Confronting the challenges

By Korsi DZOKOTO

John Mahama’s return to power as President on January 7, 2025, presents him with a daunting set of challenges.

His administration will inherit a nation mired in economic turbulence, with widespread poverty, rising unemployment, fiscal irresponsibility, and an overburdened public sector. Korsi DZOKOTO looks into the immediate obstacles the new administration must address while expanding on the critical tasks ahead.

Financial sector instability

Ghana’s financial sector is grappling with severe challenges, with numerous local banks and savings companies on the verge of collapse. Years of poor regulation, accumulation of non-performing loans, and insufficient capitalization have eroded public trust in the financial system. The situation demands urgent intervention to prevent a systemic collapse and restore confidence.

A comprehensive financial sector recovery plan will be a cornerstone of Mahama’s administration. This plan must include the recapitalization of viable financial institutions to ensure their stability, the enforcement of stricter regulatory oversight to prevent future lapses, and initiatives aimed at promoting financial literacy and inclusion for underserved populations. Transparent and consistent public communication will also be critical to reassure Ghanaians about the safety of their savings and investments in the banking system.

The Bank of Ghana (BoG), as the central institution responsible for monetary stability and economic support, is itself in a precarious position. The BoG’s financial health has been significantly undermined by impairments totalling GHS 53 billion on both marketable and non-marketable securities.

These impairments arose from the Domestic Debt Exchange Programme (DDEP), a key condition for securing the IMF bailout, which sought to restructure Ghana’s unsustainable debt levels.

While the DDEP was critical for debt sustainability, it dealt a severe blow to the central bank’s equity and reserves, raising questions about the BoG’s operational viability. The financial strain led to substantial losses, with the BoG recording unprecedented write-downs of GHS 60.8 billion in 2022 and an additional GHS 10.5 billion in 2023. By September 2024, reports revealed that the central bank continued to face significant profitability concerns.

These financial challenges are compounded by the BoG’s controversial decision to allocate over $250 million for the construction of a new corporate head office amidst its deteriorating financial state.

This decision has drawn criticism as it reflects misplaced priorities in a time of crisis. Successive losses, including GHS 1.64 billion in 2017 and GHS 793 million in 2018, have left the BoG technically insolvent, struggling to meet its capital adequacy requirements and financial obligations without external intervention.

To address these challenges, the BoG has signed a Memorandum of Understanding (MoU) with the International Monetary Fund (IMF), agreeing to an early recapitalization plan as part of Ghana’s broader economic stabilization program.

However, this solution presents its own challenges. The Government of Ghana, already burdened by a heavy debt load, lacks the fiscal capacity to inject the substantial capital required to stabilize the BoG. This creates a paradox where the central bank, tasked with ensuring financial stability, now depends on a distressed government for its survival.

Resolving this crisis will require a multi-pronged approach. Beyond recapitalization, there must be a focus on restructuring the financial sector to improve resilience. Restoring public trust will demand transparent operations and a clear commitment to addressing systemic issues.

Mahama’s administration will also need to work closely with international partners, such as the IMF and world bank, to navigate these challenges and ensure the financial sector’s recovery is aligned with the broader goal of economic stabilization.

The stakes are high, as the health of Ghana’s financial sector is critical not only to domestic economic stability but also to investor confidence and international credibility. A decisive and strategic response will be key to overcoming this crisis and laying the foundation for a robust and sustainable financial system.

Energy sector crisis

Ghana’s energy sector is facing an imminent crisis, with arrears surpassing $2.5 billion. These debts threaten the stability of the nation’s power supply, potentially leading to a return of the widespread power outages, known locally as “dumsor,” that once crippled economic activity. This looming challenge reflects years of financial mismanagement and operational inefficiencies, despite earlier progress in addressing energy supply under Mahama’s previous administration.

The situation has been worsened by the outgoing government’s failure to act decisively. Despite repeated warnings about the need to secure adequate fuel supplies, the Nana Akufo-Addo-led administration neglected to make the necessary procurements.

