Saying Ghana’s economy in the last 2 years has performed poorly is like saying the Brazilian national team performed poorly against the Germans in their semi-final clash in the just ended World Cup.

The cedi has depreciated by 60.57% against the US dollar since January 2012. Inflation went from a sub-10% in the beginning of 2013 to 15% in June 2014. The Bank of Ghana recently increased the policy rate to 19% from about 13% in January 2012. Add those figures to power cuts and the recent fuel shortages caused by the government’s US$1.8bn debt to Bulk Oil Distribution companies and you have quite a gloomy picture. It’s no wonder Fitch revised Ghana’s outlook to negative from stable in March.

There have been several explanations given for this crisis, including the fiscal deficit (FY2012: 11.5%; FY2013: 10.1%) and the fall in gold prices. A surprising revelation however, was made by the Minister of Finance and Economic Planning, Seth Terkper, yesterday when he presented the midyear review of the budget to parliament.

Ghana has a stubborn problem with raising domestic tax revenue, and if this surprising inflow of grants continues, the projected budget deficit of 8.8% (which is not even great) might be harder to meet.

I heard the minister speaking on the radio this morning as I wrote this post. He explained that the rebasing of Ghana’s GDP that revealed that we were a middle-income country meant that we were no longer going to get the level of grants we used to. He also said there were conditions that we were not meeting hence the slowdown in Grant inflow.

Unfortunately, he did not go into details about what those conditions were. What is clear however, is that Ghana can ill afford to be starved of donor support at this time. In the long run, we may be able to do without it, but now, even with our middle-income status, we need grants to balance the budget and get the economy back on track.