Economic headaches await future president

Ghana's next president, to be elected Thursday, will face a deepening economic crisis marked by high unemployment, spiralling inflation and a dangerously weakening currency.

Like many developing countries, Ghana under President Jerry Rawlings has been walking a tightrope, pursuing economic liberalization under the eye of the International Monetary Fund (IMF) while seeking to minimize social fallout.

External events have exacerbated things this year, notably sharp drops in world prices for Ghana's top two foreign exchange earners, gold and cocoa, and a more than doubling of the price of oil.

The price of gold hit a 20-year low in July, causing job losses in the mining sector, while cocoa prices fell to a five-year low in May. Ghana is the world's second-largest producer of cocoa after Ivory Coast.

A rapidly weakening cedi -- which traded at 2,500 to the dollar last year and now stands at 6,500 -- and the surge in oil prices are fanning inflation, which has reached 37 percent, according to analyst Emmanuel Aning.

As a result, the purchasing power of the average Ghanaian, living on barely more than a dollar a day, has decreased dramatically.

Rawlings, in power since 1981 as military or civilian leader, signed on to IMF reforms in 1986, agreeing to turn the state-controlled economy established under founding father Kwame Nkrumah's "African socialism" into a market economy.

His successor -- whether it will be his Vice President John Atta Mills or John Kufuor of the New Patriotic Party, the two frontrunners in Thursday's polls -- is likely to stay the course, according to a report by the Economist Intelligence Unit (EIU) in October.

Either one will face a tightening squeeze on finances, not least because social spending increased during this election year, including a 20 percent wage hike for civil servants and polytechnic teachers, forcing heavy domestic borrowing.

"All the microeconomic indicators point to the fact that the economy will get worse before it gets better," said Aning of the Institute for Economic Affairs, a public policy think-tank.

Ghana has also suffered a slackening of aid money this year, much of it suspended pending an evaluation of the fairness the elections, and of the new government's commitment to staying the IMF course.

Aning criticised the donors, saying they were cynically in search of an "African success story".

With the economy in its present state and the time needed for a new government to set up shop, Aning said: "I don't think Ghana will be in any way an African success story" in the near future.