The Structural Adjustment Program in Ghana
In the early 1980s, after the
Rawlings-PNDC (Provisional National Defense Council) government had come into
power through a coup d’etat on 31st December 1981, it faced an
economic crisis resulting partly from the government’s own policies and that of
previous governments. Ghana
experienced a continuous decline in GDP (gross domestic product) growth due to
policies that resulted in an increasing rate of inflation. The Rawlings-PNDC
regime eventually turned to the West for help in a major policy reversal which
was a sharp contrast with its earlier neo-Marxist ideas. It marked the failure
of Rawlings’ populist economic strategy.
Thus, you must note that three
major factors led to the PNDC government’s adoption of the SAP, which in Ghana was
dubbed the Economic Recovery Program (ERP). First, the disappearance of rents,
that is, the gradual inability of the government to reward people in a
patron-client relationship because of disappearing resources; this also
increased the threat to the survival of the PNDC regime.
Second, the absence of
significant aid from the government’s ally, Libya,
and an abortive trip to Eastern Europe and Cuba to solicit financial support
also accounted for the government’s turn to the West for assistance.
Third, the Rawlings-PNDC
government also had to deal with drought and bush fires, as well as the return
of more than 1 million Ghanaians from Nigeria in 1983.
By 1993, SAPs were being
implemented in 36 African countries. Ghana adopted the ERP in 1983, and
the key issue it had to tackle immediately was how to bring the rate of
inflation down. Let us note that labor bore the brunt of or suffered most from
ERP/SAP policies. The PNDC did not dialogue with civil society initially on the
economic reforms to be undertaken. In the short-run, this enabled the
government to take decisive action on some potentially controversial economic
issues such as removal of subsidies for workers and cuts in social expenditure.
Successes of the Economic Recovery
Program (ERP/SAP) in Ghana
Despite the fact that the ERP
brought some costs to Ghanaians, it also chalked some successes. Below are the
important successes chalked under the Economic Recovery Program.
First, the ERP had a good impact
on macroeconomic indicators. There was an increase in national income by 10.34%
in 1984 and a decrease in the inflation rate from 123% to 39.5% in 1983.
Secondly, export volumes also
increased by 2% in 1984 compared with the decline of 27.8% in 1983.
Third, the investment rate in the
country increased by 50% between 1984 and 1985, and increased by 30% between
1986 and 1987.
Fourth, the total national output
expanded in 1984 for the first time in four years, and GDP growth was 8.6% in
1984. GDP growth continued at 5% for the next three years, 1985, 1986, and
1987.
Fifth, the ERP brought
significant flows of aid into Ghana,
and along with the devaluation of the cedi, contributed to the increase in the
value of cocoa exports, which doubled between 1983 and 1986. Government
revenues and the incomes of cocoa farmers also increased.
Sixth and finally, the increase
in exports and imports led to a rapid expansion in domestic transportation,
retailing, and wholesaling. Imports and exports as a share of GDP together
doubled from 18% in 1984 to 37% in 1992 (Gyekye-Jandoh 2006).
You should note that those who
benefited the most from the ERP were big local and foreign capitalists or
businessmen who were engaged in gold mining and timber industries, and rural,
cash crop and cocoa farmers, who benefited from the devaluations and producer
price increases. Ghana
received official aid, long-term loans, and private transfers constituting 9%
of GDP. It also received about $4 billion in concessional loans and grants
between 1983 and 1991.
Costs of the
ERP in Ghana
First, there
were grave inequities in the distribution of the benefits of economic growth.
Students and urban workers went on strike in the 1980s, and nurses went on
strike in 1986 regarding wages, but the PNDC government cracked down on these
shows of agitation.
Second, another
cost of the implementation of the ERP in Ghana in the 1980s was that real
wages remained low and income growth was slow, while the level of poverty was
high. Between 1987 and 1988, 36% of Ghanaians lived below the poverty line. In
the years 1987-1990, poverty levels worsened.
