ANALYSIS-Ghana's new president has no time for honeymoon

ACCRA Mon Jan 5, 2009 11:04am EST

ACCRA Jan 5 (Reuters) - Ghana's president-elect John Atta Mills will have little time to celebrate his narrow election victory as he faces mounting government debts, wage demands and political divisions after a bruising campaign.

The former vice-president, in opposition for eight years, will be sworn in on Wednesday after being declared winner at the weekend of one of Africa's closest leadership races.

While crude oil production is due to start in late 2010 and that should bring some relief for the economy, handling the revenues could be a political minefield for an establishment riven with accusations of graft, patronage and drug trafficking.

"It's a very difficult time internationally to be coming to power in Ghana. And there are internal issues, not least the oil, but also the growth in the drugs trade," said Tom Cargill, Africa Programme Coordinator at Chatham House, the Royal Institute of International Affairs, in London.

"The new government's going to find itself with a long list of challenges (including) to heal the divisions opened up by these elections," he told Reuters.

The losing New Patriotic Party (NPP) administration, whose candidate to replace President John Kufuor narrowly lost a run-off to Mills, sharply raised public spending in the runup to the poll, increasing the national debt to fund expansionary measures to help the country cope with high oil import prices.

But the onset of the world economic slowdown combined with harsh credit conditions have stymied plans to follow up on its successful 2007 Eurobond issue -- a first for West Africa.

GRIM OUTLOOK

"The outlook economically is very, very grim. Anybody who comes to power on Jan. 7 will have to mount a very very serious austerity budget. You have to close the gap," said Kwesi Jonah, of the Institute of Democratic Governance think-tank.

"You have to adjust the deficits, and if loans are not coming, you must lower your expectations and programmes to do things such as building of roads etc," he said.

In the worst case, analysts fear low oil prices, which have fallen by two thirds in six months, could lead Tullow Oil and Kosmos Energy to delay their fast-track development of the Jubilee offshore oilfield -- a scenario the national oil company GNPC has dismissed.

Nevertheless there is plenty of pressure on Mills's centre-left party to spend, both to create jobs and provide the infrastructure to allow its cocoa- and gold-exporting economy to continue the healthy growth seen in recent years.

"There needs to be a very large investment programme to develop productive infrastructure: electricity, telecoms, air transport, ports, roads," Mills's brother Cadman, a former World Bank official, told Radio France International.

Papa Kwesi Nduom, a presidential candidate who came third in the Dec. 7 first round, said wage demands would also be high on the agenda of the new government after Kufuor's government deferred the matter to the next administration.

"2009 will not be an easy year. How the president-elect handles it will be determining for the coming years. I don't see the international financial crisis as the number one problem, it's the internal financial crisis," he said.

TRICKY QUEST FOR CONSENSUS

Mills's winning margin was less than 0.5 percent of votes, giving him a wafer-thin mandate to rule.

His position is further complicated by what will likely be a hung parliament. Mills's NDC has 114 of parliament's 230 seats after an election on Dec. 7, compared to the NPP's 107.

With two seats left to be declared after procedural appeals, Mills can hope for a tiny majority at best, and will probably need backing from the NPP or a minor party to pass laws.

"It does beg the question how you patch things up, when half the people want one thing but almost half the others want something else," said Anthony Goldman, a political risk analyst.

"Even before the election process and campaigning there was a fair amount of bitterness, personal animosity, allegations of abusing process in order to deal with perceived enemies, and that will take a fair bit of unravelling," he said from London.

Picking up the pieces after a hard-fought, sometimes vitriolic, campaign will be no mean feat. But analysts say it is necessary to achieve the political consensus required between two main parties, whose policies differ little in reality.

"Essentially, Ghanaians have said the two key political parties must work together. There are still some problems that need solving," Abena Amoah, head of investment banking and financing at Renaissance Capital's Ghana branch, told Reuters.

"We want our politicians to work together to resolve them ... The next four years are going to be very difficult." (Additional reporting and writing by Alistair Thomson)

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