Ghana - Economy

Overview:Ghana’s formerly strong economy was badly affected by a series of military coups and failed development plans. A highly protected economy and substantial state investment created a large manufacturing sector which by the 1980s was becoming a heavy burden on national resources. While the economy depended heavily on the export of two commodities, gold and cocoa, it would remain vulnerable to fluctuations in world commodity prices and to poor harvests.

The economic situation began to improve with government austerity programmes in the late 1980s, but the early 1990s presented new difficulties including a decline in the international price of cocoa. Donors pledged substantial aid from 1993, in support of IMF-backed economic recovery and reform programmes, which aimed to diversify exports, control public expenditure and privatise a number of state-owned enterprises.

From the mid-1990s, there followed a period of sustained economic growth, only dipping below 4% p.a. in 2000, when cocoa prices were weak and oil costs rising. Reducing inflation from its peak of 74% in 1995 and keeping it under control proved challenging. Having fallen to 12.4% in 1999, it averaged 20% p.a. during 2001–05. Then for the first time in many years the country hit single-digit inflation in March (9.5%) and April (9.9%) 2006, but the rate rose to 12.7% by the year end and was 14.8% for 2007.

Ghana has benefited from the G8 debt-relief programme launched at the Gleneagles Summit in Scotland, UK, in July 2005; a US$38 million Poverty Reduction and Growth Facility; and a Millennium Challenge Corporation grant in 2006.

Trade: Exports of goods and services account for 35% of GDP and manufactured exports for around 14% of total merchandise exports (2004). Main exports are gold, cocoa beans, cocoa products, timber and timber products. Main imports are manufactured goods, oil and consumer goods. Principal export partners are the Netherlands, the UK, the USA, Germany, France and Nigeria. Principal import partners are Nigeria (supplying most of Ghana’s oil requirement), the UK and the USA.

From 2007, when the Cotonou Agreement between the European Union and the ACP grouping of developing countries came to an end, negotiations proceeded on a series of regional Economic Partnership Agreements, to replace the preferential trade agreements of the Cotonou Agreement with WTO-compliant free-trade areas.

Mining:Gold and diamonds are the main mineral exports. There are large reserves of bauxite and manganese. Ghana’s bauxite is all exported while US-owned Valco produces alumina from imported bauxite. The country is among the world’s largest exporters of manganese.