Fractured fortunes :An evaluation of macroeconomic changes on Ghana’s socio-economic classes (2022–2025)

By  Ishmael YAMSON

Between 2022 and 2025, Ghana navigated a volatile economic cycle ranging from near-collapse to a rapid, albeit fragile, recovery. The crisis was not merely imported; it was triggered by a confluence of global shocks (the aftermath of COVID-19 and the Russia-Ukraine war) and deep-seated domestic failures—specifically excessive borrowing, fiscal indiscipline, and the misappropriation and misapplication of government funds. These internal vulnerabilities depleted fiscal buffers, leaving the economy exposed when external conditions deteriorated.

The government’s policy response, notably the Domestic Debt Exchange Programme (DDEP) and an IMF bailout, stabilized the macro-economy, leading to a resurgence in 2025 marked by single-digit inflation and a strengthening currency. This paper evaluates the impact of this boom-bust-recovery cycle through a stratified lens. It analyzes how the economic collapse and subsequent stabilization affected three distinct demographic cohorts: the lower and lower-middle income (focused on essentials), the middle income (focused on lifestyle), and the upper-middle and upper income (focused on wealth preservation).

Introduction

The period from late 2022 to 2025 represents a watershed moment in Ghana’s economic history. After a decade of robust growth, the nation found itself at the precipice of financial insolvency. By December 2022, inflation had surged to 54.1%, and the Cedi had lost over 50% of its value. To secure a $3 billion IMF Extended Credit Facility, Ghana restructured its domestic debt, inflicting significant haircuts on bondholders.

However, 2025 defied pessimistic forecasts. Inflation dropped to single digits (~9%), the Cedi emerged as one of the world’s best-performing currencies (appreciating ~30% in H1 2025), and GDP growth rebounded to over 5%. This paper examines the micro-economic reality behind these headline numbers, arguing that the psychological and financial scars of the crisis persist despite improving indices.

The Macroeconomic Context: The Perfect Storm

To understand the specific impacts on income groups, one must first appreciate the magnitude of the macroeconomic dislocation and its origins.

 The Roots of Insolvency: Fiscal Indiscipline & Governance Failures

While external shocks provided the spark, the fuel for the economic combustion was laid over years of governance failures.

• Excessive Borrowing: The debt-to-GDP ratio spiraled unsustainably as the government aggressively borrowed on commercial markets to fund ambitious projects. Crucially, this borrowing was often not matched by revenue-generating output, creating a solvency gap.
• Fiscal Indiscipline & Misapplication: Systemic weaknesses in public financial management allowed for the misappropriation and misapplication of funds. Resources meant for critical infrastructure or buffers were often diverted to recurrent expenditure or projects with poor economic multipliers.
• Depleted Buffers: Consequently, when global financing conditions tightened in 2022, Ghana had no fiscal space to maneuver. The “debt spiral” was accelerated not just by rising global interest rates, but by a loss of market confidence in the government’s ability to manage public resources responsibly.

The Inflationary Spiral

Inflation in Ghana is historically volatile, but the 2022 surge was exceptional. Driven by supply chain disruptions, money creation to finance the deficit, and a free-falling currency, the cost of the consumption basket effectively doubled. Food inflation, which disproportionately affects the poor, peaked at nearly 60% in early 2023.

Currency Depreciation

The Cedi’s depreciation was the transmission mechanism for the crisis. As an import-dependent economy, virtually every sector is pegged to the dollar. The rapid depreciation led to “price anticipatory behavior,” where traders increased prices daily to hedge against the eroding value of the local currency.

The Domestic Debt Exchange Programme (DDEP)

Launched in December 2022, the DDEP was the government’s tool to reduce its debt service burden. It targeted GHS 137 billion in domestic bonds, involving coupon reductions and maturity extensions. This effectively transferred the cost of national deleveraging onto private balance sheets.

The Crisis of Survival: Lower and Lower-Middle Income Communities

For the lower and lower-middle income demographic—daily wage laborers, petty traders, subsistence farmers—the economic collapse was an existential threat. This group typically allocates 60-70% of their income to food, shelter, and transportation.

Food Insecurity and the “Kenkey Index”

The most immediate impact was on food security. As inflation peaked, the price of staples like maize and rice skyrocketed.

• Shrinkflation: The “ball of kenkey” (a staple maize dumpling) shrank visibly while its price doubled, a phenomenon colloquially noted as the “Kenkey Index” of inflation.
• Dietary Shifts: Households switched to lower-quality calories, reducing protein intake or skipping meals entirely.

 The Transport Trap

For the urban poor, mobility is synonymous with opportunity. Fuel price hikes led to increased “Trotro” fares. This created a “transport trap,” where the cost of commuting eroded the profit from work, forcing some to withdraw from the labor force or limit activities to their immediate neighborhoods.

