A recent report from the African Development Bank (AfDB) underscores Ghana’s sustained economic growth since the 1990s, a promising trajectory that, despite weak structural transformation and recent financial instability, holds significant potential for the country’s future.
Ghana transitioned from a low-income to a lower-middle-income country in 2010, mainly driven by oil production and sound policy frameworks.
However, the country’s post-COVID-19 economic recovery has been lacklustre, with real GDP growth moderating to 3.8 percent in 2022, down from 5.1 percent in 2021 and estimated at 2.9 percent in 2023.
This slowdown is attributed to macroeconomic instability, tightening global financial conditions, and the cascading impacts of multiple shocks, including a sharp depreciation of the Cedi and a debt crisis in December 2022.
The report identifies three primary factors contributing to Ghana’s limited structural transformation.
Firstly, job creation remains concentrated in less productive sectors such as personal services, agriculture, wholesale and retail, and manufacturing.
Secondly, Ghana must utilize factors conducive to structural transformation, including declining institutional quality, limited export diversification, inadequate infrastructure, moderate human capital development, and unmet urbanization expectations.
Thirdly, the country faces challenges associated with a predominant informal sector, high vulnerability to climate change, limited access to credit, and a significant share of young people not in education, employment, or training (NEET).
Released on Wednesday, July 31, the report emphasizes the substantial financial requirements for Ghana to achieve sustainable development goals.
It estimates that Ghana needs to mobilize USD 4.87 billion annually until 2030 for the SDGs and an additional 0.85 billion until 2063 for the African Union’s Agenda 2063. Currently, the country has only secured a third of these needed funds.
To bridge this gap, Ghana must increase its tax-to-GDP ratio by 3.8 percentage points for the SDGs and 0.7 for the AU 2063 Agenda while prioritizing sectors like education and energy.
The report calls for a more conducive business environment to attract domestic and foreign investment, particularly in sectors critical for structural transformation.
It advocates for reforms to bolster macroeconomic stability, including monetary, budgetary, and exchange rate policies focused on controlling inflation, stabilizing exchange rates, and reducing non-productive expenditures.
Additionally, it suggests improving the coordination of public sector development initiatives, expediting debt restructuring efforts, expanding access to affordable credit, and enhancing stakeholder engagement.
This will optimize development assistance impact, ensuring all parties are actively involved in and integral to the country’s development.
The AfDB report underscores the urgent need for Ghana to pursue comprehensive reforms.
These reforms are crucial to strengthening its economic foundations, supporting sustainable growth, and accelerating progress towards achieving inclusive and resilient development goals.
