Countries around the world, including Ghana, are keeping a close eye on the November 5, 2024, election in the United States.
Although Ghana and the United States appear to be physically and politically apart, the outcome of the US election has significant economic ramifications for Ghana.
International commerce, remittance movements, foreign investment, and shifts in global policy all have a significant impact on economic dynamics.
How will the United States’ election influence Ghana’s economy?
1. Trade Relations and the Export Market.
Ghana has a strong trade relationship with the United States, with important commodities being oil, cocoa, and minerals. A change in US government could result in changes in trade policies, particularly if there is a push for higher tariffs, new trade agreements, or protective obstacles.
A protectionist approach may impede Ghanaian exports to the United States or increase costs, harming local producers and potentially limiting foreign cash inflows.
On the other side, an administration that promotes open trade and strengthened relationships may open up new markets for Ghanaian goods, supporting the economy.
2. Foreign aid and Development Assistance
The United States has long been a significant source of foreign aid to Ghana, funding projects in healthcare, education, and infrastructure through agencies such as USAID. These funds not only help critical sectors, but they also put money directly into the economy, creating jobs and driving growth.
An administration with a strong emphasis on international development might enhance funding for these programs, thereby aiding Ghana’s economic development. In contrast, a government with a more inward-focused or budget-conscious attitude may cut aid, affecting programs on which many Ghanaians rely and hampering some economic activities.
3. Remittances & Diaspora Engagement
Remittances from the Ghanaian diaspora, notably those from the United States, contribute significantly to Ghana’s GDP. The US election can have an impact on diaspora revenues due to changes in immigration policies, job possibilities, and economic stability in the US.
Policies that restrict immigration or make it difficult for African immigrants to find work may lower remittance flows, reducing Ghana’s foreign exchange reserves.
However, measures that promote immigrants’ employment security and well-being may have a positive knock-on impact, ensuring that remittances continue to support homes, education, and investments in Ghana.
4. Foreign Direct Investment (FDI).
Foreign Direct Investment (FDI) from the United States is critical to Ghana’s economy, particularly in the energy, mining, and technology sectors. An investor-friendly administration in the United States may encourage American businesses to grow operations in Ghana, contributing finance, technology, and expertise.
Conversely, if the state enforces restrictive rules on outward investments or raises taxes on companies investing overseas, it may diminish FDI flows into Ghana, restricting chances for economic growth and technical advancement.
5. The Dollar-Ghanaian Cedi Exchange Rate.
The strength of the US dollar has a direct impact on the value of the Ghana cedi. Changes in US economic policy, such as interest rate adjustments or inflation control measures, will have an impact on the dollar’s value against the cedi.
If the next administration implements dollar-strongening measures, the cedi may fall in value, raising import costs and adding to Ghana’s inflation. In contrast, a weaker dollar may assist Ghana’s economy by cutting import costs, but it may also affect the value of Ghana’s dollar-denominated exports.
6. Global Climate Policy and Energy.
Ghana is interested in both renewable energy and oil, making US energy and climate policy particularly crucial. A US administration that supports sustainable energy programs could help Ghana meet its renewable energy targets through partnerships and subsidies.
Furthermore, if the United States transitions away from fossil fuels, global oil prices may fall, reducing Ghana’s oil export profits. Depending on how Ghana’s economy adapts, this move could be an opportunity to invest in renewable energy or a difficulty owing to decreasing oil earnings.
7. Geopolitical influence and security assistance.
US foreign policy has broader geopolitical ramifications for Ghana, particularly in terms of security and peacekeeping support. Ghana benefits from US assistance in areas such as regional security and counterterrorism.
An administration that prioritizes African security relationships might boost Ghana’s regional influence and stability, producing a favorable atmosphere for economic growth.
Reduced support, on the other hand, may shift Ghana’s security focus and have an impact on economic confidence.
While the US election may appear remote from daily life in Ghana, its ramifications are significant. The incoming US administration’s policies affect trade, foreign aid, remittances, and investment flows.
Ghana must monitor these changes, adjust to evolving economic conditions, and seek out potential strategic possibilities. Although certain effects may be beyond Ghana’s control, proactive involvement, policy improvements, and increased local resilience could help reduce obstacles and capitalize on economic opportunities resulting from US political shifts.