Ghana: Planting Economic Seeds for Future Prosperity
IMF News, December 18, 2018
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- Authors: Christine Lagarde
- Published: December 18, 2018
Economic environment and implications for Ghana
- Global growth forecast: IMF cut its global growth forecast to 3.7 per cent for 2018 and 2019.
- Recent data from emerging markets and the euro area suggest momentum may have slowed more than expected.
- External pressures facing developing economies:
- stronger U.S. dollar,
- tightening financial market conditions,
- increased trade tensions.
- Trade and regional integration:
- African Continental Free Trade Area could boost intra-African trade by at least 50 per cent within 5 years.
- Expanding trade can boost growth, innovation, and create new jobs with higher wages.
- Labor market challenge:
- Sub‑Saharan Africa would need to create an estimated 20 million jobs per year to enjoy a demographic dividend.
- Climate and urbanization risks:
- Over the next decade, many emerging and developing economies will likely see further increases in urbanization, with new infrastructure worth trillions of dollars globally.
- Policy priority: avoid locking in carbon-intensive energy and transportation; build “greener” cities.
Planting economic seeds — progress and vulnerabilities
- Long-term progress over the past two decades:
- extreme poverty levels have declined by more than two thirds;
- life expectancy has increased by 10 percent;
- real per capita income has grown by more than 80 percent.
- Recent policy results over the past two years:
- Inflation has come down to single digits.
- There is a primary fiscal surplus for the first time in more than a decade.
- Strong growth—of about 7 percent—is expected over the medium-term, partly due to higher oil and gas production.
- Remaining vulnerabilities:
- high levels of public debt;
- fiscal risks related to the energy sector;
- vulnerabilities in the financial sector.
Planting seeds to cope with near-term vulnerabilities (policy priorities)
- Revenue and fiscal management:
- About 42 pesewas for every cedi collected by the government is used to service outstanding public debt.
- Steps recommended: broaden the tax base, reduce leakages, streamline tax exemptions to make them more targeted.
- Maintain fiscal discipline and avoid overspending, especially in election years.
- Energy sector risk reduction:
- Strengthen finances of public energy companies through improved oversight and management.
- Reform utility tariffs.
- Financial sector resilience:
- Closure and resolution of seven banks in 12 months to bolster financial stability.
- Focus on addressing remaining weaknesses, including in the non-bank sector.
- IMF role:
- Working in partnership with Ghana through policy advice, financial support when needed, and hands-on training and capacity building.
Planting seeds to foster durable and inclusive growth (longer-term strategies)
- Achieving the Sustainable Development Goals requires public sector leadership and partnership with the private sector, domestic and foreign.
- Fiscal policy guidance under heavy debt burdens:
- Reduce non-essential spending to cut debt, while maintaining or increasing essential social spending and investments in people.
- Education and human capital:
- Ghana launched a free Senior High School program that saw a 36 percent jump in student enrollment over the past year.
- Productivity and infrastructure:
- Lift productivity and reduce income inequality by scaling up infrastructure investment—e.g., upgrading road networks in farming regions, modernizing ports and power plants.
- Emphasis on high-quality projects with sound management and transparent financing for debt sustainability, ‘value for money,’ and good governance.
- Gender and inclusion:
- Ghana has a relatively low gender gap in economic participation (the share of women working in Ghana in 2016 was only 4 percentage points below the share for men), but there is room to improve women’s access to university education and leadership positions in public office.
- Innovation and private sector dynamism:
- Ghana hosts a robust network of academic institutions, innovative startups across sectors (fintech, fashion, social media), and cultural industries (film and music).
- Anti-corruption and safeguarding public resources:
- Collective action is needed; initiatives include the Office of the Special Prosecutor, the Auditor General, and the Bank of Ghana.
- Global and regional costs cited:
- annual cost of bribery alone is over $1.5 trillion—roughly 2 percent of global GDP;
- Africa is estimated to be losing more than $50 billion a year through illicit financial outflows.
- Redirecting these funds could finance education, healthcare, and stronger institutions.
Conclusion and strategic message
- Ghana’s vision: “Ghana beyond aid” — transition toward a thriving emerging market economy that unlocks the full potential of all Ghanaians.
- Policy agenda:
- Address near-term vulnerabilities (revenues, energy sector risks, financial stability).
- Foster durable, widely shared prosperity through investments in people, infrastructure, governance, and partnerships with the private sector.
- Closing sentiment: work in partnership to plant economic seeds and grow a tree that will nourish future generations.
Speech by Christine Lagarde — Accra, December 18, 2018. International Monetary Fund.