Ghana's economy will expand in 2016 due to increased oil revenues and budget planning, according to Reuters. The West African country will abide by a budget deficit goal set by the International Monetary Fund, and the upcoming 2016 elections will fall under a strict budget regimen. President John Mahama agreed to lower election spending in return for a loan of $1 billion from the IMF. The organization set a deficit goal of 5.3 percent GDP for 2016.
Ghana was one of Africa's premier emerging markets until political instability wrecked the economy and stalled growth. Although the nation remains a viable market, it fell to 14th place in Africa and ranks 111th in terms of global competitiveness, according to the World Economic Forum. Ghana's problems reflect the larger issues taking place in Africa: lacking infrastructure, ineffectual management, and power failures. Electric outages in particular create a major problem in Ghana, contributing to unemployment and falling productivity.
The country's currency fell 20 percent since the beginning of 2015 and remains unstable. Inflation runs rampant as well, standing over 17 percent compared to the government's target of 13.7 percent by the end of 2015, and public debt stood at 69 percent of GDP. The IMF forced authorities to accept a loan package to foster a stable course, but this comes at a cost, as certain financial decisions must gain approval by the international body. IMF officials monitor Ghana's finances because of the country's history of overspending during election season.
Heavy election spending remains an issue in Ghana and other African countries and one of the main reasons why governments on the continent fall into heavy debt. The fact that Ghana is under the thumb of a foreign entity does not offer the ideal solution, but it has few options left, as the country would grow worse without outside support, and officials risk losing investor confidence if leadership breaches the loan terms.
However, IMF loans usually come with rigid provisions that do not give room for nations to produce and grow at a rate that allows governments to pay back the loans. Ghana needs to diversify the economy away from oil and embark on new strategies that enhance development. Ghana is relying on increased oil revenues to sustain the economy for next year, but such a plan comes with an inherent risk given the turbulent nature of the oil market. Oil prices dropped over 40 percent since 2014, and production will get much harder if prices continue to plummet. The economy could expand 6.0 percent in 2016 and 9.0 percent in 2017 if oil production proves successful.