Third, urban
unemployment rose due to PNDC retrenchment policies and withdrawal of subsidies
from public services. Many public service workers were laid off, and the cost
of living rose as subsidies on health and education were withdrawn. Between
1987 and 1988, the civil service lost 24,000 people, and 12,000 more civil
servants were to be let go in 1989, a big blow to the Civil Servants
Association (Nugent 1996: 184). The cost recovery policy on health, education,
and public utility services led to a decline in real wages. By 1993,
unemployment had risen to 13%.
Over the
remaining years of the decade, the Trades Union Congress (TUC) leadership
consistently opposed the withdrawal of public subsidies, particularly on
petroleum, and was always at odds with the PNDC over the daily minimum wage,
which Bank/IMF SAP policies sought to keep down (Nugent 1996: 148).
These major
woes led to the PNDC’s creation of PAMSCAD, the Program of Action to Mitigate
the Social Costs of Adjustment.
Measures Taken to Address Costs/Problems
of the ERP
In an attempt to offset the
adverse effects of the SAP, external donors agreed to fund a Program to
Mitigate the Social Costs of Adjustment (PAMSCAD) in 1988. The PNDC government
initiated the US$85 million Program of Action to Mitigate the Social Costs of
Adjustment (PAMSCAD). Beginning in 1988, the program sought to create 40,000
jobs over a two-year period. It was aimed at the poorest individuals,
small-scale miners and artisans in particular, and communities were to be
helped to implement labor intensive self-help projects. As part of PAMSCAD, ¢10
billion was slated in the 1993 budget for the rehabilitation and development of
rural and urban social infrastructure. The new program, organized through
PAMSCAD and the new district assemblies, was designed to focus on improving
water supply, sanitation, primary education, and health care. An additional ¢51
billion was set aside for redeployment and end-of- service benefits for those
who had lost their jobs in civil service and parastatal organizations.
Many shortcomings, including
insufficient funds to finance projects, characterized the PAMSCAD and reduced
its effectiveness. Ultimately, PAMSCAD had a very limited impact and was unable
to adequately address the problems faced by those who suffered due to the
strict implementation of the SAP. The PAMSCAD tried but failed to bring a human
face to the effects of the adjustment policies.
Poverty Reduction Strategies from the
1990s
In the late 1990s, the World Bank
and IMF decided to try a different policy from the SAP that had resulted in
increased hardships for many workers and brought little in terms of sustained
development and economic growth in many developing and African countries. They
began to shift to a policy that focused on Poverty Reduction Strategies that
would be spelt out in Poverty Reduction Strategy Papers.
The Poverty Reduction Strategy Paper (PRSPs) describes a country's long term vision. The paper is prepared by low-income country governments in consultation with various stakeholders such as civil society and the private sector. The paper sets out macroeconomic, structural, and social policy goals.
The paper also lays out a country's external
funding needs for meeting those goals, such as loans and grants from the World
Bank and other donors, that are meant to promote economic growth and reduce
poverty. This time the Bank and other donor agencies line up their assistance
with these countries' priorities and targets and recognize the need to focus on
poverty reduction in developing countries’ quest for development.
Countries, like Ghana, have used PRSPs to address
their investment climate and prescribe measures to promote private sector
development, or to improve governance and reduce corruption. Many concentrate
on issues facing the agricultural sector and rural areas, and stress the need
for investment in key basic services, particularly health and education in
implementing their strategies. This is in stark contrast to the SAPs, which
recommended cuts in health and education subsidies.
You should note that the World Bank provides
training and technical and financial assistance to support the design of
national poverty-reduction strategies. For example, it helps countries improve
their poverty analysis, public expenditure management, and service evaluation.
It also offers Poverty Reduction Support Credits (PRSCs), annual programmatic
loans, to support the implementation of these strategies.
Both the World Bank's International Development
Association (IDA) and the International Monetary Fund (IMF) require a Poverty
Reduction Strategy Paper in order for low-income countries to receive lower
cost financial assistance from the Bank (through IDA) and the IMF (through its
Poverty Reduction and Growth Facility).
When a government takes the lead in preparing and
implementing its own strategy, development efforts are more likely to succeed.
Other key factors of success include tailoring aid to particular country
circumstances and coordinating aid with other donors for maximum impact.
