During the period 1983 to 1991, Ghana performed very well. The reform policies adopted by the country were also very fruitful. Simultaneously, there was a rise in the incoming aid. Financial help was very important in maintaining a positive economic reform in Ghana.
State of affairs, which necessitated the implementation of economic reform in Ghana may be summarized as under:
Hyperinflation had occurred due to very lenient monetary as well as fiscal policies. By the year 1981, rate of inflation recorded was 77%. Production levels subsided drastically and affected almost all the sectors of the economy. Transportation facilities were badly hit and in turn caused a lot of inconvenience to the export activities. The reason being, cocoa, which served as the main foreign exchange source was crippled because the products could not be transported to the market places from fields.
As foreign exchange had declined, inputs for various industries had also subsided. This has negatively impacted the other sectors, especially the industrial segment of the economy.
Need for reforms was realized but implemented quite late:
After the coup ended, the Provisional National Defense Council or the PNDC realized the graveness of the situation. However, the economic reform in Ghana was not implemented instantly. The reason being the country had some internal conflicts, which delayed the process of implementation of reforms despite the realization of the fact that it was for the reforms to get executed. After a lot of hue and cry, economic reform in Ghana was introduced. The program aimed at achieving economic stability. Once the economic reform in Ghana was underway, the country did not have to turn back but the momentum of the economy slowed down towards the nineties.
Reform for bringing about stabilization-1983 to 1991:
Features of the reform:
Economic Recovery Program or ERP was launched in the year 1983, by the PNDC or the Provisional National Defense Council. This economic reform in Ghana was taken up for the stabilization as well as the liberalization of the economy. The ERP was followed by Structural Adjustment Program. With the implementation of the latter program, several donors and financial institutions assisted the country by extending substantial aid. Improvement of the railways, ports as well as roads were also included in this program. Owing to the economic reform in Ghana, interest rates as well as price control on commodities were eradicated. With the advent of the ERP, in terms of gross domestic product or the GDP, Ghana manifested a growth rate of 5% every year. Real per capita income increased by 2%. However, owing to the high rate of inflation, private investment in Ghana seemed to be a distant possibility at least for the time being.
Variable Reforms- 1992 to 1996:
All was well until there was deviation in wages as a result of the election in the country and it made the economy of Ghana go astray. The wages increased to a considerable extent. As fiscal control,was lost, it resulted in the macro economy being unstable. This was evident from the fact that rate of inflation had gone up. During this period, the government in Ghana had worked hard to re align the fiscal stability in the country. But all efforts of the government did not go in vain as the period witnessed an increase in foreign investment and the investment rates were also quite high.
Last Updated on : 26th June 2013