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GAPNEWS

The need for Ghana to prepared for future uncertainty that could affect the economy.



Ghana is endowed with gold and oil palms and situated between the trans-Saharan trade routes and the African coastline visited by successive European traders, the area known today as Ghana has been involved in all phases of Africa's economic development during the last forty five years. 

In 1981 a military government under the leadership of Flight Lieutenant Jerry John Rawlings came to power. Calling itself the Provisional National Defence Council (PNDC), the Rawlings regime initially blamed the nation's economic problems on the corruption of previous governments. Rawlings soon discovered, however, that Ghana's problems were the result of forces more complicated than economic abuse. Following a severe drought in 1983 (fire out break), the government accepted stringent International Monetary Fund (IMF) and World Bank loan conditions and instituted the Economic Recovery Program (ERP).

Oil was discovered in commercial quantities under the Presidency of John Kufuor. His successor, John Atta Mills initiated Ghana's first ever foray into oil production. In 2010, the government rebased the economic statistics of the country resulting in an upward push of the GDP of Ghana by more than 60%. The GDP base year for calculations was also changed from 1993 to 2006. The rebase moved Ghana into middle income status and it placed the country as the third largest in the ranking of GDP per person in West Africa behind Cape Verde and Nigeria. After the changes in statistics, the service sector became the largest sector of Ghana's economy with a share of 51%. Agriculture, which was initially the dominant sector, accounted for 30.2% after the economic rebasing whiles the industrial sector lagged behind with a share of 18.6%. Ghana became the fastest growing nation in the world in 2011 and once more in 2019. Ghana’s rapid growth (7 percent per year in 2017-19) was halted by the consequences of COVID-19 pandemic, especially the March 2020 Ghana’s lockdown.

 

Ghana’s economy entered a full-blown macroeconomic crisis in 2022 on the back of pre-existing imbalances and external shocks. Large financing needs and tightening financing conditions exacerbated debt sustainability concerns, shutting-off Ghana from the international market. Large capital outflows combined with monetary policy tightening in advanced economies put significant pressure on the exchange rate, together with monetary financing of the budget deficit, resulting in high inflation. These developments interrupted the post COVID-19 recovery of the economy as GDP growth declined from 5.1% in 2021 to 3.1% in 2022. The 2022 fiscal deficit was well above target at 11.8%. Public debt rose from 79.6% in 2021 to over 90% of GDP in 2022.

And GH¢21 billion used to collapse some nine banks and other financial institutions exposes Ghana’s monetary policy, which increase Ghana debt.

 

 

 

The invasion in Ukraine, has affect the economy of Ghana as import and export to Ukraine will also not be possible causing shortage of goods imported from Ukraine. According to the United Nations COMTRADE database on International Trade, Ghana's trade balance with Ukraine in 2020 was US$52 million, with 2019 recording US$118.30. The main exports of Ghana to Ukraine are Ores, slag and ash and cocoa.

 

Another way, the economy of Ghana have been affected by the war in Ukraine is the production of crude oil. According to the International Energy Statistics, Russia was the third largest producer of crude oil in the world in 2020. The war in Ukraine have had a major impact on the world energy market negatively and Ghana as well.

To mitigate the impact of these external and internal factors on the economy of Ghana, the country should be seeking self-sufficiency and self-reliance as an all-round strategy. The government should implement policies that will protect local production of certain produce. Cleverly designed import substitution policies linked to the development of Ghana especially agri- industrial value chains can support trade balances and create jobs.

Government should invest heavily in TOR to refine the crude oil that the country produces. This will reduce the country's dependence on importation of petroleum products.

GEORGE ATTA PEPRAH

Attageorge3@gmail.com


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