Economic deterioration: Why our development has now gone back for 31 years (2024)

By Bernard L. TETTEH-DUMANYA (Dr)

An economist Amartya Sen, said, “Development can be seen as a process of expanding the real freedoms that people enjoy.” This perspective highlights that development is not merely about economic growth but also encompasses broader aspects such as political freedoms, social opportunities, and access to essential services.

When a country experiences regression, it reflects a shrinking of these freedoms and opportunities, indicating setbacks in its developmental journey. Ghana, once hailed as a beacon of economic progress in Africa, has faced a perplexing regression from 2017 to 2024.

Despite intermittent periods of growth and promise, the overall trajectory of the economy has been characterized by setbacks and stagnation. To comprehend the gravity of Ghana’s current economic predicament, an examination of its historical context is imperative. Analysis of key macroeconomic indicators reveals a troubling picture of Ghana’s economic performance.

Despite sporadic bursts of growth, GDP expansion has been erratic, failing to sustain momentum over the long term. Persistent inflationary pressures, fiscal imbalances, burgeoning public debt, and stubbornly high unemployment rates have further exacerbated the country’s economic woes.

In 2021, for example, Dr. Sam Jonah raised concerns about Ghana’s “culture of silence,” noting a perceived reluctance or fear among citizens to openly critique the government or powerful individuals in government. His remarks sparked nationwide discussions on freedom of expression and accountability. This highlights a growing worry over the government’s seeming resistance to diverse opinions, prompting questions about the depth of political freedom in Ghana.

Recent events, such as the president’s request for chiefs to stand before a handshake and the alignment of political parties along tribal lines, have intensified these concerns. Accusations of tribalism against President Akufo-Addo have emerged, with critics citing biases in political appointments and resource distribution that seemingly favor his ethnic group or region.

Some perceive these actions as exploiting tribal sentiments for political gain. While such claims may be influenced by political motives, they also echo historical tensions among Ghana’s diverse ethnic groups and concerns about fairness and inclusivity.

These issues, though present in the past, have become more pronounced in today’s Ghana. These challenges, compounded by the poor performance of the economy, lend credence to the regression of Ghana as a nation.

The government has grappled with policy inconsistencies and populist measures, undermining fiscal discipline and investor confidence. A notable example is the Vice President, who was the head of the economic team, pledging to abolish E-levy when he is given the mandate to become president. Such rhetoric, alongside a lack of sustained commitment to structural reforms, has hindered efforts to address deep-rooted constraints and foster inclusive growth, despite the government’s “Ghana beyond aid” mantra.

One significant economic concern from 2017 to 2024 has been chronic issuance of Bond with long-duration bonds, indicating that the current administration’s policies have eroded prospects for the past, present, and future of the economy. The table below shows various Bonds issuance since 2017:

Sources: Ministry of Finance

Based on the table data above, the average bond duration, relative to the frequency of bond issuances, indicates an average maturity of 34.5 years, effectively binding the country to honor its debt obligations for this extended period. This raises poignant questions among Ghanaian citizens about the decisions impacting both the present and future generations.

Reliance on long-term bond issuance, particularly those exceeding 30 years in maturity, has been flagged as detrimental to the nation’s economic health. By elongating repayment periods, such bonds compound Ghana’s debt burden, imposing enduring financial commitments that strain fiscal resources and constrain budgetary flexibility.

Criticisms have been leveled at the Finance Ministry, led by Ken Ofori Atta, for potentially insufficient analysis preceding bond market engagements, prompting concerns about the Economic Management Team’s grasp of debt management principles. Many attribute Ghana’s current economic challenges to perceived incompetence in both fiscal management led by the Minister of Finance and monetary prudence led by the Bank of Ghana.

The ramifications of these financial decisions which must be investigated whether there is the element of financial loss to the state must be a priority to all of us. The sad event of pensioners protesting at the finance ministry is a rare occurrence even during challenging times in Ghana.

