The Institute of Economic Affairs (IEA) has criticized Ghana’s economic policies, arguing that the country’s recurring economic crises and frequent reliance on International Monetary Fund (IMF) bailouts highlight deep policy failures that have increased its vulnerability to economic shocks.
The IEA noted that since independence, Ghana’s economy has seen little transformation, continuing to rely heavily on the export of primary commodities while depending on a broad range of imports. The institute pointed out that the economic policies pursued by successive governments have mostly adhered to the orthodox neoclassical model, which emphasizes free markets and a limited role for the state—a model more suited for mature economies. The IEA emphasized that the expected failures from such free-market policies have not been adequately addressed, leading to severe consequences for the country.
“The country clearly needs to chart a new course, as repeating the same policies will not yield different outcomes,” the IEA stated. “This new path should involve transformative policies that build a resilient, self-reliant economy and should focus on leveraging internal resources and capacities to support broad transformational initiatives.”
As the December 2024 elections approach, the IEA has outlined a set of key policies for the incoming government, addressing critical areas such as Macroeconomic Stability, Economic Growth and Employment, Infrastructure, Energy Security, Agriculture and Food Security, and Industrialization and Economic Transformation.
Macroeconomic Instability
The IEA also expressed concern over the persistent macroeconomic instability in Ghana, characterized by high inflation, exchange rate fluctuations, high interest rates, and unsustainable debt levels. These issues, the institute argued, are rooted in both the structural weaknesses of the economy and poor macroeconomic fundamentals.
The structural weaknesses, it added, have continued to constrain production and supply, while expansionary fiscal and monetary policies have fueled demand pressures. The imbalance between supply and demand has led to ongoing macroeconomic instability. The IEA noted that when the situation reaches a crisis point and Ghana loses international policy credibility, the country typically rushes to the IMF for a financial bailout. However, these IMF programs focus on restoring macroeconomic balance without addressing the fundamental structural issues. Once the program concludes, the country often reverts to fiscal profligacy and monetary expansion, leading to another cycle of instability.
The IEA concluded that without macroeconomic stability, sustained high growth will be difficult to achieve. It called for a new approach focused on entrenching macroeconomic stability to ensure lasting economic progress.