Shelter and Utilities

Landlords demanded multi-year rent advances, while utility tariffs were hiked to clear energy sector debt. For households on the margins, these hikes forced a choice between electricity and food.

 Summary of Impact

The lower-income group suffered a massive real wage compression. Their income remained static while the cost of survival doubled.

The Crisis of Lifestyle: Middle Income Community

The Ghanaian middle class faced a crisis of identity and social mobility.

 The Education Squeeze

Private education, a non-negotiable priority for this group, saw fees dollarized or indexed to the exchange rate. Parents were forced to withdraw savings, take loans, or move children to less expensive schools.

 The Housing Dilemma

Landlords in middle-class enclaves demanded dollar-indexed rents, and the cost of building materials (cement, iron rods) doubled, halting private construction projects. The dream of homeownership was indefinitely paused.

 The DDEP and the Erosion of Security

This demographic was heavily invested in mutual funds and pension schemes. The DDEP caused a liquidity crisis, freezing emergency funds and shattering trust in “risk-free” assets.

 The “Japa” Phenomenon (Brain Drain)

The loss of faith in the local economy triggered a surge in emigration of skilled professionals (nurses, teachers, IT specialists) seeking stability abroad.

 The Crisis of Wealth: Upper-Middle and Upper Income Community

The upper-middle and upper-income community focused on wealth preservation and portfolio growth.

 The Direct Hit: DDEP and Asset Valuation

This demographic held the bulk of individual Government of Ghana (GoG) bonds. The DDEP resulted in an estimated NPV loss of 30-50%, shattering the perception of sovereign bonds as risk-free assets.

 Portfolio Reallocation: The Flight to Safety

The primary reaction was a massive flight to foreign currency (dollarization) and high-end real estate. This capital flight exacerbated the Cedi’s depreciation in 2022–2023.

 Business and Operational Challenges

Wealthy business owners faced prohibitive borrowing costs (policy rates reaching 30%) and forex scarcity, complicating imports and supply chain management.

 The Recovery Phase (2024–2025): A Retrospective on Resilience

By 2025, the macroeconomic landscape shifted dramatically. Inflation fell to single digits (hitting ~9.4%), the Cedi appreciated by approximately 30% against the dollar in the first half of the year (moving from ~15.5 to ~10.5 GHS/USD), and interest rates began to fall. This “stabilization phase” produced divergent outcomes for the different classes.

 Impact on Lower and Middle Income Communities

• Lower Income (Relief, not Restoration): The drop in inflation brought immense relief. Food prices stabilized, and the “Kenkey ball” stopped shrinking. However, prices did not revert to 2021 levels; they simply stopped rising. The stronger Cedi helped stabilize transport fares, easing the “transport trap,” but the lost savings and debt incurred during the crisis years remain a burden.
• Middle Income (Return of Optimism): Consumer confidence indices surged in 2025. The stability of the Cedi allowed for better planning of school fees and rent. However, the “wealth effect” remains negative; while cash flow improved, the value of their frozen mutual funds and pension pots has not fully recovered in real terms.

Upper Class and Diaspora: An Investment Post-Mortem

For the wealthy and the Diaspora, 2025 offered a harsh lesson in market timing and asset allocation. The prevailing wisdom in 2023—”Sell everything and buy Dollars”—proved financially disastrous for many in 2025.

The “Panic Penalty”: Cedi vs. Dollar Assets

A comparative analysis of two investment strategies reveals a counter-intuitive outcome:

• Strategy A: The “Panic Flight” (Dollarization): An investor who, fearing total collapse, converted GHS 1,500,000 into Dollars at the peak of the crisis (rate ~15.00) would have obtained $100,000. Holding this in a US account earning ~5% would yield ~$105,000 by late 2025.
  • Result: With the Cedi appreciating to ~10.50, that $105,000 is now worth GHS 1,102,500.
  • Net Outcome: A nominal capital loss of ~GHS 400,000 (-26%).
• Strategy B: The “Stay the Course” (Retaining DDEP Bonds): An investor who kept the GHS 1,500,000 in DDEP bonds (even with reduced coupons of ~10%) would have earned interest and preserved principal.
  • Result (GHS Evaluation): Principal (1.5m) Coupons (~150k) = GHS 1,650,000.
  • Result (USD Evaluation): Converting this GHS 1,650,000 back to Dollars at the new rate of 10.50 yields ~$157,143.
  • Net Outcome: A nominal gain of GHS 150,000 ( 10%) in local currency, but a staggering USD gain of ~$57,143 ( 57%) compared to the $100,000 value at the peak of the crisis completely reversing any DDEP losses.

