The new Mills-led Government inherited an economy characterised by severe macroeconomic instability which manifested itself in, among other things, a record budget deficit estimated at 14.5 percent of GDP at the end of 2008.

The deficit of 2008 was primarily due to spending excesses that have come to be associated with hotly contested presidential and parliamentary elections. These exacerbated an underlying persistent deterioration of fiscal discipline which the Centre for Policy Analysis (CEPA) had drawn attention to since 2006 (see Chart 1 below) - what CEPA described as a phenomenon of "stubbornly high and widening fiscal deficits".

The new Government also had to grapple with adverse developments on the international scene - the global financial turmoil and the consequent world economic melt down. As a result it found itself in the rather unenviable position of being in a home-grown financial crisis in the midst of a global financial crisis and recession. Consequently, an important risk to the stabilization programme agreed with the IMF under the three-year Poverty Reduction and Growth Facility (PRGF) Arrangement, therefore, was "the potential downside risks from the global macroeconomic situation, with implications for real GDP growth, macroeconomic stability and financing prospects (from public and private creditors) for Ghana"