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Ghana OVERVIEW OF THE CURRENT ECONOMY
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Figure 7. Economic Activity, 1994
In the early 1990s, Ghana's economic recovery still appeared
uneven and was geared primarily to the export rather than domestic
market. GDP had risen by an average of 5 percent per year since
1984, inflation had been reduced to about 20 percent, and export
earnings had reached US$1 billion. Most production came from the
export sector, and by the 1992-93 crop year, cocoa production
surpassed 300,000 tons, placing Ghana third in the world. In 1990
exports of minerals--primarily gold but also diamonds, manganese,
and bauxite--brought in US$234 million, an increase of 23.2 percent
from the year before
(see
fig. 7). Nevertheless, salaries were low,
and because the cost of public services continued to rise, Ghana's
poor bore the brunt of the negative effects of the austerity
program.
Despite devaluations by the Rawlings regime and rising exports,
the government has been unable to fulfill a key stabilization goal
of reducing the trade and current account deficits. To stimulate
production in various sectors, the government has incurred loans to
finance imports of necessary inputs such as machinery, fertilizer,
and petroleum. As a result, the country's foreign debt exceeded
US$4 billion in 1991. According to World Bank estimates, the
country's debt continued to rise in 1992, and was equivalent to
almost 63 percent of Gross National Product
(
GNP--see Glossary). In
1992 the debt service ratio (debt service as a proportion of
exports) was 27 percent, an improvement on late 1980s levels, which
averaged as high as 62.5 percent. To cover the deficits that result
from loans and increased imports, the government came to rely on
rising levels of foreign aid, with net aid disbursements increasing
to an estimated US$550 million by 1990. Unfortunately, foreign
investment, compared with aid, was weak except in the mining
sector, and domestic savings were insufficient to finance the
country's ambitious development projects.
Government policies have produced mixed results in terms of
productivity and debt, and they have also incurred significant
social costs through job elimination and reduced public expenditure
policies. The government has addressed this problem by launching a
special initiative to create 40,000 jobs providing services to the
poorest groups. Spending on health and education also has increased
as a proportion of GDP, but the central government believes that
major poverty alleviation can come only with even faster and higher
economic growth.
Data as of November 1994
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