[ 2021-01-29 ]

Rawlings' Legacy: Economic Reforms and Impact on the ordinary Ghanaian
By Godwill Arthur-Mensah

Accra, Jan. 26, GNA - Flight Lieutenant Jerry John
Rawlings, a former Airforce Officer, who presided
over the Provisional National Defence Council
(PNDC) as Chairman and Head of State for 11 years,
implemented many life-changing economic policies
that defined Ghana's economic structures and aided
its socio-economic development.

It must be noted that most of those economic
reforms were proposed and supervised by the
International Monetary Fund (IMF) and the World
Bank from 1982 to 1992 under the PNDC regime and
during the constitutional rule under the Fourth
Republic from 1993 to January 7, 2001.

Following his passing on November 12, 2020, it is
imperative to go down the memory lane on some of
those economic policies and programmes that laid
the foundation for the country's economic growth.

Although some of the Rawlings' critics and
economic pundits, over the years, have downplayed
the impact of those policies on the overall
development of the country, it is impossible to
ignore their far-reaching impact on the ordinary
Ghanaian.

The measures included economic recovery
programmes, poverty reduction strategies,
institutional structures for reducing poverty,
poverty monitoring and indicators, Programme of
Action to Mitigate the Social Costs of Adjustment
(PAMSCAD), growth in non-traditional exports,
medium term cocoa development strategy and tax
reforms.

President Rawlings leveraged on his personal
qualities and principles of probity,
accountability and service to champion the
implementation of those economic reforms. His
economic strategy has been the identification of
poverty reduction as an overarching objective of
ensuring macroeconomic stability, which the IMF
fully recognises as crucial for ensuring
sustainable economic growth.

It is worthy to note that the plethora of economic
policies and reforms rolled out by the Rawlings'
governments under both military and constitutional
era saw significant progress in poverty
reduction.

The Revolutionary Phase Economic Policies

Ghana unveiled an Economic Recovery Programme
(ERP) in 1983 aimed at reversing a protracted
period of serious economic decline characterised
by lax financial management, high inflation rates,
which was over 100 per cent and extensive
government involvement in the economy. The
overriding objective of the ERP was to reduce
Ghana's debt stock and improve upon its trading
position in the global economy.The programme was
an open market-based one intended to eliminate
price ceiling, reduce the influx of foreign
imports and stabilise the fiscal deficit.

In 1984, Rawlings' administration introduced the
Structural Adjustment Programme (SAP) with the
primary aim of reducing government's involvement
in the economy and allowing the free interaction
of demand and supply actors.

However, during the period, the performance of the
banking industry deteriorated with high levels of
non-performing assets and investment deposit
mobilisation, which made the public banks
insolvent.

Therefore, the government launched the first phase
of the Financial Sector Adjustment Programme
(FINSAP) in 1988 to fully deregulate and
liberalise the financial sector and improve
resource allocation within the various sectors of
the economy.

The IMF and the World Bank note that Ghana's
pioneering PAMSCAD cushioned the adverse effects
of the free market reforms, hence it was
introduced as a safety net for the vulnerable
people.

The programme was conceived to help small-scale
businesses to identify their local needs such as
the rehabilitation of school buildings, health
facilities among others, which government received
support from the IMF and other donor agencies to
help finance them.

In the 1990s, the Rawlings administration set up
the National Development Planning Commission
(NDPC) to formulate and implement an enhanced
economic strategy to consolidate the gains chalked
by the economic programmes.

The establishment of the NDPC was a key foundation
for accelerating economic growth and poverty
reduction.

For instance, the NDPC constituted a Working Group
comprising academicians, consultants,
non-governmental organizations and researchers
from both the public and private sectors in an
attempt to make the development efforts as
broad-based as possible. It was from these early
efforts that the Ghana-Vision 2020 Strategy
emerged.

The proponent of the programme felt that the
private sector has to play a dominant role in
generating substantial increases in savings,
investments and exports.

Therefore, the private sector Advisory Group was
set up in 1991 charged with the responsibility to
make recommendations on how to improve the
economic environment.

This long-term programme of economic and social
policies developed in a participatory fashion
became known as 'Ghana-Vision 2020' and remains
the foundation of the country's strategy towards
raising the living standards of the people and
reducing poverty.

These consensus- building efforts led to the
National Economic Forum in September 1997 that
rolled out pragmatic policy measures for
accelerated economic growth within the framework
of Ghana-Vision 2020.

