Ghana - The Economy

The economy

GHANA'S ECONOMY HAS LEFT an indelible imprint on the country's social and political structures. Just as the presence of gold gave rise to the Asante confederacy and empire and attracted European traders and colonial rulers, so, too, were modern day politicians moved to try to protect the country's wealth by establishing the first socialist regime in twentieth-century Africa. As the ambitious plans initiated by Ghana's first president, Kwame Nkrumah, unraveled, however, military officers seized control of the country and promised to overturn what they perceived as a corrupt ruling class enriching itself from the nation's coffers. In the 1980s, military and civilian officials failed to revive the economy through stringent anti-corruption measures and embarked instead upon a restructuring of the economy.

The transformation of Ghana's economy undertaken in the 1980s was considered a test case for "structural adjustment" prescriptions advocated by international banking institutions. Faced with growing impoverishment in Africa as well as in much of the so-called developing world, the World Bank and the International Monetary Fund proposed radical programs to revive troubled economies and to restore their productivity. The government of Jerry John Rawlings turned to these agencies in 1983 and accepted their recommendations in exchange for assistance packages to ease Ghana's economic and social transformation. Foremost among the changes enacted in Ghana were the disengagement of the government from an active role in the economy and the encouragement of free-market forces to promote the efficient and productive development of local resources. The reformers cut government budgets, privatized state enterprises, devalued the currency, and rebuilt industrial infrastructure by means of assistance programs. As in other countries of Africa in the 1980s, government was identified as the problem, and free-market forces were seen as the solution.

By the 1990s, the effects of structural adjustment in Ghana were beginning to be assessed. According to the World Bank and other western financial institutions, the economy had become much more stable, and production was on a more solid footing than it had been a decade earlier. Exports were up, government deficits had been reduced, and inflation was down. Many Ghanaians, however, questioned whether the structural adjustment benefited all Ghanaians or just a few sectors of the economy. Critics of the World Bank charged, moreover, that it concentrated on infrastructure such as airports, roads, and other macro-economic projects that did little to improve the lives of the average Ghanaian.

Under the sway of free-market forces, production had increased in Ghana's traditionally strong sectors, cocoa and gold, thereby reverting to the pre-independence economic structure; still, a more broadly based economy had not developed. In addition, substantial loans had been incurred by the government to promote those sectors- -at the expense of recurrent budget expenditures such as health and education--without a compensatory increase in government revenues. Ironically, the tax breaks prescribed to encourage these sectors worked against increased government revenues, so that by 1992, tax revenues began to drop. In addition, jobs not only had been cut from the once bloated public sector but also had not expanded in the more successful export sectors. Although the government claimed its finances were much healthier in the 1990s than in the 1980s, the long-term economic and social impact of structural adjustment was uncertain.

Relying heavily on the exploitation of some non-renewable and even endangered resources, Ghana's economic recovery will have to expand to create a broader and better balanced economy. In addition to cocoa, Ghana's leading export commodities are gold, a nonrenewable resource, and timber, the harvesting of which has included more than eighteen endangered species of trees and has led to alarming deforestation. Furthermore, Ghana's ocean waters are seriously overfished, leading the government to ban the catching of shellfish.

According to the Ghanaian government, these resources could be used to develop local manufacturing, the goal Nkrumah tried to reach through direct state intervention thirty years ago. Local manufacturing could create jobs, cut the import bill, and provide a more diversified economic base. The question for Ghana is whether free-market forces will be more successful in promoting healthy economic expansion than the failed policies of direct state intervention.

For more recent information about the economy, see Facts about Ghana.

Economy of Ghana - Wikipedia
Ghana Economy - GDP, Inflation, CPI and Interest Rate
Ghana Economy 2018, CIA World Factbook
Ghana Economy: Population, GDP, Inflation, Business, Trade
What is Ghana's economy? An Opinion - MyJoyOnline.com