Sustaining recovery and development in economic transitions: The role of deregulation in Ghana's experience
| Date | 01 November 2006 |
| DOI | http://doi.org/10.1002/pad.4230150311 |
| Author | Kwesi Botchwey |
| Published date | 01 November 2006 |
PUBLIC ADMINISTRATION AND DEVELOPMENT, VOL. 15,245247
(1995)
Sustaining recovery and development in economic transitions:
the role
of
deregulation in Ghana’s experience
KWESI BOTCHWEY
Ghana
Ghana embarked on a programme of far-reaching economic reforms
in
1983, against
the background of a decade of unprecedented economic decline and crisis. It was a
crisis that was a cumulative decline in real GDP of about
15%
and a 30% decline in
real per capita income. The crisis was characterized by large fiscal deficits financed
mainly by borrowing from the domestic banking system with predictable
consequences for inflation and the exchange rate. Typically, the reaction of
successive Governments was more and more state regulation resulting in a
labyrinth of price distribution and import controls and the further expansion of
an already large public sector through the creation of more state enterprises. This, in
turn, led to a worsening of distortions in the economy and an erosion of incentives
for production, savings and investment. In consequence, exports fell by about one
third, imports by about one half, while external financing, especially official
development assistance just about ceased as creditors lost confidence in the economy.
Widespread shortages of foreign exchange led to an intensification of parallel market
activities and the near collapse of social and economic infrastructure. As per capita
incomes plummeted, large numbers of Ghana’s skilled and well-trained manpower
began to emigrate, leaving public administration generally in a complete state of
disrepair.
Against this background the strategy of the reform programme was, to a very
large extent, a conventional one: it sought to realign relative prices in favour of
production, restore monetary and fiscal discipline and repair social and economic
infrastructure. The programme also entailed radical institutional and structural
reforms to improve overall efficiency and promote saving and investment and, more
importantly, general deregulation of the economy through a shift from direct
controls to greater reliance on markets.
The adjustment experience has not been without difficulties. But
as
all key
economic indicators show, and also from the point of view of its social impact, the
programme has been very successful, although many problems still remain. Real
GDP has grown by about
5%
per annum over the programme period, making
possible substantial gains in real per capita incomes. The purpose here is not to hawk
the glory of the experience. It is to discuss one very fundamental aspect-the role of
deregulation, its form and content, and the challenges that successful deregulation
poses for governance and public administration. But first, it is necessary to take a
critical look at an old ideological bogey that is fast gaining new lustre. Such
The
Hon.
Dr.
Botchwey
is
Minister
of
Finance,
Government
of
Ghana.
CCC
0271 -2075/95/030245-03
0
1995
by
John
Wiley
&
Sons,
Ltd.
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