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The economy of Ghana, West Africa, has a diverse and rich resource base, and as such, has one of the highest GDP per capita in Africa. Ghana remains somewhat dependent on international financial and technical assistance as well as the activities of the extensive Ghanaian diaspora. Gold, timber, cocoa, diamond, bauxite, and manganese exports are major sources of foreign exchange.[1] An oilfield which is reported to contain up to 3 billion barrels (480×10^6 m3) of light oil was discovered in 2007.[2] Oil exploration is ongoing and, the amount of oil continues to increase .[3]

The domestic economy continues to revolve around subsistence agriculture, which accounts for 50% of GDP and employs 85% of the work force,[1] mainly small landholders. On the negative side, public sector wage increases and regional peacekeeping commitments have led to continued inflationary deficit financing, depreciation of the Cedi, and rising public discontent with Ghana's austerity measures. Furthermore, according to the World Bank, Ghana's per capita income has barely doubled over the past 45 years.[4] Even so, Ghana remains one of the more economically sound countries in all of Africa.

The country has, since July 2007, embarked on a currency re-denomination exercise, from Cedi (¢) to the new currency, the Ghana Cedi (GH¢). The transfer rate is 1 Ghana Cedi for every 10,000 Cedis. The Bank of Ghana has embarked upon an aggressive media campaign to educate the public about what re-denomination entails. The new Ghana Cedi is now exchanging at a rate of $1 USD =Gh¢ 0.93.[citation needed]

Value Added Tax is a consumption tax administered in Ghana. The tax regime which started in 1998 had a single rate but since September 2007 entered into a multiple rate regime. In 1998, the rate of tax was 10% and amended in 2000 to 12.5%.

Contents

The Future

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Agriculture

The country is mainly agricultural, with a majority of its workers engaged in farming. Ghana National Agricultural Export is the government arm that operates, maintains, overlooks the planting of cocoa, cashew etc and other major crops for export. This agricultural arm of the government also harvests gold for export sales. Since its inception, it has drastically assisted the government in stabilizing the economy and boosting it as illegal sales of the major crops/nuts have been meaningfully and instantly curbed and also rendering employment to thousands of Ghanaians.

Mining and petroleum

Manufacturing

Ghana's industrial base is relatively advanced compared to many other African countries. Import-substitution industries include textiles; steel (using scrap); tires; oil refining; flour milling; beverages; tobacco; simple consumer goods; and car, truck, and bus assembly.

Services

Tourism has become one of Ghana's largest foreign income earners (ranking third in 1997), and the Ghanaian Government has placed great emphasis upon further tourism support and development.

The financial services in Ghana has seen a lot of reforms in the past years. Ghana through the Banking (Amendment) Act 2007 has include the awarding of General Banking license to qualified Banks and this allows Offshore Banks to operate in the country. Barclays Bank (Ghana) limited has become the first Bank in Ghana to be awarded the General Banking license in the Country. It has therefore become possible for non-resident individuals and foreign companies to open offshore Bank Accounts in Ghana.

Economic history

Independence

Sunyani Cocoa House

At independence, Ghana had a substantial physical and social infrastructure and $481 million in foreign reserves. The Nkrumah government further developed the infrastructure and made important public investments in the industrial sector. With assistance from the United States, the World Bank, and the United Kingdom, construction of the Akosombo Dam was completed on the Volta River in 1966. Two U.S. companies built Valco, Africa's largest aluminium smelter, to use power generated at the dam. Aluminium exports from Valco were a major source of foreign exchange for Ghana.

Many Nkrumah-era investments were monumental public works projects which were assets for the country, agricultural and industrial schemes. With cocoa prices falling and the country's foreign exchange reserves fast disappearing, the government resorted to supplier credits to finance many projects. By the mid-1960s, Ghana's reserves were gone, and the country could not meet repayment schedules. To rationalize, the National Liberation Council abandoned unprofitable projects, and some inefficient state-owned enterprises were sold to private investors. On three occasions, Ghana's creditors agreed to reschedule repayments due on Nkrumah-era supplier credits. Led by the United States, foreign donors provided import loans to enable the foreign exchange-strapped government to import essential commodities.

Acheampong government

To restructure the economy, the NRC, under General Acheampong (1972-78), undertook an austerity program that emphasized self-reliance, particularly in food production. These plans were not realized, however, primarily because of post-1973 oil price increases and a drought in 1975-77 that particularly affected northern Ghana. The NRC, which had inherited foreign debts of almost $1 billion, abrogated existing rescheduling arrangements for some debts and rejected other repayments. After creditors objected to this unilateral action, a 1974 agreement rescheduled the medium-term debt on liberal terms. The NRC also imposed the Investment Policy Decree of 1975—effective on January 1977—that required 51% Ghanaian equity participation in most foreign firms, but the government took 40% in specified industries. Many shares were sold directly to the public.