Reports indicated that, at one point, the country had only two days’ worth of fuel reserves for power generation. Such mismanagement has compounded the energy sector’s difficulties and left the incoming government to confront a potentially destabilizing crisis.

Ghana’s energy landscape is characterized by a mix of sources, including hydroelectric power, thermal energy (natural gas, crude oil, and diesel), and a small but growing contribution from renewables like solar power. Historically, hydropower has been the backbone of the electricity supply, contributing 30-40% of the energy mix.

However, its reliability has diminished in recent years due to inconsistent rainfall patterns. Thermal power now accounts for 50-60% of the mix, relying heavily on domestic natural gas supplies from the Jubilee and Sankofa oil fields, as well as imports from Nigeria via the West African Gas Pipeline. Renewable energy sources, though promising, still contribute less than 2% of the total energy supply.

Despite having an installed generation capacity exceeding 5,000 MW, the country continues to face significant challenges. Operational inefficiencies, maintenance issues, and fuel supply disruptions mean that actual available capacity frequently falls short of meeting peak demand, which is around 3,800 MW.

The incoming Mahama administration will inherit an energy sector in dire need of reform and stabilization. The first priority will be addressing the mounting arrears by negotiating with creditors, restructuring debts, and stabilizing the financial health of key energy institutions.

Ensuring a consistent and reliable fuel supply for thermal plants will be critical to preventing immediate power outages. Long-term sustainability will require a comprehensive strategy to improve the efficiency and financial viability of the energy sector.

Expanding renewable energy investments and promoting energy efficiency will be central to reducing reliance on costly fossil fuel imports. Solar power projects, such as the VRA Solar Plant, offer promising opportunities for diversification. Additionally, exploring innovative financing options, including public-private partnerships, could secure the necessary resources for sector reform and growth.

The Mahama administration also faces the task of rebuilding public trust by holding the outgoing government accountable for its failures. The same leaders who publicly claimed that dumsor would return under Mahama were simultaneously creating conditions for its resurgence through their neglect.

Transparency in addressing these failures and implementing reforms will be essential to restore confidence in the government’s ability to manage Ghana’s energy needs.

Resolving the energy sector crisis will not only stabilize power supply but also serve as a cornerstone for broader economic recovery. It is a critical test of leadership for the new administration and an opportunity to set the sector on a sustainable path for the future.

The Agenda 111 dilemma

The Agenda 111 initiative, launched by the outgoing government, aimed to build 111 hospitals across Ghana. However, this ambitious project has been plagued by poor planning, lack of coordination, and fiscal irresponsibility. Despite spending over $400 million, none of the hospitals have been certified as complete, and the total project cost has ballooned from $1.45 billion to as high as $7.5 billion.

Alarmingly, there is no dedicated funding source to sustain or complete the project, raising concerns about its viability and leaving the incoming administration with an enormous financial and logistical challenge.

This financial burden looms large as the new government must decide whether to complete, restructure, or abandon the project. The Ministry of Health, which was sidelined during the planning phase, has no clear strategy for staffing, stocking, or maintaining these hospitals even if they are completed.

Completing these hospitals without further exacerbating Ghana’s financial woes will require innovative financing strategies, such as public-private partnerships, donor support, or a phased approach prioritizing high-need regions. Additionally, the absence of a dedicated funding mechanism underscores the importance of instituting robust project financing systems for future initiatives.

Mahama’s team must develop a realistic healthcare strategy that includes identifying sustainable sources of funding, ensuring proper staffing, and establishing long-term maintenance plans.

Transparency in reviewing and auditing the project will be critical to restoring public confidence and ensuring accountability. Effective communication with the public about the administration’s plan for Agenda 111 will also be essential in managing expectations and rebuilding trust.

 Unveiling hidden financial liabilities

One of the most pressing concerns is the risk of hidden financial obligations, often referred to as “fiscal bombs.” A recent example is the suspicious $20 million payment to a mobile app developer just weeks before the current administration leaves office. This transaction raises fears that other questionable expenditures may emerge once the books are audited.