It is important for you to note that poverty is
more than just lack of income – it is also lack of opportunity, security or
voice in key decisions. To overcome this, Poverty Reduction Strategy Papers try
to be country-driven; results-oriented; comprehensive; inclusive and long-term.
In Ghana, the Bank's over-arching goal
is to support the country's growth and poverty reduction objectives. The
Country Assistance Strategy approved in May 2007 lays out objectives,
baselines, targets, government actions and partner contributions. For example,
the Bank proposes to help Ghana
sustain economic growth of at least 6% per year; surpass the 2015 Millennium
Development Goal of halving poverty; and start to reduce inequalities (http://digitalmedia.worldbank.org/projectsandops/strategy.htm). So
let us note that the Bank itself seems to have moved toward a broader
conception of development, in its increased focus on the reduction of poverty
and inequalities.
The Impact of Poverty Reduction
Strategies in Ghana
Ghana’s fight against poverty to make
progress towards the Millennium Development Goals has seen various successive
policies introduced to accelerate national development, with a special focus on
rural development. In 2001, the economy was characterized by
large fiscal deficits and a heavy debt burden, a combination of which placed
severe limitations on the nation's capacity to address the high incidence of
poverty. Following Ghana’s
application to the Enhanced Highly Indebted Poor Country (HIPC) facility
in 2001, the government formulated the Ghana Poverty Reduction Strategy (GPRS
I), which was implemented over the period 2003-2005. The process of
formulating the GPRS I was participatory with consensus built through
consultations with major stakeholders, including Ministries, Departments and
Agencies, civil society organizations, local government institutions, groups of
experts and Ghana's
development partners.
One of the key components of the strategy to
reduce poverty was to create the necessary fiscal space for increased poverty
related expenditures in agriculture (where the bulk of the poor are employed),
health, education, water and sanitation. Prudent fiscal policy management
including the reduction of the debt burden, improved revenue mobilization and
public financial management was pursued and this was largely successful.
In the social sector there has been the
introduction of capitation grant for schools, school feeding program, free bus
ride for school children and the National Health Insurance Scheme (NHIS), all
aimed at mitigating the cost of living for the poor.
Following the positive results achieved by the
GPRS I, The Government launched a successor national development policy
framework - the Growth and Poverty Reduction Strategy (GPRS II) - to be
implemented over the period 2006-2009. The strategic direction of the GPRS II
was to accelerate economic growth and poverty reduction by supporting the
private sector to create wealth. Emphasis was therefore placed on the
implementation of policies and measures which have the potential to
fundamentally restructure the economy by diversifying the export base,
increasing agricultural productivity, processing and storage, thereby
contributing to national food security and rural incomes.
By far, the design and implementation of these
policies for social well-being have required a constant evaluation and have had
some impact on development and poverty reduction programs. One such program is
the Community-Based Rural Development Project (CBRDP), which was initiated by
the Government of Ghana as part of its poverty reduction strategy in 2004. The
Project aims at using rural community participation to reduce rural poverty and
build and strengthen capacities for effective local government administration.
The Project aims also to build and strengthen the
capacity of rural communities, and enhance their quality of life by improving
their productive assets, rural infrastructure and facilitate their access to
key support services from public and private sources. In addition, the Project
contributes to improved employment and economic growth, especially among the
rural population, with several innovations to give the projects
community-ownership by maximizing community involvement in the implementation
of projects.
After six years of its implementation, the CBRDP
has made significant contribution to the effort to alleviate poverty among Ghana’s rural
population. With the construction of five dams, one dugout, 188 feeder roads,
20 market structures and 12 slaughterhouses in rural communities across the
country, many otherwise disillusioned people in the rural areas can now make
something meaningful out of life. There is light at the end of the tunnel, and
the future looks even brighter with on-going projects on two wind pumps, eight
dams, two dugouts, irrigation facilities, 214 feeder roads, 45 market
structures and 15 slaughterhouses, which are expected to bridge the urban-rural
development gap (http://ghanaian-chronicle.com/features/fighting-poverty-and-enhancing-rural-development/).
