66 Years Of Ghana’s Independence: Have We Achieved Financial Independence?

Ghana gained its independence on March 6, 1957, making it the first sub-Saharan African country to do so. This year marks the 66th anniversary of Ghana’s independence. Over the years, Ghana has made significant strides in various sectors of the economy, including education, healthcare, infrastructure, and politics. However, the question remains: have we achieved financial independence?

To answer this question, we must first understand what financial independence means. Financial independence refers to a state where a country can sustain itself without relying on external aid or borrowing. It means that a country is self-sufficient and can meet its financial obligations without relying on external support. It also means that a country can fund its development programs without accumulating debt.

State of Ghana’s economy after independence

Ghana has made some progress towards financial independence since gaining independence in 1957. In the early years after independence, Ghana’s economy was heavily reliant on agriculture. However, in the 1960s, the government embarked on an industrialization drive to diversify the economy. The government invested heavily in infrastructure, including roads, railways, and ports, to support the growth of industries. The state also established state-owned enterprises to lead the industrialization drive.

In the 1980s and 1990s, Ghana experienced economic challenges that led to a significant decline in economic growth. Inflation skyrocketed, and the value of the Ghanaian cedi depreciated. The government, in collaboration with international financial institutions, implemented structural adjustment programs to stabilize the economy. These programs included fiscal austerity measures, currency devaluation, and trade liberalization.

The structural adjustment programs helped to stabilize the economy, but also led to significant social and economic hardships for many Ghanaians. The government later adopted a poverty reduction strategy, which prioritized human development and poverty reduction. The strategy included the implementation of the Ghana Poverty Reduction Strategy (GPRS) and the Medium-Term Development Plan (MTDP).

Economic progress made
Over the past decade, Ghana has experienced a steady increase in GDP growth, averaging 6% annually. However, the country still relies heavily on exports of raw materials, particularly gold, cocoa, and oil, which account for 70% of the country's total exports. This reliance on commodity exports makes Ghana vulnerable to fluctuations in global prices.

In recent years, Ghana has made significant progress towards financial independence. The country has experienced a sustained period of economic growth, with an average growth rate of 7% between 2017 and 2019. The government has also implemented several initiatives to promote economic growth and development, including the One-District-One-Factory program, the Planting for Food and Jobs program, and the Ghana Beyond Aid agenda.

Current economic challenges
However, Ghana still faces significant challenges in achieving financial independence. Ghana’s dependence on external financing to fund its development programs remains high. The COVID-19 pandemic also had a significant impact on the economy, leading to a decline in economic growth and an increase in debt.

Ghana’s debt-to-GDP ratio has also been a concern in recent years. Currently, Ghana’s debt-to-GDP ratio is about 93%, which is higher than the recommended limit of 60% by the IMF. The country’s rising debt levels have been attributed to its infrastructural development and the financing of its budget deficit. Ghana’s government has been taking steps to address the debt situation, including implementing fiscal consolidation measures and seeking debt relief.

Inflation has been another challenge for Ghana’s economy, with a rate of 53% as of January 2023. High inflation rates have been attributed to supply-side factors such as food prices, energy prices, and exchange rate movements. The government has been implementing monetary policy measures such as increasing interest rates and reducing the money supply to control inflation.

Another challenge to Ghana's financial independence is the country's tax system, which is characterized by low tax compliance and weak revenue mobilization. The Ghana Revenue Authority (GRA) estimates that the country's tax-to-GDP ratio was only 13.6% in 2021, compared to the Sub-Saharan Africa average of 17.2%. This low tax revenue limits the government's ability to invest in infrastructure, social services, and other developmental projects that can spur economic growth and reduce poverty.

Also, Ghana's trade balance has been negative in recent years, meaning that the country imports more than it exports. This has resulted in a balance of payment deficit, which has put pressure on the country's foreign reserves. To address this, the government has been promoting non-traditional exports and seeking to increase foreign investment.

Way forward
To achieve financial independence, Ghana requires a range of measures that address various economic, political, and social factors. Here are some specific measures that Ghana can put in place to achieve financial independence:

1. Develop a diversified and resilient economy: Ghana should reduce its dependence on commodity exports by developing other sectors such as manufacturing, services, and agriculture. This will require investment in infrastructure, technology, and human capital to increase productivity and competitiveness.
2. Implement sound fiscal policies: Ghana should pursue a sustainable fiscal policy that balances revenue and expenditure. This will involve reducing wasteful spending, improving tax collection, and managing public debt.
3. Strengthen the financial sector: Ghana should improve access to financial services and promote financial literacy to enhance financial inclusion. The country should also develop its capital markets to attract investment and deepen the financial sector.
4. Promote foreign investment: Ghana should create an enabling environment for foreign investment by improving infrastructure, providing incentives, and reducing bureaucracy. This will help to boost economic growth, create jobs, and increase revenue.
5. Enhance governance and transparency: Ghana should strengthen institutions and promote transparency and accountability to reduce corruption and enhance public trust. This will require reforms in areas such as procurement, public financial management, and the justice system.
6. Invest in human capital: Ghana should invest in education, health, and social protection to improve the well-being of its citizens and enhance productivity. This will require policies that promote access to quality education and healthcare, and support vulnerable groups such as women and children.
7. Foster regional integration: Ghana should promote regional integration and cooperation to enhance trade, investment, and economic growth. This will involve working with regional organizations such as the African Union and the Economic Community of West African States (ECOWAS).

Overall, achieving financial independence requires a comprehensive and coordinated effort that involves government, private sector, civil society, and other stakeholders. By implementing these measures, Ghana can build a more resilient, diversified, and prosperous economy that benefits all its citizens.

To conclude, while Ghana has made progress towards financial independence since gaining independence 66 years ago, there is still much work to be done. The country needs to reduce its debt levels, promote domestic revenue mobilization, and reduce its dependence on external financing. The government must also prioritize policies and programs that promote economic growth and development while reducing poverty and inequality. Achieving financial independence is a long-term goal that requires sustained effort and commitment from all stakeholders.

By: Emmanuel Owusu
Policy Analyst & Executive Director
Movement for Responsible & Accountable Governance (MoRAG)

0248110208 or [email protected]