Ghana: Planting Economic Seeds for Future Prosperity

December 18, 2018

As Prepared for Delivery

Vice President Bawumia, Minister Ofori-Atta, Governor Addison, Ladies and Gentlemen—good morning, and thank you for your incredible hospitality.

This is the second day of my visit here in Ghana, and it is perhaps even more enjoyable than yesterday—because I continue to hear the word ‘ akwaaba.

As you know, akwaaba is not just a simple ‘welcome;’ it is an expression of warmth and openness that allows visitors like myself to connect with Ghana at a deeper level.

Add to this the benefits of political stability, a drive to build a better future, and the boundless creativity of the Ghanaian people, and you have a powerful mix of ingredients. A recipe that has been driving the economic wellbeing of this nation.

These ingredients can also help drive Ghana’snext economic transformation. President Akufo-Addo described this vision with three words: Ghana beyond aid.

The longer-term goal is to become a thriving emerging market economy—one that has the capacity to unlock the full potential of Ghanaians, young and old, rich and poor, here in Accra and across this nation.

In many ways, this story began in the late 19th century when a blacksmith named Tetteh Quarshie brought the first cocoa beans into this country—hidden underneath his toolbox.

By growing the first cocoa trees, Tetteh Quarshie helped usher in a new era—planting the seeds of what has become a diversified and fast-growing economy.

That spirit is more important than ever to ensure Ghana’s future prosperity and to meet the challenges of the present—from reducing high debt, to boosting productivity, to creating opportunities for all.

I am convinced that Ghana can achieve this next transformation by planting new economic seeds, especially fiscal and financial seeds.

This is about growing a more resilient and more vibrant economy—a tree that will nourish future generations. This is what I would like to focus on today.

1. Economic Environment and Implications for Ghana

Let us start with the key “environmental factors.” One is, of course, the changing global economic landscape.

In October, the IMF cut its global growth forecast to 3.7 per cent for 2018 and 2019. And recent data from emerging markets and the euro area suggest that the momentum may have slowed even more than we had expected.

This means that, after a good stretch of solid growth, the world is now facing a period where significant risks are materializing, and darker clouds are looming.

For example, many developing economies are facing pressures from a stronger U.S. dollar, tightening financial market conditions, and increased trade tensions.

On that point, the IMF has called on all countries to help de-escalate the current trade disputes. Fixing the global trade system and making it fit for the future will be essential.

I am hopeful because there is an appetite to expand and improve trade, especially in this region. Think of the African Continental Free Trade Area, which Ghana has strongly supported, and which could boost intra-African trade by at least 50 per cent within 5 years. [1]

So, when it comes to trade, countries such as Ghana know that there is strength in unity. By expanding trade, economies in this region can boost growth and innovation, while delivering on the promise of creating new jobs with higher wages.

This will be critical to keep up with a rapidly growing workforce. If Sub-Saharan Africa is to enjoy a demographic dividend—a prolonged period of high and inclusive growth—it would need to create an estimated 20 million jobs per year—which is one of the issues that we discussed at yesterday’s conference on the Future of Work.

And yet, even as policymakers manage these challenges, they also need to address the decisive “environmental factor” —climate change.

Here I am thinking of the livelihoods of farmers, who will be affected by rising temperatures and more volatile weather patterns. I am also thinking of the rapidly expanding urban centers, and their potential impact on climate change.

Over the next decade, many emerging and developing economies will likely see further increases in urbanization, and with that comes new infrastructure—worth trillions of dollars globally. [2]

The key is to avoid new projects that lock in carbon-intensive energy and transportation structures. It means building “greener” cities that can actually help us fight climate change.

As Kofi Annan once put it: “ The world is not ours to keep. We hold it in trust for future generations.”

2. Planting Economic Seeds

With this in mind, let me focus on how Ghana can grow a more resilient and more vibrant economy. The good news is that, in many areas, sound policies are bearing fruit.

Over the past two decades, extreme poverty levels have declined by more than two thirds; life expectancy has increased by 10 percent; and real per capita income has grown by more than 80 percent. But that is not the whole story.

Over the past two years, Ghana has implemented bold policies to reach another set of milestones:

Inflation has come down to single digits. There is a primary fiscal surplus for the first time in more than a decade. And strong growth—of about 7 percent—is expected over the medium-term, partly due to higher oil and gas production.

These are remarkable achievements and a testament to Ghana’s immense potential.

At the same time, vulnerabilities have continued to build up, including high levels of public debt, fiscal risks related to the energy sector, and vulnerabilities in the financial sector.

Policymakers can meet these challenges by building on the progress made and by planting new seeds.

a) Planting seeds to cope with near-term vulnerabilities

I would like to highlight some of these economic seeds—such as revenues, risk-reduction, and resilience. What do I mean?

