Ghana’s score on the Economic Freedom of the World Index has fluctuated from 2.8 to 6.9 from 1975 to 2015 (out of a possible score of 10). In more recent years, from 1990 to 2015, Ghana’s score has stagnated between 5 and 6.9 and was ranked 6.5 in 2015. This resulted in Ghana being ranked in the third quartile in comparison with the other 159 countries evaluated. While efforts have been made to increase democracy and decentralisation, the inconsistent and inefficient implementation of some policies has begged the question of whether economic freedom has truly improved in the country. To answer this question, an audit of Ghana’s economic freedom was necessary.
As such, in July 2018, IMANI Center for Policy and Education, with the support of Fraser Institute and Atlas Network, conducted an audit of economic policies in Ghana with the goal of increasing economic freedom and prosperity. Fraser Institute’s 2017 Economic Freedom of the World report, which has been in publication since 1996, was used as a basis for the audit. The index shows the current status of economic policy and how the policy can be improved. It also provides models of world class policy that, if implemented, would bring renewed growth and prosperity to Ghana. The Institute’s Economic Freedom project leader, Fred McMahon, as well as representatives from Atlas Network were present at the Audit in Ghana.
The actual Audit was preceded by series of online publications on Ghana’s performance of all the indicators under the Economic Freedom of the World Report. The aim of the exercise was to create awareness among the citizenry and the targeted stakeholders who were to be invited for the audit. The audit was organised as a full day event, with breakout sessions for each of the five indicators on the index: size of government, legal systems and property right, sound money, freedom to trade internationally, and regulations. The members of each group were tasked to examine the economic policy dimensions of a particular indicator and suggest viable recommendations to enhance Ghana’s performance. These recommendations were presented during the final plenary session. An individual’s participation in a particular session was based on his/her expertise and familiarity of the issue discussed. In all, over 100 individuals from academia, industry, government, diplomats, economic and international business associations, think tanks, CSOs and media, participated in the audit.
The findings from the analysis of size of government in Ghana and the session that took place at the audit were that, although Ghana scored relatively well on this indicator, attaining Ghana’s highest score on any indicator, with a score of 6.97 in the 2017 report, there are still areas of size of government that could be improved. These include the Government Consumption and Top marginal income and payroll tax rate sub-indicators. Ghana should not be complacent with this score and should not allow government expenditure to become excessive.
With the legal systems and property rights indicator, the focus of the break-out session during the audit was on topics such as the weak accountability for corruption in the legal system, nepotism in recruitment in the judiciary, low quality and high cost for enforcing contracts. The many challenges identified were evident in the score of 5.44 Ghana received for this indicator. Many recommendations were suggested for this indicator, such as the installation of court monitoring and evaluation systems.
Regarding the sound money indicator, at the time that data was collected in 2015 for the 2017 report, inflation in Ghana had reached high levels of 17.15%, due to excessive fiscal expenditure, amongst other things. This led to a score of 6.87 in the 2017 Economic Freedom of the World Index, in large part as a result of money supply being disproportionately greater than GDP. Ghana’s inflation had reduced since 2015, but there is still scepticism as to the sustainability of the lower inflation levels in international spheres.
The dual contrary effects of efforts to reform trade procedures as well as constant stagnant bureaucracy has led to Ghana scoring 6.51 on the freedom to trade internationally indicator. The number of procedures and the cost of importing and exporting have remained unchanged since 2015. The audit highlighted these challenges and offered solutions such as, introducing a one-off payment for the registration of products and strengthening the monitoring and evaluation of the paperless ports project.
The regulations indicator was audited in two parts; regulations in credit and regulations in business. Ghana scored 6.85 overall for the regulations indicator, 7.39 for credit market regulations sub-indicator and scored 6.40 for business regulations sub-indicator. Ghana’s score for credit market regulations earned a rank of 124th out of 159 countries in the index. Challenges that arose included the high cost of borrowing, excessive government borrowing and the risk of default. Regarding business regulations, the complexities in business registration, license acquisition and tax payment procedures were affirmed as challenges to economic freedom.