This scrutiny is juxtaposed against Ghana’s significant strides in offshore oil exploration and production, boasting notable fields such as the Jubilee Field operated by Tullow Oil, the TEN Fields in the Deepwater Tano Block, the Sankofa Field under the OCTP Integrated Oil and Gas Project operated by Eni, and the Gye Nyame Field managed by Springfield Group. While these oil fields hold promise for Ghana’s energy sector and economic advancement, questions persist regarding the transparency and effective utilization of oil revenues for the nation’s development.

In my perspective, the setback of the country by 31 years can be traced to incompetent management, institutional failures, and widespread corruption, issues that are often emphasized. It is crucial to appoint competent individuals to steer the governance of the nation.

As a solution, I suggest implementing a system where each of the 16 regions appoints a finance director, with one of them selected through a vote to serve as the substantive Minister of Finance for a two-year term in rotation. This approach would prevent any single political figure from advancing their agenda under the guise of serving as the finance minister, promoting fairness and accountability in leadership.

In addition to the mismanagement that has set Ghana back by 31 years, the prescriptions imposed by the IMF and the World Bank on Ghana have also played a role. Concerns have been raised about the potential negative impacts of their directives on the economy and citizens alike. Critics argue that these institutions have become political instruments for neo-colonial agendas, pointing to increasing politicization and their involvement in sensitive policy areas influenced by geopolitical considerations.

They contend that the stringent policy conditions imposed reflect political motives, prioritizing debt repayment and market liberalization over the welfare and development of citizens. Unequal power dynamics further fuel skepticism about the IMF’s neutrality and legitimacy, with major donor countries exerting significant influence within the institution.

To address Ghana’s enduring 31-year economic setback, I propose a multifaceted approach involving collaboration between future governments and citizens to implement comprehensive reforms to address structural weaknesses and foster sustainable development.

This approach would prioritize policy reforms to enhance fiscal management, transparency, and regulatory efficiency, coupled with investments in education, healthcare, and skills development to cultivate a more productive workforce. Diversifying the economy through strategic initiatives in agriculture, manufacturing, and tourism, alongside infrastructure development, would bolster resilience and spur growth.

Introducing a 24-hour economy policy initiative could serve as a potential game-changer, stimulating job creation, attracting investment, and boosting economic activity across various sectors. Furthermore, investing in infrastructure, supporting small businesses, and fostering entrepreneurship could leverage the potential of a vibrant 24-hour economy to drive sustainable development, improve living standards, and enhance social cohesion.

Successful implementation would require meticulous planning, stakeholder collaboration, and supportive policies to ensure inclusivity, sustainability, and resilience in Ghana’s economic transformation journey.

Additionally, social protection programs could cushion vulnerable populations against economic shocks, while promoting small and medium enterprises and strengthening regional partnerships could further propel economic recovery and prosperity. Through active citizen engagement, visionary leadership, and prudent policymaking, Ghana could overcome its economic challenges and realize its full potential for inclusive and sustainable development.

>>>the writer is a seasoned Financial Economist & Consultant with an illustrious career spanning 29 years across academic, corporate, and agribusiness sectors. His extensive professional journey includes pivotal roles at esteemed institutions such as UBA Ghana, SIC Financial Services, Empretec Ghana, and the Swiss International Finance Group, reflecting his profound understanding of global finance.

Renowned as a pioneer in risk management, compliance, and corporate strategy, Dr. Tetteh-Dumanya has made significant contributions to the Ghanaian financial landscape. He has been instrumental in spearheading initiatives in Venture Capital, business/financial reengineering, and fundraising, thereby playing a pivotal role in the growth and development of numerous entities.

Driven by a fervent dedication to capacity development, Dr. Tetteh-Dumanya has offered consultancy services to a diverse array of local and multinational organizations notably GIZ, AGRA, SNV, DANIDA, and USAID among others. His expertise in financial and business domains is multifaceted, showcased through his adept navigation of complex challenges and his commitment to driving sustainable growth in every endeavor. For inquiries, Dr. Tetteh-Dumanya can be reached at: [emailprotected]