These fiscal liabilities are often “hiding in plain sight” and may include unauthorized spending, unreported debt, or poorly documented contracts. For instance, discrepancies in Ghana’s reported fiscal deficit and public debt suggest that the official figures may understate the true situation.

Mahama’s administration will need to conduct a thorough audit of public accounts to determine the extent of hidden liabilities. This will not only reveal the nation’s actual financial position but also inform necessary adjustments to the national budget.

However, this process is likely to reveal an even grimmer financial picture, requiring urgent renegotiations with creditors and international financial institutions.

Economic turmoil and IMF pressures

Ghana’s current IMF bailout program, aimed at stabilizing the economy, has disbursed much of its $3 billion package, leaving little fiscal room for the incoming administration. However, many of the painful structural reforms, such as revenue mobilization and expenditure cuts, have been deferred, leaving Mahama’s government to bear the political and economic consequences.

Renegotiating the IMF program will be essential to secure additional support and revise unrealistic targets. The government must present a credible economic recovery plan that balances fiscal discipline with growth-oriented policies. This will require delicate negotiations to align Ghana’s needs with IMF conditions, particularly in areas such as debt restructuring, taxation, and social spending.

Rising poverty and unemployment

The economic crisis in Ghana has deepened poverty and unemployment, with devastating consequences for millions of citizens. According to the Ghana Statistical Service (GSS), as of the last quarter of 2023, 41.3% of Ghanaians are multidimensionally poor, translating to over 7.3 million people living in deprivation and deep poverty.

This metric reflects not just income poverty but also access to basic necessities such as education, healthcare, and decent living conditions. Meanwhile, youth unemployment has exceeded 32%, leaving a significant portion of the population, particularly the young, without stable livelihoods.

The economic downturn has widened existing inequalities, pushing many families to the brink and making it increasingly difficult for them to meet their basic needs. Rising inflation, high costs of living, and diminishing opportunities have further compounded the hardships faced by ordinary Ghanaians, creating a crisis of both economic and social dimensions.

The incoming administration faces the daunting task of reversing these trends and revitalizing the economy. Job creation must become a central pillar of the government’s strategy, focusing on sectors that can deliver broad-based employment opportunities.

Investments in agriculture, for instance, can help modernize the sector while employing a significant portion of the population, particularly in rural areas. Promoting manufacturing, with an emphasis on adding value to raw materials, can create industrial jobs and reduce Ghana’s dependency on imports.

Digital innovation presents another avenue for employment generation, particularly for young people. By fostering a robust digital economy, the government can unlock opportunities in tech-driven sectors, ranging from e-commerce to software development. Strengthening vocational training programs will also be essential in equipping the youth with practical skills aligned with industry needs, enhancing their employability.

Small and medium-sized enterprises (SMEs), which are the backbone of the economy, require targeted support to thrive. Access to affordable credit, capacity-building programs, and a conducive regulatory environment will empower SMEs to expand and hire more workers, providing much-needed employment opportunities.

To address the immediate challenges of poverty, the government must expand social protection programs. Initiatives like cash transfers, food subsidies, and targeted assistance to vulnerable groups can provide short-term relief while the broader economic recovery takes shape. These measures must be implemented transparently and efficiently to ensure they reach those most in need.

The crisis of rising poverty and unemployment is not merely an economic issue; it is a social emergency. Addressing it will require bold, innovative, and inclusive policies that prioritize the well-being of all Ghanaians, particularly the most vulnerable. The stakes are high, but with decisive leadership and a clear vision, the incoming administration can lay the groundwork for a more equitable and prosperous future.

Education crisis: CHASS threatens school closure over unpaid debts

Ghana’s education sector faces a potential crisis as the Conference of Heads of Assisted Secondary Schools (CHASS) has issued a stern ultimatum to the government. CHASS has warned that it may advise against the reopening of schools in January 2025 if outstanding debts are not settled.

These arrears, which include funds for essential services such as food, transportation, utilities, and operational expenses, have severely hampered the effective functioning of senior high schools across the country.