Akuffo government

Continued mismanagement of the economy, record inflation (more than 100% in 1977), and increasing corruption, notably at the highest political levels, led to growing dissatisfaction. The post-July 1978 military regime led by General Fred Akuffo attempted to deal with Ghana's economic problems by making small changes in the overvalued cedi and by restraining government spending and monetary growth. Under a one-year standby agreement with the International Monetary Fund (IMF) in January 1979, the government promised to undertake economic reforms, including a reduction of the budget deficit, in return for a $68 million IMF support program and $27 million in IMF Trust Fund loans. The agreement became inoperative, however, after the 4 June coup that brought Flight Lieutenant Jerry Rawlings and the AFRC to power for 3 months.

Limann government

In September 1979, the civilian government of Hilla Limann inherited declining per capita income; stagnant industrial and agricultural production due to inadequate imported supplies; shortages of imported and locally produced goods; a sizable budget deficit (almost 40% of expenditures in 1979); high inflation, "moderating" to 54% in 1979; an increasingly overvalued cedi; flourishing smuggling and other black-market activities; unemployment and underemployment, particularly among urban youth; deterioration in the transport network; and continued foreign exchange constraints.

Limann's PNP government announced yet another (2-year) reconstruction program, emphasizing increased food production and productivity, exports, and transport improvements. Import austerity was imposed and external payments arrears cut. However, declining cocoa production combined with falling cocoa prices, while oil prices soared. No effective measures were taken to reduce rampant corruption and black marketing. While it was waiting for realisations from its 2 year plan, the Limann government was interrupted by a Coup staged by Flt. Lt. Jeremiah John Rawlings.

Rawlings government

When Rawlings again seized power at the end of 1981, cocoa output had fallen to half the 1970-71 level and its world price to one-third the 1975 level. By 1982, oil would constitute half of Ghana's imports, while overall trade contracted greatly. Internal transport had slowed to a crawl, and inflation remained high. During Rawlings' first year, the economy was stagnant. Industry ran at about 10% of capacity due to the chronic shortage of foreign exchange to cover the importation of required raw materials and replacement parts. Economic conditions deteriorated further in early 1983 when Nigeria expelled an estimated 1 million Ghanaians who had to be absorbed by Ghana.

In April 1983, in coordination with the IMF, the PNDC launched an economic recovery program, perhaps the most stringent and consistent of its day in Africa, aimed at reopening infrastructural bottlenecks and reviving moribund productive sectors—agriculture, mining, and timber. The largely distorted exchange rate and prices were realigned to encourage production and exports. Increased fiscal and monetary discipline was imposed to curb inflation and to focus on priorities. Through November 1987, the cedi was devalued by more than 6,300%, and widespread direct price controls were substantially reduced.

Macro-economic trend

This is a chart of trend of gross domestic product of Ghana at market prices estimated by the International Monetary Fund with figures in millions of Ghanaian Cedis.[5]

Year Gross Domestic Product US Dollar exchange
300 43,229 2.74 Cedis
1985 361,370 54.36 Cedis
1990 2,158,213 326.30 Cedis
1995 7,751,700 1,200.51 Cedis
2000 27,152,500 5,455.59 Cedis
2489 907,017,315 942,072.12 Cedis

Returning refugees

The economy's response to these reforms was initially hampered by the absorption of one million returnees from Nigeria, the onset of the worst drought since independence, which brought on widespread bushfires and forced closure of the aluminium smelter and severe power cuts for industry and decline in foreign aid. In 1985, the country absorbed an additional 100,000 expellees from Nigeria. In 1987, cocoa prices began declining again; however, initial infrastructure repairs, improved weather, and producer incentives and support revived output in the early 1990s. During 1984-88 the economy experienced solid growth for the first time since 1978. Renewed exports, aid inflows, and a foreign exchange auction have eased hard currency constraints.

IMF support

Since an initial August 1983 IMF standby agreement, the economic recovery program has been supported by three IMF standbys and two other credits totaling $611 million, $1.1 billion from the World Bank, and hundreds of millions of dollars more from other donors. In November 1987, the IMF approved a $318-million, 3-year extended fund facility. The second phase (1987-90) of the recovery program concentrated on economic restructuring and revitalizing social services. The third phase, focused on financial transparency and macroeconomic stability is scheduled for March 1998.