Economic Highlights from 1992-2000

In 1992, the Rawlings' administration for the
first time allowed private traders to buy cocoa
beans in competition with the state-owned Produce
Buying Company (PBC).
Additionally, export trade in coffee, shea nuts
and cocoa products had been privatised.
Significant economic activities took place in the
monetary and exchange rates space.

For instance, in 1992 the Bank of Ghana (BoG), the
country's Central Bank, began using indirect
instruments as the primary instruments of monetary
policy, replacing a system of credit ceiling on
commercial banks with weekly auction of government
and central bank securities.

Again, a floating exchange rate system based on an
interbank market was introduced in March 1992 to
replace the weekly exchange rate auction. A new
pay and grade structure was introduced in July
that year. Also, a new social security system was
introduced in the efforts to improving the
investment climate for the private sector.

In fact, Ghana's economy was poised to embrace
private sector investments for sustainable growth.
It must be noted that the economic reforms pursued
under Rawlings' administration was participatory
approach for decision-making.

Ghana was recognised as one of the first African
countries to seek more widespread participatory
approach involving civil society organizations in
development planning.

Ghana's economic strategy under Rawlings was
mainly the identification of poverty reduction as
an overarching objective of macroeconomic policy
and the IMF fully recognises this as crucial to
ensuring sustainable development.

In 1998, Rawlings' government re-introduced the
Value Added Tax (VAT) after receiving massive
public resistant in 1995 when it was introduced
first.The tax reform enabled the government to
generate tax revenue for development purposes.

The Rawlings administration also diversified about
200 state-owned enterprises under its
Privatisation initiative, executed by the
Divestiture Implementation Committee to help
government meet its high expenditures.

Rawlings first came to power through a military
coup as a 32-year old Air Force flight lieutenant
in 1979, and then a second coup on December 31,
1981.

He went on to rule the country for 19 years as a
military leader and democratically elected
president under the Fourth Republic.

He took the nation through difficult economic
crisis by implementing economic recovery
programmes after inheriting a seemingly corrupt
economic environment, with market women largely
blamed for shortchanging their customers by
hoarding their goods and later sold them at
cutthroat prices, which became popularly known as
"Kalabule" in the late 1970s.

Some of the traders were flogged publicly by
soldiers to serve as a deterrent to others, while
others had their wares seized and looted.

Professor Peter Quartey, the Director, Institute
of Statistical, Social and Economic Research,
University of Ghana, says Ghanaians witnessed
massive electrification projects under the
Rawlings administration that helped immensely to
reduce poverty.

The economic policies and reforms from 1982 to
January 7, 2001 such as the ERP in 1983 ensured
the country gained a sound foundation to propel
her growth in subsequent years.

Prior to the implementation of the economic
recovery programmes, he notes that Ghana recorded
low economic growth and sometimes negative
indicators.

"The year-on-year inflation was hovering around
120 per cent coupled with high prices of basic
goods like food stuffs," he recalls.

"Public sector workers were not respected because
their salaries could be in arrears for months.

"At that time, Makola traders even gained more
respect than public sector workers because they
have money."

Thus, the roll out of the ERP helped to revive the
economy and reduced endemic poverty.

The SAP, the Financial Sector Adjustment
Programme, and PAMSCAD restructured the economy
and reduced inflation to double digit.

Those policies, he says, increased access to
healthcare, maternal care, water, electricity,
improved education and bridged the poverty gap.


Prof.Quartey, however, points out some challenges
with the diversification of the SOEs.

Some were not properly valued, while others,
though were doing well, were still privatised or
sold.

The implementation of the Structural Adjustment
Programme also led to retrenchment of public
sector workers.

This resulted in social hardships, hence the
rolling out of the PAMSCAD to mitigate the
economic hardships.

Nonetheless, the roll out of the FINSAP helped the
recapitalization of collapsing financial
institutions at that time and, subsequently,
opened up the country for Foreign Direct
Investment (FDI).

Prof. Quartey lauds Rawlings administration' for
executiving many infrastructure projects across
the country, including national landmarks such as
the Accra International Conference Centre and
National Theatre.

Indeed, the socio-economic impact of the roads to
rural areas to help the carting of food stuffs to
the market centres and its ripple effects sums up
the Rawlings socio-economic factor on the ordinary
man.

Note: This article borrows from: The International
Monetary Fund's Occasional Paper 199, "Ghana:
Economic Development in a Democratic
Environment".
It was authored by Sérgio Pereira Leite, Anthony
Pellechio, Luisa Zanforlin, Girma Begashaw,
Stefania Fabrizio, and Joachim Harnack.

Source - GNA

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