings, a potential cedi reversal and fiscal pressures from political decisions.

Medium-term challenges range from rising debt servicing to unresolved energy deficits and climate shocks to agriculture.

Recommendations for Government

Government has been urged to strengthen the Sinking Fund, broaden the tax base and focus on high-impact, revenue-generating projects.

It further cautioned that without deeper reforms, the country risks sliding back into its “familiar boom-bust cycle”.

The review flagged several challenges, including a GH₵1.6billion shortfall in Customs revenues and a GH₵1.3billion overshot in the public wage bill.

Conclusion

In conclusion, while the economy has shown signs of stability, the gains are fragile and could be short-lived if the underlying weaknesses are not addressed.

The government must take bold steps to strengthen the economy, including reforms to address productivity gaps, import dependence and fiscal pressures.

By doing so, the country can avoid sliding back into its familiar boom-bust cycle and achieve sustainable economic growth.