At the end of February the Ghanaian parliament passed a bill introducing prison sentences of up to three years for individuals identifying as LGBT+ and five years for those “promoting” LGBT+ activities, in a move that could have damaging economic ramifications.
It appears likely that the bill will not become law: it is opposed by the government while the president, Nana Akufo-Addo, has said that he will await a Supreme Court ruling on the law’s constitutionality before signing off on the bill.
Akufo-Addo has also stated that “I want to assure you that no such [human rights] backsliding will be contemplated or occasioned.”
That said, the bill has raised eyebrows among business leaders and financial institutions, especially after the government leaked documents to the media which outlined the impact they believe the law would have on the Ghanaian economy, should it come into force. Ghana’s finance ministry suggested that the law would jeopardise almost $4bn of World Bank funding over the next five to six years, which would force Ghana to cut its 2024 budget by $600m.
While the World Bank has not publicly commented on political developments in Ghana, the Washington-based institution has previously reduced or cut off funding to countries deemed to be backsliding on human rights. Last year, for example, it halted new funding to Uganda after Kampala criminalised the “promotion of homosexuality” and introduced the death penalty for “aggravated homosexuality”.
The ministry also noted that Accra’s Financial Stability Fund, which provides liquidity to Ghanaian banks and is designed to improve macroeconomic stability, would similarly need to be cut by $250m. Furthermore, the government argued that the legislation would “negatively impact on Ghana’s foreign exchange reserve and exchange rate stability” and would have “dire consequences on the debt restructuring exercise and Ghana’s long-term debt”.
A bad time for the bill
This political turbulence comes at a time when Ghana is already facing serious economic challenges. In December 2022 Accra defaulted on almost all of its foreign liabilities after running up debts of $55bn. The debt burden became particularly unsustainable after the US Federal Reserve began to raise interest rates earlier that year: that sent global rates higher and therefore drove up debt payments. A stronger US dollar and much weaker Ghanaian cedi – the dollar has made gains of almost 150% against the currency – also made interest and repayments significantly more expensive in local terms. This pushed the government into a situation in which servicing its debt would cost more than 70% of its total income – something it was unwilling to do.
Meanwhile, the government was also unable to refinance its debt after several global credit ratings agencies downgraded it, sending Ghana’s debt deep into distressed territory and ultimately leading to the default. Following the default, Ghana turned to the International Monetary Fund (IMF) and is now the recipient of an ongoing $3bn programme, of which a second tranche worth $600m was disbursed in January. That in turn was expected to unlock a further $550m in World Bank funding.
Ghana’s economic struggles have had severe effects on the cost of living. The balance of payments deficit hit a record $4.6bn in 2022: that and the weaker cedi have fuelled rampant inflation. It stood at 54% in December 2022 and the IMF now predicts that it will be 23% in 2024. The higher cost of food and fuel has sparked protests in Accra. In October last year these centred on the performance of the central bank governor, demanding the resignation of Ernest Addison and his two deputies after blaming him for mismanaging the economy.
It is in this volatile context that the anti-LGBT+ bill caused such concerns for the government and business leaders. While there are tentative signs of a recovery, any loss of funding from global financial institutions would likely send the economy back into a downward spiral. But human rights activists believe that there are barriers to the bill’s passage.
Genevieve Partington, Amnesty International’s country director for Ghana, tells African Business that she is hopeful the bill will be blocked. This is because, despite the view expressed by the Ghanaian parliament, both the president and his government appear to be against the move. “Our president is a human rights activist himself and a lawyer, and I know he is aware of the consequences that could come Ghana’s way should he sign this into law,” she says.
“The Ministry of Finance, the Office of the Attorney General, and the Commission for Human Rights and Administrative Justice have all opposed the bill. It’s good to see that government institutions are coming out to declare this bill a non-starter,” Partington adds.
“We’re hopeful that the bill will not be signed.”
However, she adds that LGBT+ individuals are facing increased discrimination regardless of whether the bill ultimately ends up on the statute books.
An otherwise optimistic picture?
Samuel Sule, CEO of Lagos-based investment banking firm Renaissance Capital Africa, tells African Business that there are many reasons to be optimistic about Ghana’s prospects even at a difficult economic time.
“From a global standpoint, the fact that US rates have peaked and will start to trend downwards is positive for emerging and frontier markets,” Sule says. “As the Fed’s rate hikes start to get reversed, you should find that risk-on sentiment towards emerging and frontier markets improves.”
More widely, Sule also notes that the Ghanaian economy has proved “resilient” during a period of economic distress and has in fact performed better than many expected.
“Just recently the Q4 GDP number was published at 3.8% and yearly GDP growth for 2023 was found to be 2.9%. We are talking about relatively modest numbers compared to countries such as Senegal, but compared to what the IMF had expected, growth is much, much higher,” he explains.
“I think that shows the resilience of the Ghanaian economy using a very real dataset.” Thecla Wricketts, lead counsel at a business and investment law firm in Accra, similarly argues that the country’s businesses have demonstrated flexibility and resilience at a time of economic difficulty.
“Businesses have struggled because of the economic downfall, but they are now building up capacity and adapting,” she says. Ghana’s relatively strong growth and business’ ability to adapt to a more challenging climate could prove to be a strong basis for economic recovery, particularly as other market factors are going in Ghana’s favour. Sule points out that Ghana is one of the world’s major cocoa exporters, for example, and prices for the commodity are currently at record highs. In late March, cocoa futures prices for May surpassed $10,000 per metric ton for the first time ever. Should this trend be sustained, it could lead to significantly higher foreign exchange inflows into Ghana, a lower balance of payments deficit and could even contribute to a stronger Ghanaian cedi.
Wricketts believes that, because of this work to stabilise the cedi and broader economy, the “outlook for foreign investment is more positive”.
“I think with the IMF funds, and other policies that the government is putting in place to stabilise the exchange rate, Ghana is becoming more attractive for investment.”
Another positive sign for foreign investors and the Ghanaian economy is that, according to Sule, Ghana is making strong progress on restructuring its debt. The IMF made restructuring a condition of Ghana receiving financial assistance following the default, but there have been some delays, with the government working with bondholders to work out the best type of debt instrument to use.
“We are acting on behalf of regional holders on the Ghana Eurobond restructuring, and we are seeing much progress on that front,” he tells African Business. “The completion of that process will be another trigger for things to settle and normalise and move the economy forward in a sustainable fashion.”