In a statement released on December 21, CHASS expressed frustration over the government’s failure to address the critical financial needs of both day and boarding schools. While acknowledging recent disbursements, the organization emphasized that these funds were insufficient to resolve the financial strain threatening the smooth operation of schools.

“This situation has posed a serious threat to the smooth operation of schools and could negatively impact students’ well-being,” the statement noted. CHASS called on the government to prioritize immediate payments to ensure that schools can reopen without disruption and provide quality education to students.

The International Monetary Fund (IMF) has highlighted the structural challenges within Ghana’s education system. While Ghana allocates approximately 4% of its Gross Domestic Product (GDP) to education, the nation continues to struggle with poor learning outcomes.

The flagship Free Senior High School (SHS) program has successfully increased enrolment, but its effectiveness has been questioned due to flaws in its targeting mechanism. The IMF suggests that improving education spending impact will require targeted investments in strengthening primary education, enhancing teacher training programs, and implementing performance-based funding practices.

These observations underline the urgent need for reforms to not only expand access to education but also improve its quality. Addressing the financial concerns raised by CHASS and restructuring education funding will be critical for aligning Ghana’s education system with the nation’s broader development goals. Failure to act promptly could jeopardize the future of millions of Ghanaian students and undermine the country’s progress.

Tackling corruption and recovering stolen funds

Mahama’s government has pledged to investigate and recover funds misappropriated by the outgoing administration. While such promises are common, few governments have delivered on them effectively.

To succeed, the new government must establish independent investigative bodies and ensure transparency in all proceedings. Recovering stolen assets will not only provide fiscal relief but also send a strong signal about the administration’s commitment to accountability. However, this effort must avoid the perception of political witch-hunting, which could deepen partisan divides.

Addressing public services and infrastructure

Beyond Agenda 111, Ghana’s broader public services and infrastructure are in disrepair. Chronic underfunding has left schools, hospitals, and roads struggling to meet the needs of a growing population.

The government must develop a comprehensive infrastructure plan that prioritizes critical projects and ensures value for money. Leveraging international partnerships and private sector expertise can help address funding gaps while maintaining fiscal discipline.

Rebuilding trust and unity

Years of corruption and economic mismanagement have eroded public trust in government institutions. Restoring this trust will require a clear commitment to transparency, fairness, and inclusive governance.

Mahama’s administration must engage stakeholders from all sectors of society to foster a sense of unity and shared purpose. Regular updates on progress, open communication, and citizen engagement initiatives can help rebuild public confidence in the government.

Promoting political stability and economic reforms

Ghana’s deeply divided political landscape poses a risk to stability, especially as the government undertakes difficult economic reforms. Balancing the need for austerity with public expectations will be one of Mahama’s greatest challenges.

The administration must implement reforms in a way that minimizes social disruptions. Strengthening democratic institutions and ensuring that political processes are transparent and fair will be key to maintaining stability and public support.

Conclusion

President John Mahama’s return to office in January 2025 marks the beginning of a critical juncture for Ghana. With the nation facing significant challenges—from a faltering healthcare initiative like Agenda 111, an energy sector on the brink of collapse, and financial sector instability, to rising poverty and unemployment—his administration must act decisively. The multidimensional poverty rate, at 41.3%, highlights the urgent need for solutions that address both immediate and long-term issues affecting millions of Ghanaians.

Tackling these crises will require strategic planning, transparent governance, and bold leadership. To restore confidence, the government must prioritize practical solutions such as innovative healthcare financing, sustainable energy policies, and a comprehensive financial sector recovery plan.

Investments in job creation, agriculture, manufacturing, and digital innovation will not only provide immediate relief but also lay the foundation for long-term growth. Expanding social protection programs and supporting SMEs will be essential to alleviate poverty and reduce unemployment.

While the challenges are daunting, Ghana’s path to recovery is not insurmountable. Success will depend on the resilience, cooperation, and collective effort of all Ghanaians. By fostering unity and demonstrating unwavering commitment to transformative policies, President Mahama’s administration can guide the country through these turbulent times and build a stronger, more inclusive, and prosperous Ghana for future generations.

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