The Institute of Economic Affairs (IEA) has said that there is a need for Ghana to adopt a different economic approach, arguing that the current reliance on the neoclassical model is not yielding the desired results.
According to IEA, “Economic policies have largely followed the orthodox neoclassical model of free markets and a limited role for the state, a model that is more suitable for mature economies. The failures expected from free-market policies have not been adequately addressed, with dire consequences. Obviously, the country needs to chart a new path since repeating the same policies would not achieve different outcomes.”
This new path, the IEA maintained, should focus on transformative policies aimed at building a resilient and self-reliant economy, prioritizing the use of the country’s internal resources and capacities to support broad transformational initiatives.
Moreover, it was pointed out that the frequent economic crises and reliance on International Monetary Fund (IMF) bailouts reveal significant policy failures that have increased Ghana’s vulnerability to economic shocks since independence, the economy has not undergone any substantial transformation, remaining largely dependent on exporting primary commodities while heavily relying on imports.
As the December 2024 elections approach, the IEA has outlined key policy areas for the incoming government, including macroeconomic stability, economic growth and employment, infrastructure, energy security, agriculture and food security, and industrialization and economic transformation.
The IEA expressed concern over ongoing macroeconomic instability characterized by high inflation, exchange rate fluctuations, high interest rates, and unsustainable debt. It noted that this instability stems from both structural weaknesses in the economy and weak macroeconomic fundamentals.
It explained that these structural issues continue to constrain production and supply, while expansionary fiscal and monetary policies exacerbate demand pressures.
“The resulting supply-demand imbalances manifest in macroeconomic instability. As the situation reaches a crisis point—and we lose policy credibility internationally—we rush to the IMF for a financial bailout, backed by a program that prescribes measures aimed at restoring macroeconomic balance to the economy, without, however, addressing the fundamental structural weaknesses,” the IEA stated.
It further noted that after each program, the country often returns to its previous habits of fiscal irresponsibility, leading to another cycle of instability.
To move forward, Ghana must embrace a new economic path that breaks free from past failures and prioritizes sustainable development.
