03/01/2026
WHY ARTIFICIAL STABILITY IS NOT ECONOMIC TRANSFORMATION: PART TWO
Admittedly, recent improvements in the performance of the cedi have yielded short-term welfare benefits, and this is not in dispute. However, macroeconomic management must go beyond nominal stability and address the structural vulnerabilities arising from excessive dependence on external markets. Sustainable economic transformation requires a careful balance between exchange rate management and domestic productive capacity.
1. The simultaneous increase in electricity and water tariffs—which raises production costs—alongside reduced import duties induced by currency appreciation, creates strong incentives for increased imports. This policy mix undermines the competitiveness of domestic producers and deepens import dependence.
2. Any policy framework that expands imports at the expense of local production is inherently counterproductive to structural transformation. Such an approach weakens domestic industrial activity, constrains job creation, and erodes the internal revenue base.
3. Evidence of these adverse effects began to emerge in 2025, notably in the inability of the Ghana Revenue Authority to meet its revenue targets. While the immediate fiscal consequences may appear muted due to the temporary suspension of significant debt obligations until 2027, this situation merely postpones the adjustment costs. When debt servicing resumes, the fiscal and economic implications of current policy choices are likely to become more pronounced.
4. The relatively stronger growth performance in 2024 compared to 2025 can largely be attributed to exchange rate targeting. While such measures may enhance short-term macroeconomic stability, they do not, on their own, drive real sector expansion or generate the scale of employment required for inclusive growth.
5. Overall, the current approach to economic management reflects a short-term orientation that prioritises nominal stability over long-term structural ch
