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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