The Ghanaian economy has experienced a significant growth and development with an optimistic projection into the future. The country has been on an upward trajectory over the past two decades. This article seeks to highlight the salient economic reforms and incidents and their implication to the Ghanaian citizen. Today’s article will highlight the economic and social policies between the period 2001 – 2012 . By the end of our economic review series, we hope to offer some perspective for investors, students and to the general public.
BACKGROUND (2001-2012)
Ghana is a democratic country located on west Africa with an estimated population of 31million (28mil as of 2012). It is the first country in the sub-Sahara Africa to gain independence from British colonial rule in 1957. The country’s economy is ranked 86th largest in the world with a total GDP of $40.70M in 2012 and $65.56m in 2020.
In the ECOWAS region, Ghana’s economy is second only to Nigeria. With a strong performance over two decades during with the country perused market led polices with little direct involvement of the government in economic activities.
However, concerns have been raised over the past years about the quality of economic growth and whether it truly reflected in the standing of living of the people. income inequality, employability and standard of living has failed to be affected by the growing economic figures.
A lot of policies have been implemented between 2001 -2012. in this article we will take a look at the following topic /incidents whiles enumerating various critics and challenges posed by such policies.
· The world bank /IMF HIPC initiative
· Increase in minimum wage rate
· Introduction of NHIS
THE WORLD BANK /IMF HIPC initiative
In 1996, the IMF and world Bank launched an initiative aimed at some 41 indebted poor countries, whose total debt amount to about 10% of a third of the world debt. The initiative provided relief and low interest loans to cancel out or reduce external debt repayments to sustainable levels meaning Ghana could repay its then hefty debts in a sustainable and timely fashion in the future. As a requirement for consideration or eligibility the country had to be faced with an unsustainable debt burden which could not be managed by traditional means. The effect of this initiative brought about major economic reforms as more resources could be focused on other projects within the country instead of paying debts.
CRITICS OF THE IMF /WORLD BANK HIPC INITIATIVE
The Heavily In-debt Poor Countries (HIPC) initiative set up in 1996 by the rich nations through the IMF and World Bank calls for the reduction of external debt through write-offs by official donors. It was set up for the poorest of nations, for whom, according to the World Bank, the debt of the HIPC countries was, on average, more than four times their annual export earnings, and 120 percent of GNP. But the HIPC initiative has been met with a lot of criticism for not actually helping the countries it is supposed to be helping (the indebted nations) while helping those it wasn't necessarily meant to (the rich nations)
The most glaring problem with the Heavily Indebted Poor Country (HIPC) initiative for debt relief is that it will not provide lasting relief from debt for the highly indebted countries. The HIPC process is aimed not at canceling debts, but at ensuring that they can be repaid. It has little to do with enhancing human development, reducing poverty, or even increasing economic growth in the debtor countries. Rather, it is designed to massage debt figures down to a level where they would be deemed sustainable again according to the criteria of the International Monetary Fund (IMF).
The piling up of different sets of conditionality slows down the process. Conditionality such as the much-criticized Poverty Reduction Strategy Papers (PRSPs) from the IMF and World Bank do not succeed in aligning macro-economic issues and poverty issues more closely than in the past and macro-economic frameworks haven't changed significantly as a result of PRSPs.
INTRODUCTION OF THE NHIS SCHEME
The NHIS initiative was a system introduced to abolish the cash and carry system of health care delivery. One of the primary goal of this initiative was to increase affordability and utilization of drugs and health services in general among the most vulnerable populations in the country.
Ghana's National Health Insurance Scheme (NHIS) was created by the National Health Insurance Act of August 2003, and is one of very few attempts by a sub-Saharan African country to implement a national-level, universal health insurance program.12 A newly-created National Health Insurance Authority (NHIA) was commissioned “to secure the implementation of a national health insurance policy that ensures access to basic healthcare services to all residents.”13 The NHIA licenses and regulates district-level mutual health insurance schemes (DMHISs) as well as other schemes allowed under the Act, accredits providers, determines—in consultation with DMHISs—premium levels, and generally oversees and reports on NHIS operations. There are currently 145 district schemes, including ten that operated in the Greater Accra area during the study period.14
CHALLENGES FACED BY THE NHIS
The NHIS since its implementation has been faced with sustainability issues. The Ability of the NHIS to continue its operations in Ghana is threatened financially and operationally by factors such as: cost escalation, possible political interference, inadequate technical capacity, spatial distribution of health facilities and health workers, inadequate monitoring mechanisms, broad benefits package, large exemption groups, inadequate client education, and limited community engagement. Moreover, poor quality care in NHIS-accredited health facilities potentially reduces clients’ trust in the scheme and consequently decreases (re)enrollment rates.
INCREASE IN MINIMUM WAGE RATE
Wage rates are the minimum remuneration per time unit output. By increasing the wage rate from then $0.20 to $2.60 in 2008. As a results, the standard of living of the people slightly surged as a result. This also simultaneously increased the spending ability of citizens thus fostering trade and the growth of internal markets thus aiding development. Other effects included reduced poverty rates and welfare programs.
EFFECTS
Increased minimum wage rate meant increased operational expenditure for Businesses thus leading to layoffs especially in small and medium sized Enterprises. Increased inflation, Fewer Hiring and the large unregulated informal sector resulted in an increase in income inequality as the rich got richer and the poor get poorer.
Join us next week as we probe further into recent economic issues between 2012 -2020 in the part 2 of this series . see you next week
Writer : Joseph Obeng Junior
References : Ghana statistical services, researchgate