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Prof. Quartey: Ghana Must Innovate and Invest to Escape Middle-Income Trap

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Prof. Peter Quartey, Economist and Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, emphasized the need for strategic innovation and investment to address Ghana’s economic challenges.

He pointed out that while Ghana has achieved middle-income status, the country’s economic fundamentals still present major hurdles.

Prof. Peter Quartey advised on the launch of the World Bank’s report “The Middle-Income Trap”  in Accra.

The event, which delved into the difficulties middle-income countries face in advancing their development, saw Prof. Peter Quartey stressing the urgency of closing the investment gap and reducing reliance on borrowing.

Another critical issue he highlighted was the continued reliance on borrowing, despite the limited access to concessional loans due to the country’s middle-income designation.

“Because we are at middle income, a lot of the informality hasn’t changed. We are middle-income and we continue to borrow our revenue. GDP remains low, and as a result, we have to borrow to finance investment,” Prof. Peter Quartey stated.

He explained that this borrowing is necessary due to the gap between Ghana’s revenue levels, which hover around 15%, and the required investment savings threshold of 15% to 20%, a standard met by other nations like Botswana. “So we have a gap. And how do you finance that gap? We borrow from the capital market.

When you become a middle-income country, you cannot borrow from certain concessional sources like IDA or the World Bank. So we are shut out of the concessional loan market, and that brings a lot of problems.”

Prof. Peter Quartey underscored the need to “step back” and assess how Ghana can accelerate investment and innovation to overcome this trap. He emphasized the importance of combining foreign and local capital while also fostering homegrown innovation.

“We have to innovate locally as well; we cannot continue to rely on external technology all the time. We have the brains; we have the institutions,” he urged.

As the challenges of the middle-income trap become more pressing, the Deputy Governor’s comments serve as a reminder of the need for Ghana to prioritize domestic investment, innovation, and long-term financial strategies.

The World Bank’s report, which focuses on the difficulties faced by middle-income nations in breaking out of economic stagnation, provides a critical framework for discussions on how Ghana can sustain its growth and avoid falling into the trap.

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