The Verdict: The rapid appreciation of the Cedi in 2025 meant that Cedi assets significantly outperformed Dollar cash holdings for local residents. The “flight to safety” incurred a massive opportunity cost. High real yields on local bonds, combined with currency appreciation, rewarded those who maintained confidence in the recovery.

The Diaspora & Real Estate Boom

The Diaspora community, earning in strong foreign currencies, capitalized on the 2023–2024 window.

• Real Estate Acquisition: Diaspora investors drove a boom in high-end real estate (Cantonments, Airport Residential). They bought assets when the Cedi was weak (getting more “house for their dollar”).
• 2025 Valuation: As the Cedi strengthened in 2025, the dollar value of these properties surged. A property bought for GHS 3,000,000 (costing $200,000 at a 15.00 rate) is still worth GHS 3,000,000 but now translates to ~$285,000 at a 10.50 rate.
• Conclusion: The Diaspora who invested in hard assets (real estate) fared significantly better than those who simply held cash abroad.

 Comparative Analysis: Relative vs. Absolute Pain

Comparing the three groups reveals the asymmetric nature of the crisis.

Feature	Lower Income	Middle Income	Upper Income
Primary Loss	Consumption: Inability to afford food and basic transport.	Status: Inability to sustain private education, housing, and mobility.	Valuation: Loss of asset value (bonds) and capital liquidity.
Coping Mechanism	Skipping meals, pulling children from school, walking instead of riding.	Depleting savings, switching to public services, emigration (Brain Drain).	Dollarization, offshore diversification, distress sale of assets.
Recovery (2025)	Stabilization: End of price spikes, but cost of living remains historically high.	Relief: School fees/Rent stabilize. Optimism returns but savings are depleted.	Regret/Reward: Dollar holders lost value; Cedi/Property holders saw massive gains.

The Equity of Suffering: While the upper class lost the most in nominal monetary terms during the crash, they were the primary beneficiaries of the 2025 recovery if they remained invested in local assets. The lower class faced the most acute physical suffering—hunger and deprivation—and their recovery is merely a cessation of pain rather than a restoration of wealth.

 Conclusion and Policy Outlook

The economic cycle of 2022–2025 reshaped Ghana’s social contract. The collapse taught the middle class that their lifestyle was more fragile than they believed, while the upper income community learned that the era of risk-free state returns is over.

Assessment of Government Performance

The current administration deserves credit for steering the economy away from the precipice. The decision to front-load pain through the DDEP and adhere strictly to IMF conditionalities—despite severe political backlash—has delivered undeniable macroeconomic results by 2025. The stabilization of the Cedi and the conquest of inflation are significant technical achievements that have restored Ghana’s creditworthiness. The government successfully avoided a chaotic sovereign default and prevented the complete collapse of the banking sector, a feat that should not be understated given the severity of the initial crisis.

The Path Forward: From Stabilization to Transformation

However, macroeconomic stability is not synonymous with prosperity. To maintain this trajectory and prevent a recurrence of the 2022 cycle, future policy must pivot from austerity to structural transformation. The priority for subsequent years must be:

1. Job-Rich Growth: The recovery has been driven by capital-intensive sectors (gold, oil) and fiscal tightening. The focus must shift to incentivizing the private sector—particularly SMEs and agriculture—to absorb the disillusioned youth demographic.
2. Industrial Import Substitution: The 2025 strength of the Cedi should be leveraged to import capital goods for manufacturing, rather than consumption goods. Reducing import dependence is the only way to permanently insulate the economy from global shocks.
3. Restoring Social Mobility: To stem the “brain drain,” the government must address the cost-of-living crisis for the middle class, specifically by stabilizing housing costs and making education more affordable.
4. Fiscal Governance Reform: Most critically, to prevent a return to the “Roots of Insolvency” (Section 2.1), strict legal frameworks must be enforced to check excessive borrowing and punish the misapplication of funds.
5. Radical Transparency & Communication: As noted in recent public discourse, silence does not equal purity. To bridge the gap between macroeconomic success and the public’s “pocket reality,” the government must institute a culture of radical transparency—publishing consolidated, accessible reports on reforms (digitalization, civil service clean-ups) to rebuild the eroded trust of the citizenry.

Only by bridging the gap between macroeconomic green shoots and microeconomic wallet reality can the government turn this recovery into a sustainable legacy. As Ghana moves forward, the wealthy are re-calculating their portfolios, the middle class is rebuilding its safety nets, and the poor are simply grateful that the price of Kenkey has stopped rising.

The Author is a seasoned strategic leader with over three decades of experience spanning finance, technology, and media. As President & CEO of Ishmael Yamson & Associates and CEO of Nosmay Company Limited, he uniquely bridges the gap between macroeconomic strategy and digital transformation, advising organizations on navigating volatile markets and optimizing operational efficiency effective change management and governance.

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