Ghana

Abstract

Instability has characterised the Ghanaian economy since independence in 1957. At that time Ghana was one of the most prosperous countries in Africa, with the highest per capita income in the region and very low inflation. Agriculture was the main source of wealth, making up about half of GDP. Cocoa provided about three-fifths of export earnings. Foreign reserves were strong as a result of buoyant cocoa exports and an abundant supply of labour for agriculture, much of it migrants from neighbouring countries. Disastrous economic policies in the 1960s and 1970s over-expanded the state and favoured import-substituting manufacturing and large-scale farming. By 1982 per capita incomes had fallen 30 per cent, export earnings were halved, and imports were at 30 per cent of their 1970 levels (Sarris and Shams 1991: 1, 3). In 1983, in the face of much internal opposition, the military government of Gerry Rawlings adopted an Economic Recovery Programme (ERP) financed by World Bank and IMF, to restore fiscal and monetary discipline and production incentives. This involved radical realignment of exchange rates and interest rates and cutting of government expenditure and employment.

This chapter consists of extracts from Shepherd and Onumah (1997), edited and updated by Michael Hubbard.