The IMF Deputy Managing Director, Antoinette M. Sayeh, has touchingly stated that: “Countries that have strong economic institutions respond more effectively to crises and are better prepared for a resilient recovery. And that is true across any level of development”.
We are told by the IMF that the excruciating economic hardships Ghanaians are experiencing today – which are unprecedented in their scale and unbearable in their impact – are caused by the global pandemic and Russia-Ukraine war.
Can our porous institutions be the reason why such external factors have crucified our economy to the point where we can barely afford our local goods? Any leader who intends to build an elastic economy for this country should take cues from these thought-provoking statements in order to build robust institutions that help create a better economy for this nation.
An Austrian-American Consultant, Peter Drucker, posited that: “The ultimate resource in economic development is people. It is people – not capital or raw materials – that develop an economy”.
As a country saddled with an abundance of resources which have proved more of a curse than blessing, the question we still ask is: why with our skilled human resources, the economy continues to plummet despite all the resources we have? This article criticises the current state of the Ghanaian economy as well as suggests ways to build a strong economy in this current dispensation.
According to a journal by Africa Portal, Ghana’s per capita GDP rose to Middle-Income Country (MIC) level as defined by the World Bank. However, in 2021 the IMF downgraded Ghana’s economic classification from a low-middle-income country to a low-income developing country. Further reports stated that both reports were in fact very different, and it was important to not confuse the two. The country’s correct status was highlighted to be a low-middle income country.
At the grassroots there seems not to be that big of a difference, as the cost of living continues to shoot up exponentially day by day. As at October 2022, US$1 stood at GH¢14.05 – a phenomenon that has led to a radical spike in prices of food, fuel and other commodities. The economy’s increasing inflation rate has been attributed to excessive importation of goods into the market. Though easily identifiable, these hikes are not exactly an easy bet for the country.
The Ghanaian economy has not changed much since its colonial days: it was a Guggisberg economy then and it is a Guggisberg economy now. The country relies heavily on foreign exchange derived from the export of raw materials, and does little to process it into secondary products.
As a result, the commodity gap in the market has to be filled by importation – leading to an influx of foreign goods on the market and thus worsening the economy, the job market (slow deterioration of the Ghanaian manufacturing sector) and the currency. In the event that value of imports exceeds the value of exports, it leads to unfavourable balance of payments.
Article 36 (1) in the 1992 Constitution encourages government to: “… take all necessary action to ensure that the national economy is managed in such a manner as to maximise the rate of economic development and to secure the maximum welfare, freedom and happiness of every person in Ghana, and to provide adequate means of livelihood and suitable employment and public assistance to the needy.”
To ensure implementation of the foregoing, among others, Article 36 (5) requires that: “… within two years after assuming office, the President shall present to Parliament a coordinated programme of economic and social development policies, including agricultural and industrial programmes at all levels and in all the regions of Ghana.”
Building a strong economy out of the proverbial ashes that we have on our hands in this moment of time is possible. Zambia has managed to reduce the inflation rate from 24.4 percent in August 2021 to 9.7 percent in October 2022. The giant economies of the world have survived through peculiar circumstances, and they emerged with watertight bustling economies which literally hold the global economy. To bolster the economy, we can adapt some of the strategies which have been listed below.
Domesticating the economy
To begin with, government can strengthen the economy by cutting excessive importation and domesticating the economy. Professor John Kwaku Mensah Mawutor in August lamented that: “If you have an economy wherein the very things that you consume, much of them are produced by outsiders and you need a foreign currency to procure them – by so doing there will be so much burden on your currency. Once there is a burden on your currency, it means there will surely be an escalation in prices because you do not buy using cedi”.
There is no scintilla of doubt that excessive importation cripples the economy by crippling local infant industries, leads to a balance of payment deficit and worsens the currency value. A country has a trade imbalance when the entire dollar value of its imports exceeds the total dollar value of its exports. This indicates that the nation exports less commodities than it imports.
A country’s currency loses value as compared to the currencies of its trading partners when its trade imbalance widens. Ghana has consistently imported more commodities throughout the years than it has exported to its trading partners, causing the cedi to fall in value in comparison to the dollar and other currencies.
Ghana imports almost everything. Domesticating the economy at this crucial time should be national priority, and this can be done by encouraging crops production (Agricultural). Dr. Henry Herbert Lartey in 2014 suggested that: “A long-term way of reducing inflation, and thus restoring some confidence in our national currency, is to produce, produce and produce and export, export and export. Ghana can earn dollars, euros, pound Sterling and other currencies (foreign reserves) by producing”.
Yaw Osafo-Maafo, the Senior Minister, emphasising why we should domesticate the economy during the Ghana Economic Forum’s sixth-edition opening ceremony at the Kempinski Gold Coast City Hotel in Accra, succinctly stated that: “It is time to come on board to domesticate the economy to make Ghanaian businesses play a key role in resolving the challenges. Ghana must play a leading role; this means that our laws must support the private sector together with the captains of the industries, so that the Ghanaian will be at the steering wheel directing the economy”.