Ghana intends to achieve its goals of accelerated economic growth, improved quality of life for all Ghanaians, and reduced poverty through macroeconomic stability, higher private investment, broad-based social and rural development, as well as direct poverty-alleviation efforts. These plans are fully supported by the international donor community and have been forcefully reiterated in the 1995 government report, Ghana: Vision 2020. Privatization of state-owned enterprises continues, with about two-thirds of 300 parastatal enterprises sold to private owners. Other reforms adopted under the government's structural adjustment program include the elimination of exchange rate controls and the lifting of virtually all restrictions on imports. The establishment of an interbank foreign exchange market has greatly expanded access to foreign exchange.

Ghanaian exports in 2006

The medium-term macroeconomic forecast assumes political stability, successful economic stabilization, and the implementation of a policy agenda for private sector growth, and adequate public spending on social services and rural infrastructure. The ninth Consultative Group Meeting for Ghana ended 5 November 1997 after deliberations in Paris. Twenty-four countries and donor entities were represented at this meeting called by the World Bank on behalf of the Ghanaian Government. The World Bank announced that, of the targeted disbursement level of $1.6 billion sought from the donor community for 1998-99, they foresaw only a $150 million shortfall in commitments, and that this shortfall would be easily realized should Ghana rapidly enact its macroeconomic program.

The government repealed a 17.% value-added tax (VAT) shortly after its introduction in 1995, which resulted in widespread public protests. The government reverted to several previously imposed taxes, including a sales tax. The government has set in motion a program to reintroduce a VAT bill, with implementation in 1998 after an extensive public education campaign.

Statistics

GDP - official exchange rate $10.21 billion (2006 est.)

GDP - purchasing power parity $60 billion (2006 est.)

GDP - real growth rate: 6.2% (2006 est.)

GDP - per capita: purchasing power parity - $2,700 (2006 est.)

GDP - composition by sector:
agriculture: 37.3%
industry: 25.3%
services: 37.5% (2006 est.)

Investment (gross fixed): 29% of GDP (2006 est.)

Population below poverty line: 31.4% (1992 est.)

Household income or consumption by percentage share:
lowest 10%: 2.2%
highest 10%: 30.1% (1999)

Distribution of family income - Gini index: 30 (1999)

Inflation rate (consumer prices): 10.9% (2006 est.)

Labor force: 10.87 million (2006 est.)

Labor force - by occupation: agriculture 60%, industry 15%, services 25% (1999 est.)

Unemployment rate: 20% (1997 est.)

Budget:
revenues: $3.616 billion
expenditures: $3.947 billion, including capital expenditures of NA (2006 est.)

Agriculture - products: cocoa, rice, coffee, cassava (tapioca), peanuts, corn, shea nuts, bananas; timber

Industries: mining, lumber, light manufacturing, aluminium smelting, food processing

Industrial production growth rate: 3.8% (2000 est.)

Electricity - production: 6.489 billion kWh (2004)

Electricity - production by source:
fossil fuel: 0.1%
hydro: 99.9%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 7.095 billion kW·h (2004)

Electricity - exports: 900 million kW·h (2004)

Electricity - imports: 1.96 billion kW·h (2004)

Oil - production: 7,477 barrels per day (1,188.7 m3/d) (2004 est.)

Oil - consumption: 44,000 barrels per day (7,000 m3/d) (2004 est.)

Oil - exports: NA (2001)

Oil - imports: NA (2001)

Oil - proved reserves: 8.255 million barrels (1.3124×10^6 m3) (1 January 2002)

Natural gas - proved reserves: 23.79 billion cubic metres (1 January 2005)

Current account balance: -$219 million (2006 est.)

Exports: $3.286 billion f.o.b. (2006 est.)

Exports - commodities: gold, cocoa, timber, tuna, bauxite, aluminium, manganese ore, diamonds

Exports - partners: Netherlands 12.5%, United Kingdom 8.3%, United States 6.7%, Belgium 5.8%, France 5.6%, Germany 4.4%, (2005)

Imports: $5.666 billion f.o.b. (2006 est.)

Imports - commodities: capital equipment, petroleum, foodstuffs

Imports - partners: Nigeria 15.2%, the People's Republic of China 12.5%, United States 6.3%, United Kingdom 5.23%, South Africa 4.5%, Brazil 4.1%, Netherlands 4.0% (2005)

Reserves of foreign exchange & gold: $2.098 billion (2006 est.)

Debt - external: $2.7 billion (30 April 2007)

Economic aid - recipient: $6.9 billion (1999)

Currency: cedi (GHS)

Exchange rates: cedis per US dollar - 0.9215 (July 2007), 9,174.8 (2006), 9,072.5 (2005), 9,004.6 (2004, 8,677.4 (2003), 7,932.7 (2002), 7,170.76 (2001), 5,455.06 (2000), 2,669.3 (1999)

Fiscal year: calendar year

References


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