Opposition leader Nana Akufo-Addo of the New Patriotic Party (NPP) won rather convincingly from incumbent President Mahama of the National Democratic Congress (NDC) in the December 2016 elections and even attained a parliamentary majority. In line with Ghana’s earlier power transfers, the transition and government formation is expected to be peaceful. The poor economic performance of the country, falling living standards and some high-profile corruption scandals drove voters towards the opposition. High levels of voter bribery (on both sides) and the continued patron-client underpinnings of Ghana’s democracy pressurise the new government to swiftly reward its supporters and materialise major campaign promises in order not to lose popular support. 

Impact on country risk

For now, the structural reforms implementation under the three-year IMF support programme remains broadly on track and has been vital for evading a full-fledged fiscal crisis. In theory, there are few fundamental policy differences between the two major parties. However, certain NPP campaign promises like building an industrial factory in every district or creating a development fund for every constituency are too costly for the budget, while forced industrialisation proved inefficient in the past. Therefore, a significant risk would be for the new administration to re-engage in such loose fiscal spending, driven by election promises and leading to tensions with the IMF or even suspension of support funds. Despite gradual progress and growth projections reaching an estimated 7% and 8% in 2017 and 2018 respectively, public finances continue to be a major challenge and the roll-over risk of public debt remains significant given that a large share of domestic public debt consists in short term debt. Moreover, the cedi is re-exposed to capital outflows and depreciation in the aftermath of the US election.

Analyst: Louise Van Cauwenbergh, l.vancauwenbergh@credendo.com