On our failure to domesticate the economy and export more of what we produce rather than importing more goods, he further stated that: “There will always be pressure on the local currency due to the high importation of goods to satisfy customers”.
In the case of The Attorney General versus Balkan Energy Ghana Ltd. and Others (J6/1/12)  GHA SC 35 (May 16, 2012), Dr. Date Bah JSC (as he then was) stated as follows: “One of the values of the 1992 Constitution is the promotion of probity and accountability.
“In the proposals for a Draft Constitution of Ghana prepared by the Committee of Experts appointed in 1992 under PNDC Law 252 to draft the proposals which were placed before the Consultative Assembly that formulated the 1992 Constitution, the committee makes this important point in the General introduction to its proposals (paragraph 6 on page 5): “With respect to development within the past 10 years, the guiding principle was that the essential attributes of institution which are compatible with a constitutional order should be retained, subject to modifications as are appropriate. The committee feels that in this regard, accent should be on substance not form. Thus, for example, the social or political values of accountability and probity and fidelity to the public interest should survive the inauguration of the Constitution …”
It is time to join the effort to domesticate the economy, so that Ghanaian companies can play a significant role in addressing the issues. This is the time we expect the executive to push the Price Control Mechanism bill in parliament for it to be passed as a law to regulate the astronomical price increases in the market sector.
The Deputy Commissioner of the Commission on Human Rights and Administrative Justice (CHRAJ) stated that Ghana loses more than three billion dollars every year through corruption. A study by IMANI Ghana on procurement losses in the reports of the Auditor-General between 2012 and 2014 showed that the amount is said to be about 300 percent of all the aid it received in the same period.
The news piece by Graphic Online also highlighted that corruption-related money loss is commonly found in the area of public procurement, with public officials inflating contract prices for the provision of goods or services. With regard to public officers, in the case of Okudzeto Ablakwa & Another v. Attorney-General & Obetsebi Lamptey  2 SCGLR 986, the court speaking through Her Ladyship Adinyira JSC stated” “Article 2(1) of the 1992 Constitution imposes on the Supreme Court the duty to measure the actions of both the legislature and the executive against the provisions of the Constitution.
“This includes the duty to ensure that no public officer conducts himself in such a manner as to be in clear breach of the provisions of the Constitution. It is actions of this nature that give reality to enforcing the Constitution by compelling its observance and ensuring probity, accountability and good governance.”
Further, government can strengthen the economy through the imposition of taxes. Taxes are a great source of revenue to every government. We recommend that there should be more education on the Electronic Transaction Levy for taxpayers to accept paying the E-levy.
Moreover, government should put measures in place to avoid multiple taxations through the Electronic Transaction Levy. Government must ensure transparency and accountability on use of the E-levy. If the people recognise that their taxes are being used judiciously, it will enhance payment of the E-levy.
From the above analysis, we consider these realities to be obvious. Not only does implementation of these strategies lead to a more efficient economy, it also provides employment opportunities and improves the livelihood of its citizens. Whenever any form of government becomes destructive of those ends, it shall be the right of the people to alter or abolish it and to institute new government; laying its foundations upon such principles, and organising its powers in such form as shall seem to them most likely to affect their safety and happiness.
- African Union. 2022. Governance and Accountability in Africa: Progress and Road Ahead’ Remarks by Antoinette M. Sayeh, Deputy Managing Director. https://au.int/en/speeches/20220613/remarks-antoinette-m-sayeh-deputy-managing-director-imf
- AZ Quotes. https://images.app.goo.gl/CpTX2yzhfSczFVxS9
- Dr J.K. Kwakye. Ghana’s Middle-Income Reality Check Part II. https://www.africaportal.org/documents/16105/monograph-30.pdf
- Jonas Nyabor. 2022.Ghana Is Low-Middle Income Country; IMF’S Classification Presents ‘Narrow View’- Prof. Quartey. https://citinewsroom.com/2021/04/ghana-is-low-middle-income-country-imfs-classification-presents-narrow-view-prof-quartey/amp/
- 2022. Managers Of Economy Have Not Found Solutions To Stop High Appetite For Imported Goods. GhanaWebhttps://mobile.ghanaweb.com›
- Caroline Boateng. 2018. Ghana Loses More Than $3bn Yearly Through Corruption. https://www.graphic.com.gh/news/politics/ghana-loses-more-than-3bn-yearly-through-corruption.html
- Katherine Stephenson. 2022. How The Cost Of Living Is Affecting The People Of Ghana Today. https://sovereignhousegh.com/ghana-and-the-rising-cost-of-living/
- Principles of Economics. Textbook on Economics.
- 2017. We Must Domesticate The Ghanaian Economy-Osafo Maafo. https://mobile.ghanaweb.com/GhanaHomePage/business/We-must-domesticate-the-Ghanaian-economy-Osafo-Maafo-567321
- Daily Graphic. 2014. Domestication, Answer To Dollarisation Of Economy.