Now is the Time to Rethink the Economic Structure of Ghana Twumasi Baffour, Ph.D.

This sentiment has been echoed by the IMF, which has urged Ghana to implement structural reforms in order to resolve its economy's underlying weaknesses.

Priscilla Twumasi Baffour, Ph.D.

Dr. Priscilla Twumasi Baffour, Senior Lecturer in the Economics Department at the University of Ghana, asserts that Ghana's current economic difficulties present an opportunity for the government to reevaluate the structure of the country's economy.

Dr. Baffour observes that if the structure of the economy is not altered, the nation will continue to confront macroeconomic challenges whenever an internal or external shock occurs. This analysis reflects the sentiments of numerous economists who have expressed concern about the vulnerability of Ghana's economy and its reliance on a limited number of commodities for foreign exchange.

Dr. Baffour, speaking on NorvanReports' Twitter Space Conversation on Sunday, April 23, 2023, with the topic "The Current Economic Crisis: Is There Any Silver Lining; What is Ghana Missing? ", highlighted several factors that have contributed to Ghana's economic vulnerability, such as import dependence, inefficient tax management, and persistent budget deficit financing. According to her, these issues undermine Ghana's economic resilience, and the country must resolve them if it wishes to achieve sustained growth and development.

Dr. Baffour argues that the current economic difficulties confronting Ghana present an opportunity for the country to alter its methods. Even if Ghana receives temporary relief from multilateral institutions such as the International Monetary Fund (IMF), she notes that the country will continue to face difficulties if the structure of its economy is not substantially altered. This sentiment has been echoed by the IMF, which has urged Ghana to implement structural reforms in order to resolve its economy's underlying weaknesses.

The reliance of Ghana's economy on imports is one of its most significant challenges. In 2021, imports of commodities and services accounted for 56.7% of Ghana's GDP, according to the World Bank. This degree of reliance on imports makes the nation susceptible to fluctuations in global commodity prices and currency exchange rates, which can have a significant effect on its economy. Dr. Baffour observes that reducing reliance on imports will necessitate substantial investments in domestic production and the growth of local industries.

Another issue confronting Ghana's economy is ineffective tax administration. Dr. Baffour observes that the nation has had difficulty mobilizing domestic resources to fund its development agenda. This is owing in part to the tax system's complexity and lack of enforcement. The resolution of these issues will necessitate extensive tax simplification and enforcement reforms.

Financing a persistent budget deficit is another difficulty confronting Ghana's economy. According to the Bank of Ghana, in 2022 Ghana's budget deficit was 7.8% of GDP. This level of deficit financing is unsustainable over the long term and could result in inflation and other macroeconomic difficulties. Dr. Baffour explains that reducing budget deficits requires the government to prioritize fiscal discipline and increase revenue generation.

Dr. Priscilla Baffour's analysis highlights the need for Ghana to implement significant structural reforms in order to address the underlying economic weaknesses. These reforms will necessitate substantial investments in domestic production, the growth of domestic industries, and the simplification of the tax structure. These reforms may be difficult in the short term, but they offer Ghana the greatest opportunity for sustained growth and development in the long run.