First, there is room to generate higher public revenues to ensure sustainable priority spending, especially on education, and to reduce borrowing needs. Already, about 42 pesewa for every cedi collected by the government is used to service outstanding public debt.

A first step is to broaden the tax base, reduce leakages, and streamline tax exemptions to make them more targeted. At the same time, it is critical to avoid overspending—to maintain fiscal discipline—especially in election years.

Second, there is room for risk-reduction in the energy sector. The goal is to further strengthen the finances of public energy companies through improved oversight and management and by reforming utility tariffs.

Third, there is scope to increase the resilience of the financial system —where we have recently seen the closure and resolution of seven banks in 12 months. These were courageous steps to bolster financial stability and pave the way for greater financial inclusion. Now the focus is on addressing remaining weaknesses, including in the non-bank sector.

The IMF has been working in partnership with Ghana on these and many other pressing issues—through policy advice, financial support when needed, and by providing hands-on training and capacity building.

Going forward, the Fund remains deeply committed to Ghana—not just in addressing immediate challenges, but in planting the seeds of more durable and more widely shared prosperity.

b) Planting seeds to foster durable and inclusive growth

We know that Ghana has the potential to become a thriving, and more inclusive, emerging market economy. We also know that there is a policy roadmap—the Sustainable Development Goals—to support this transformation.

Reaching key goals in such areas as health, education, and access to water is not an easy task.

While responsibility for achieving the SDGs must begin with efforts by the public sector, it cannot end there. In particular, it requires a partnership with the private sector, domestic and foreign.

It also requires a steadfast commitment to fairness, especially in countries with heavy debt burdens. Yes, the priority is to reduce non-essential spending to cut debt, but countries also need to maintain, or increase, essential social spending—investments in people.

That spirit is reflected in Ghana’s decision to launch a free Senior High School program, which saw a 36 percent jump in student enrollment over the past year.

Of course, Ghana is already, in many ways, a modern economy. When Google recently decided to open a research center for artificial intelligence in Accra—the first one in Africa—people were excited but not really surprised.

Why? Because Ghana has a robust network of academic institutions as well as a growing number of innovative startups in various sectors—from fintech, to fashion, to social media. And think of the vibrant film and music scenes that are resonating across the region and beyond.

But there is always more work to be done.

For example, Ghana can be proud of its relatively low gender gap in economic participation [3] —but there is room to improve women’s access to university education and leadership positions in public office.

There is also room to lift productivity and reduce income inequality by scaling up infrastructure investment. Consider the enormous benefits of upgrading road networks in farming regions and modernizing ports and power plants.

This requires high-quality projects that are based on sound management and transparent financing—which, in turn, is critical for debt sustainability, ‘value for money,’ and good governance.

Which brings me to my final point—stepping up the fight against corruption. This is, in the words of President Akufo-Addo, “not a battle I can wage or win alone.” [4]

The need for collective action—for joint responsibility—is reflected in a series of anti-corruption initiatives led by the Office of the Special Prosecutor, the Auditor General, and the Bank of Ghana—to name just a few.

The stakes are high, not just here in Ghana but across the world. The annual cost of bribery alone is over $1.5 trillion—roughly 2 percent of global GDP. [5] And it is estimated that Africa is losing more than $50 billion a year through illicit financial outflows. [6]

These funds should be put to better use—for education and healthcare, and to build stronger institutions that can help protect the public purse. That is why we need a stronger alliance among individual citizens, civil society, governments, and international institutions, including the IMF.

Together we can wage and win this struggle, for the benefit of all.


Let me conclude with a quote from Ghana’s first President, Kwame Nkrumah: “ We face neither East nor West: we face forward.”

Indeed, Ghana was the first African nation to gain independence; it was the first multi-party democracy; and now it is the first to lay out a bold vision of moving beyond aid.

Today policymakers have an opportunity to face forward by addressing near-term vulnerabilities and fostering more durable and more widely shared prosperity.

Today we are working in partnership to plant economic seeds and grow a tree that will nourish future generations.

Thank you—medaase!

[1] Estimate by the United Nations economic commission on Africa.

[2] Global Commission on the Economy and Climate (GCEC); Blog by Nicholas Stern.

[3] The share of women working in Ghana in 2016 was only 4 percentage points below the share for men, compared to a 17 percentage point gap for the Western Africa region (source: ILO).

[4] Speech by President Akufo-Addo, August 2018.

[5] Corruption: Costs and Mitigating Strategies (IMF 2016), citing and extrapolating from work done by Daniel Kaufmann in 2005.

[6] Report of the High Level Panel on Illicit Financial Flows from Africa.

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