According to a report released on July 31, the African Development Bank (AfDB) has advised Ghana to undertake significant reforms to boost macroeconomic stability and support structural transformation efforts.
The AfDB’s report highlights three critical factors contributing to Ghana’s slow structural transformation.
Firstly, it notes that employment is concentrated in less productive sectors such as personal services, agriculture, wholesale and retail, and manufacturing.
Secondly, the report points out that Ghana needs to fully leverage favourable conditions for structural change, citing deteriorating institutional quality, low export diversification, inadequate infrastructure, and underdeveloped human capital.
Additionally, urbanization has yet to achieve the anticipated transformational benefits.
The third factor includes challenges related to the informal sector’s dominance, vulnerability to climate change, high credit costs, and a significant proportion of young people not engaged in education, employment, or training (NEET).
Despite experiencing sustainable economic growth since the 1990s, Ghana’s growth has been coupled with weak structural transformation and recent instability.
The country transitioned from low-income to lower-middle-income in 2010, aided by oil production and stable policies.
However, the economic recovery post-COVID-19 has been sluggish, with real GDP growth slowing to 3.8% in 2022 from 5.1% in 2021 and an estimated 2.9% in 2023.
The decline is attributed to macroeconomic instability, tightening global financial conditions, and multiple external shocks, which exacerbated Cedi’s depreciation and triggered a debt crisis in December 2022.
The report underscores that while the financial needs for structural transformation are substantial, they are achievable.
To align with the Sustainable Development Goals (SDGs) and the African Union’s Agenda 2063, Ghana needs to mobilize USD 4.87 billion annually until 2030 for the SDGs and USD 0.85 billion annually until 2063 for the AU Agenda.
Currently, Ghana has mobilized only a third of this amount.
The country must also enhance its tax-to-GDP ratio by 3.8 percentage points for the SDGs and 0.7 percentage points for the AU Agenda and invest more in high-need sectors such as education and energy.
The AfDB report advocates for a business-friendly environment to stimulate investment and a coherent urbanization framework to accelerate structural transformation.
It recommends reforms including better coordination of public sector development initiatives, expedited debt restructuring, expanded access to concessional finance, and deepened financial markets to improve credit availability.
Additionally, it calls for enhanced stakeholder engagement and development assistance coordination to maximize impact.
Ghana is urged to align monetary, budgetary, and exchange rate policies to control inflation, stabilize exchange rates, reduce the public deficit through more efficient spending, and mobilize internal resources to foster inclusive and sustainable growth.
