| ECONOMIC
RECOVERY |
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Ghana has an abundance of both natural and human
resources. The natural resources include mineral wealth, a good
supply of arable land suitable for both crop and livestock production,
forest resources, marine and freshwater fish stocks, and a good
potential for hydroelectricity generation. The economy of the
country is based on two distinct sectors:
- a large, traditional sector (principal by agricultural
and informal activities);
- relatively small, labour-intensive industrial and service
sector.
The economy has traditionally depended on export of primary
products, with about 60 percent of the labour force employed
in agriculture. Agriculture contributes about 46 percent of
the gross domestic product (GDP) and is characterised by small-scale
operations, principally staple food crops and cocoa production.
The services sector is the second largest employer (about
25 percent of the labour force), accounting for over 40 percent
of real GDP from trade and public sector services, while the
industrial sector accounts for about 14 percent of GDP and
employment.
Ghana began an Economic Recovery Program (ERP) in 1983, and
has undertaken a series of comprehensive macroeconomic and
structural adjustment reforms aimed at reversing the economic
decline that had characterised the state of the economy for
almost a decade. The reform program included restructuring
of institutions, diversifying the economy, balancing the national
budget, liberalising trade and currency and attracting direct
private investment. The ERP also sought to improve the economy’s
capacity to adjust to both external and internal shocks and
to generate sustainable growth and development.
It is widely acknowledged by economic analysts that the reforms
have largely succeeded. The precipitous decline in real GDP
has been arrested and reversed, with the result that annual
GDP growth rate has averaged 5 percent since 1984. Government
revenues have increased to an extent that the overall fiscal
balance has shown a surplus. In addition, the growth in money
supply has been controlled, bringing about relative price
stability in the economy.
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| FINANCIAL RESTRUCTURING |
The banking sector has been restructured to respond more positively
to the needs of the productive sector. Incentive packages have
also been introduced to enable these sectors of the economy
to increase production, while public investment strategies have
helped to rehabilitate the physical infrastructure on a large
scale. The industrial production growth rate is positive and
the mining sector is booming, an indication that confidence
has been restored in commerce and other tertiary activities.
In spite of these significant improvements, the earlier period
of economic stagnation has left its mark. Per capita income
remains low, at about US$400 (1992), while the country’s
population of over 18.4 million is growing at approximately
2.6 percent per annum.
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| GOVERNMENT INITIATIVES |
Over the past few years, the Government has initiated
specific policies to lay a firmer foundation for private sector
development. Policies initiated to achieve this include the
following
- the program of divestiture of state-owned enterprises;
- application of stronger discipline to the remaining state-owned
enterprises, through establishment of corporate plans and
performance agreements with the Government;
- introduction of monetary and banking sector reforms;
the Financial Sector Adjustment Program (1990) aimed at
improving the private sector’s access to capital by
transferring non-performing assets of some state-owned banks
to the Non-Performing Assets Recovery Trust to enable banks
to recapitalise;
- reduction of corporate taxes for most business activities
from 45 percent to 35 percent; and
- rehabilitation of roads, ports and the telecommunications
system. The policies implemented under the ERP and other
reform programs have brought about significant improvements
in the country’s economic position in general and
in private sector growth in particular.
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