The Economic Recovery Program
In 1983 the government launched the Economic Recovery Program
(ERP) under the guidance of the World Bank and the IMF. The
overriding purpose of the ERP was to reduce Ghana's debts and to
improve its trading position in the global economy. The stated
objectives of the program focused on restoring economic
productivity at minimum cost to the government and included the
following policies: lowering inflation through stringent fiscal,
monetary, and trade policies; increasing the flow of foreign
exchange into Ghana and directing it to priority sectors;
restructuring the country's economic institutions; restoring
production incentives; rehabilitating infrastructure to enhance
conditions for the production and export of goods; and, finally,
increasing the availability of essential consumer goods. In short,
the government hoped to create an economic climate conducive to the
generation of capital.
The ERP was carried out in roughly three phases. Beginning in
1983, the government focused on reducing its expenditures while
creating incentives for private production. Initial expenditure
cuts and improved tax collection brought the budget deficit down
from 6.3 percent of GDP in 1982 to 0.1 percent by 1986, relieving
government pressure on the banking system, while a series of cedi
devaluations boosted export activity. During the second phase,
which lasted from 1987 to 1989, the government moved to divest
itself of many assets through privatization and to institute
radical foreign exchange reforms to devalue the cedi further.
Although privatization was sluggish, the hard-currency black market
was nearly eliminated with the introduction of foreign exchange
bureaus in 1988. In the ERP's third phase, the government
intensified monetary reforms and reduced private corporate taxes to
boost private-sector growth.
By the end of 1991, ERP efforts had improved the country's
international financial reputation because of its ability to make
loan repayments (although not wipe out foreign debt) and its first
entry onto the international capital market in almost two decades.
Critics maintained, however, that the ERP had failed to bring about
a fundamental transformation of the economy, which still relied on
income earned from cocoa and other agricultural commodities.
Critics also contended that many Ghanaians had seem few, if any,
benefits from the program.
In addition to its focus on stabilizing the country's financial
structure, the ERP also aimed to promote production, especially in
the export sectors. In 1986 the government began to rebuild
infrastructure through a US$4.2 billion program, more than half of
which was provided by external sources. This amount was divided
roughly equally among infrastructure repair, energy imports (oil
for machinery), and export industries. Increased imports financed
by the IMF, the World Bank, and other sources made possible the
rehabilitation and repair of some key parts of the infrastructure
through the supply of spare parts and inputs for industry, mining,
utilities, and agriculture.
Although the ERP was geared primarily toward restoring the
country's international economic standing, it came under popular
criticism inside Ghana for ignoring the plight of those not
involved in the export sector. The overwhelming shift in resources
was toward cocoa rehabilitation and other export sectors, not
toward food production. Government employees, especially those in
state enterprises, were actively targeted, and many lost their
jobs. Farmers suffered as the percentage of the total budget
devoted to agriculture fell from 10 percent in 1983 to 4.2 percent
in 1986 and to 3.5 percent in 1988, excluding foreign aid projects.
Although cocoa contributed less to Ghana's GDP than food crops,
cocoa nonetheless received 9 percent of capital expenditures in the
late 1980s; at the same time it received roughly 67 percent of
recurrent agricultural expenditures because of its export value.
In response to criticism of such policies, the government
initiated the US$85 million Program of Action to Mitigate the
Social Costs of Adjustment (PAMSCAD). Beginning in 1988, the
program sought to create 40,000 jobs over a two-year period. It was
aimed at the poorest individuals, small-scale miners and artisans
in particular, and communities were to be helped to implement labor
intensive self-help projects.
As part of PAMSCAD, ¢10 billion was slated in the 1993 budget
for the rehabilitation and development of rural and urban social
infrastructure. The new program, organized through PAMSCAD and the
new district assemblies, was designed to focus on improving water
supply, sanitation, primary education, and health care. An
additional ¢51 billion was set aside for redeployment and end-of-
service benefits for those who had lost their jobs in civil service
and parastatal reorganizations.
In the early 1990s, the government was committed to continuing
the policies of the ERP. New agreements were concluded with the
World Bank to continue credit arrangements on condition that Ghana
review and revise its various economic laws and regulations and
support private sector development. In particular, the government
agreed to revise or to repeal existing laws and regulations
affecting private investment that undermine the spirit of
deregulation, economic liberalization, and exchange rate reforms.
The government also agreed to develop and to strengthen the
institutional framework that would facilitate private investment.
Key priorities for 1992 and afterward included giving new impetus
to state enterprise reform, broadening the scope of banking-sector
reforms, liberalizing the administrative framework, and
strengthening public-sector management. Basic education and primary
health-care services were to receive attention over the long term
Data as of November 1994