Ghana as a nation is not exempted from economic challenges. Following the macroeconomic crises experienced in 2022, Ghana witnessed some improvements in its economic conditions throughout 2023. However, persistent challenges remain, greatly characterized by elevated inflation, subdued growth, and substantial pressure on public finances and debt sustainability. International organizations, notably the World Bank and the International Monetary Fund (IMF), have significantly promoted economic freedom. This article highlights the influence of these organizations on Ghana’s economic policies and initiatives.
Economic freedom is the fundamental right of every human to control his or her own labor and property. It implies the liberal ideologies emphasizing free markets, free trade, and private property. In other words, Economic Freedom is defined as the freedom to produce, trade, and consume any goods and services acquired without the use of force, fraud and theft, or government regulation. Economic freedom is essential and significant in national development by enhancing economic stability and growth. Some key indicators of economic freedom include the Rule of Law (property rights, government integrity, and judicial effectiveness), Government Size (government spending, tax burden, fiscal health), Regulatory Efficiency (business freedom, labor freedom, monetary freedom), and Open Markets (trade freedom, investment freedom, and financial freedom).
World Bank’s Role and Contribution towards Education in Ghana and its Broader Impact on the Economy
The World Bank is a unique global partnership working for sustainable solutions that reduce poverty and build shared prosperity in developing countries. Its main aim is to create a world free of poverty on a livable planet.
The World Bank’s Education Sector Project for Ghana aims to achieve two basic goals:
- More equitable access to and completion of basic education in underprivileged districts
- Better teaching and learning quality, management effectiveness, and post-basic education relevance.
The project’s development objectives have been revised with new activities introduced and planned activities have been better aligned with the national sector strategy. Outcome and output indicators and targets have been revised with credit proceeds being reallocated. Ghana has experienced rapid economic progress and advancements through the availability of basic educational services since the adjustments. As a result, there is a larger need to address the growing demand for post-basic education and to fortify the ties between the domains of labor and education.
Within the larger public administration framework, the decentralization of public services is occurring, and the National Education Reform Program (NERP) aims to address these issues. Despite the fact that the process has not moved forward as quickly as anticipated during the project appraisal, new government priorities have surfaced, such as the requirement to further develop district-level capability. This is justified given the significance of their contribution to attaining more efficient and equitable access to education.
The Role of IMF: Policy Advice, Financial Assistance and Economic Reforms
The International Monetary Fund is a global organization that works to achieve sustainable growth and prosperity for all of its 190 member countries. It supports economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being.
Ghana experienced an economic and financial crisis as a result of inherent vulnerabilities and significant external shocks when it requested an IMF-supported program in July 2022. Since then, the government has significantly advanced under the plan that the IMF Board adopted in May 2023. The Ghanaian economy is starting to show signs of stabilization thanks to the authorities’ unwavering execution of its IMF-supported economic program, which aims to achieve debt sustainability, restore macroeconomic stability, and lay the foundation for greater and more inclusive growth.
Although inflation is still high, it is heading in the right direction, with December 2023 seeing 23% of the country’s total inflation, down from a record high of 54% in December 2022. Sound policies should support economic recovery by restoring long-term growth, safeguarding the weak, and ensuring sustainable public debt through debt restructuring and budget consolidation.
Analyzing Ghana’s Economic Freedom Scores
Ghana’s economy ranks 104th in the world, according to the 2024 Index of Economic Freedom with a score of 55.8. Ghana is now placed 13th out of 47 countries in Sub-Saharan Africa, down 2.2 points from the previous year. The nation’s score on economic freedom is greater than the regional average but lower than the global average. The Ghanaian economy is regarded by the 2024 Index as “mostly unfree.”
Ghana’s ineffective property rights protection still places restrictions on its economic freedom. Corruption continues to impede broad-based, long-term economic development notwithstanding advancements. To firmly establish an entrepreneurial framework capable of long-term economic growth and significantly reducing poverty, reform momentum must be maintained. When compared to other economies, the improvement of total regulatory efficiency has lagged.
Although there have been updates to labor laws, there is still a considerable amount of informal work. According to current data available, the inflation rate stands at over 25%.
Challenges Ghana Faces Despite Support from World Bank and IMF and How Government Attempts to Combating Them
Ghana faces financial difficulties due to its unmanageable governmental debt. To address this, the government has initiated debt restructuring, a significant fiscal consolidation program, and the implementation of reforms to foster economic stability and resilience. This effort is being supported by an Extended Credit Facility (ECF) program of the IMF for approximately $3 billion.
The rate of economic growth slowed to an estimated 2.9% in 2023 and is expected to remain poor in 2024 as a result of the crisis. The macroeconomic environment must remain stable for growth to resume at its potential rate of 5%. The country’s debt problems and macroeconomic challenges are having an immediate negative impact on the country’s poverty and living standards.
Growth in the non-extractive sector is predicted to be constrained in 2024 by persistent macroeconomic uncertainties, high rates of inflation, high interest rates, and continuous fiscal contraction, which are all expected to stifle private consumption and investment.
Recommendations
Governments can foster economic freedom by establishing a legal framework and impartial enforcement but must avoid seizing property, interfering with private property rights, and limiting market participation.
Again, in order to improve successful development programs, cooperation between governments, stakeholders, and international organizations needs to be formed. This can be achieved by holding frequent policy discussions to plan, organize, carry out, and keep an eye on development projects.
Conclusion
International organizations like the World Bank and IMF continue to have a major impact on Ghana’s economic freedom, but in order to develop and carry out programs, the government and other stakeholders must remain steadfast and cooperative. Policymakers should refrain from the use of force and theft in constraining and demoralizing free market ideas and initiatives. Policymakers should also make it a point to strengthen collaborations by ensuring local ownership of reforms and integrating freedom opportunities and initiatives with broader sustainable development goals.
Article by
Josephine Ayorkor-Boi Doku
She is a graduate of the University of Ghana, Legon, with a Bachelor of Arts degree in Philosophy and Sociology. With experience as a customer service consultant and a passion for writing, she loves reading across genres and continuously seeks to refine her craft. She appreciates art and nature, which enrich her personal life. Motivated by a desire for growth, she strives to achieve success in both my career and personal development. Currently, she is a research intern at the YAFO Institute.