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Recent economic history

Of all the countries which we are studying, it is Ghana about which the most has been written by economists. Every few years has seen the emergence of yet another study of the political economy of this enthralling country (e.g. Apter, 1955; Birmingham et al., 1966/7; Foster and Zolberg, 1971; Killick, 1978; Roemer, 1984; Green, 1987; Younger, 1989; and Rothchild, 1991). Chronologically, these authors have run the course from optimism, through disappointment, to disillusion, depression and finally to optimism once again.

Aggregate economic statistics for Ghana move in parallel with these opinions. At the time of independence, the Ghanaian economy was quite well endowed in respect of natural resources, skills and finance. With a productive agriculture, not only feeding the population but also providing substantial volumes of cocoa for export, the Ghanaian economy had a solid base from which to advance. Industrial output value-added was nearly 20 per cent of GDP. Besides, before independence, education had flourished and capital had been accumulated. In 1957 Ghana's was, by African standards, a flourishing economy, each inhabitant, on the average, receiving an income of approximately US$600 in today's prices (see Tables 3.1, 3.2).

The subsequent history has been one of a rapidly rising population combined with a much less rapidly rising output. The first estimate of Ghana's GDP covered the year 1965 and amounted to 4.64 billion Cedis, measured in constant prices of 1975 (see Table 3.1). Distributed among the 8 million Ghanians this yielded an average of 580 Cedis each, or approximately the same number of US dollars (see Table 3.2). Sixteen years later, in 1981, GDP per capita had fallen to 489 Cedis (again in 1975 prices); both agriculture and industry had suffered, the latter more dramatically, its share of the total national output falling from 19 per cent in 1965 to 9 per cent in 1981 (see Table 3.3; note that in 1984 the figures in Table 3.3 shifted from the basis of current prices to the basis of constant prices of 1975).

By the end of 1981, the economy was in chaos. The response was the return to power of Flight Lieutenant Rawlings, heading a government comprised of both military officers and civilians and dedicated to moral and economic uplift. At first, the Ghanaian government attempted to stabilize the economy through its own efforts, mobilizing the population and emphasizing the need for improved performance. But by the end of 1982 the government recognized that assistance from outside would be necessary and, for the first time, approached international financial agencies for assistance. The following year, Ghana embarked upon a programme of Structural Adjustment, with its first loan from the World Bank (see Rothchild, 1991).

Table 3.1 Ghana, GDP, 1965-1991

Sources:
1965: Ghana, Republic of, 1991
1969-1991: World Bank, World Tables 1991, 1993
1990-1991: Ghana, Republic of, 1991

Table 3.2 Ghana, population, GDP per capita, and annual rate of growth of GDP, 1965-1991

Sources:
1965-1991: Ghana, Republic of, 1991
1965-1989: World Bank, World Tables 1991, 1993

Table 3.3 Ghana, GDP by sector, 1965-1991

Sources:
1965: 1984-1991 Ghana, Republic of, 1991. (GDP at market prices, in constant 1975 prices)
1969-1983: World Bank, World Tables 1991. (GDP at factor cost, in current prices)
The totals are not equal to the revised GDP figures in Table 3.1

Table 3.4 Ghana: public, private and total investment as percentages of GDP, 1970-1991

Source: 1970-1991: World Bank, World Tables 1991, 1993

More than 10 years have passed since then, and six additional loans from the World Bank have been secured. Looking at the overall changes in the Ghanaian economy during this period and comparing the present with the trough of 1981, the Ghanaian economy has shown remarkable recovery. The overall measure of economic output, GDP, has risen from 4.8 to 7.1 billion Cedis, at 1975 prices. The increase in industrial output has been even more rapid, from 0.4 billion Cedis in 1981 to 1.1 billion Cedis 10 years later. The share of industry in total GDP has very nearly been restored to its value at the time of independence; since total GDP is some 50 per cent higher than at the time of independence, total industrial output has increased by approximately the same percentage. Total investment has risen from approximately 5 per cent of GDP in the initial year to nearly 17 per cent at the present (see Table 3.4). During this time, public investment has remained more or less constant at 8 per cent of GDP; the increase has come about entirely through a resurgence in private investment, which rose from a negligible rate in 1981 to nearly 9 per cent of GDP at the present.

If the domestic economy appears to be recovering, Ghana's international economy has not vouchsafed the same improvement. In Table 3.5 we see data on total exports, imports and the balance on current account for Ghana, as well as figures for the exports and imports of its chief commodities. The improvement in the domestic economy has generated some improvement in exports in recent years, but only to the level of the late 1970s, chiefly because of the debilitated state of the cocoa plantations and the low price which gold commands in world markets. It is the value of imports which has increased so rapidly in recent years. The resurgence of industrial output, and the growth of incomes, has increased the need for imports - of raw materials, capital goods and consumer goods - and the reduction of restraints on imports, through the scheme of liberalization, has encouraged the increase. Financed in part by foreign borrowing, the deficit on the current account has been contained until recently, but the figures for the last few years - 1990 and 1991 particularly - suggest that the deficit on the current account has now reached a dangerous level.

As it is, the pressure on Ghana to service previous borrowing from abroad is already beginning to tell. The figures in Tables 3.6, 3.7, and 3.8 display Ghana's growing international indebtedness. The majority of Ghana's debts are to international financial agencies and to governments in the developed countries; the eight loans which Ghana accumulated in the six years 1983-1989 amounted alone to US$626 million (see Table 3.6). In 1989, Ghana was allocating approximately 10 per cent of its total export earnings to servicing official debt; the servicing of unofficial debt claimed another 2 per cent of Ghana's export earnings.

The annual outflow in payments to creditors has now surpassed the annual inflow, from both official and unofficial sources. In 1989 Ghana became, on balance, a supplier of capital to the developed countries and to their financial institutions. If Ghana is to fulfil its obligations to the international financial community, it will have to continue to export more capital than it receives from abroad.

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