6/28/2011 A ID IN AFRICA : ECONOMIC RECOVERY AND G ROWTH ECONOMIC RECOVERY AND G ROWTH E Ernest Aryeetey t A t 1 1 University of Ghana
M AIN THESIS M AIN THESIS � Aid has facilitated economic growth in many countries of the region of the region. � This happened for two reasons � It increased the amount of capital available to countries for � It increased the amount of capital available to countries for public investments and public consumption � It was accompanied by general economic management and institutional reforms that helped to improve performance of the economy There are questions about the sustainability of growth in the absence of structural g transformation. Aid was not designed to facilitate that.
1. M ACROECONOMIC F UNDAMENTALS 1. M ACROECONOMIC F UNDAMENTALS � Growth Rates Across Regions , 1980-2015, IMF g , , 14 World 12 10 Developing Asia 8 DP wth Rate of GD 6 Latin America and the Caribbean 4 Grow 2 Middle East and � Note the drop in growth rates in 2009. North Africa 0 1975 1975 1980 1980 1985 1985 1990 1990 1995 1995 2000 2000 2005 2005 2010 2010 2015 2015 2020 2020 -2 Sub-Saharan Africa -4
…// CONT . � Other Key Macroeconomic Variables, 1980- 2015, IMF , 80 70 60 Inflation rate 50 40 C Current account 30 balance, % of GDP 20 10 External debt, % of GDP 0 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 -10 -20 � N t � Note: High external debt, high inflation rates. Hi h t l d bt hi h i fl ti t � Can the current account deficits be sustained?
2. A ID F LOWS TO A FRICA 2. A ID F LOWS TO A FRICA � Stock of ODA Net Disbursement by Regions, 1960-2009, OECD 1960 2009, OECD 1400 1200 1200 onstant USD) 1000 800 llions (2008 co ODA Total, Net 600 disbursements 400 Bil 200 0 Europe Africa America Asia Oceania � Africa and Asia, the two biggest beneficiaries of ODA disbursements.
G HANA AS A CASE STUDY � The economy has grown at an average 6/2 annual rate of about 5.2% over 1992-2010 8/2011 � Growth was especially less volatile p y between 2003 and 2008–averaging around 6.0% � A recent rebasing exercise now places the country in the lower middle income country in the lower middle income category � However even at this level of growth the � However, even at this level of growth the country will take over 20 years to get to the upper middle income level the upper middle income level 6 6
C URRENT E CONOMIC S ITUATION IN G HANA (E CONOMIC G ROWTH C ONT D ) (E CONOMIC G ROWTH C ONT ’ D ) 6/2 8/2011 Real GDP Growth Rates of Ghana, 1980-2010 8.6 7.9 7.7 7.3 6.4 6.4 6.2 5.2 5.6 5.9 5.3 5.1 5.2 4.8 4.9 4.7 4.4 4.7 4.6 4 2 4 2 4.5 4.4 4.2 3.7 4.2 4.0 2.9 3.3 3.3 0 5 0.5 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -3.3 3.3 -4.5 -6.9 7
CURRENT ECONOMIC SITUATION IN GHANA (SECTORAL COMPOSITION OF GDP IN GHANA) (SECTORAL COMPOSITION OF GDP IN GHANA) � Historically, agricultural sector has been the 6/2 most important sector of the Ghanaian economy t i t t t f th Gh i 8/2011 � Until recently, agricultural sector had always b been the biggest contributor to GDP th bi t t ib t t GDP � However, the sector relinquished its position as the largest contributor to national output to the h l ib i l h service sector in the year 2010 � Industry is another important sector, currently I d i h i l contributing 25.7% of the total GDP (2010) � However the bulk of this is due to mining and H h b lk f hi i d i i d construction 8
CURRENT ECONOMIC SITUATION IN GHANA SECTORAL CONTRIBUTIONS TO GDP : 2003-2010 SECTORAL CONTRIBUTIONS TO GDP : 2003 2010 6/2 8/2011 40.0 35.0 30.0 30 0 25.0 20.0 15.0 10.0 5.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 Agriculture Agriculture 36 1 36.1 36 7 36.7 37 0 37.0 35 8 35.8 34 7 34.7 33 9 33.9 34 5 34.5 32 4 32.4 Industry 24.9 24.7 24.7 25.4 26.1 25.6 24.9 25.7 Service 29.8 29.5 29.4 30.0 30.5 31.8 32.3 32.8 9
P OVERTY HAS IMPROVED B UT INEQUALITY REMAINS PROBLEMATIC REMAINS PROBLEMATIC � The incidence of poverty in Ghana has almost halved � The incidence of poverty in Ghana has almost halved 6/2 8/2011 from the 1990s level � Poverty in Ghana remains a widespread rural y p phenomenon � Per capita income in the urban areas has been growing p g g faster than it is in the rural areas � The ratio of per capita income of rural dwellers to per capita income of urban dwellers has been on a decline since 1991/92 � While the ratio of per capita income of rural dwellers to per Whil th ti f it i f l d ll t capita income of urban dwellers was 0.83 in 1991/29, it declined to 0.68 in 1998/99 and further to 0.59 in 2005/6 10 10
G ROWTH HAS IMPACTED POSITIVELY ON THE INCIDENCE OF POVERTY G ROWTH HAS IMPACTED POSITIVELY ON THE INCIDENCE OF POVERTY IN G HANA 6/28/2011 11 11
B UT INEQUALITY REMAINS PROBLEMATIC Per capita income in constant prices of the respective years of the p p p y 6/2 surveys by rural/urban 8/2011 Year Rural Urban Rural/Urban 1991/92 100, 000 120, 000 0.83 1998/99 469, 000 692, 000 0.68 2005/2006 3, 050, 000 5, 170, 000 0.59 12 12
F ISCAL DEVELOPMENTS � Ghana has faced a number of macro-fiscal imbalances and institutional weaknesses for 6/2 several years, l 8/2011 � These include (but are not restricted to � Large budget deficits responding in part to political L b d d fi i di i li i l cycles � recurrent expenditures especially compensation of public p p y p p employees (‘wage bill’) remains very high � The quality of spending can be improved 13 � High inflation � High inflation � High interest and exchange rates � Low capacity in key sectors Low capacity in key sectors � Low capacity is sometimes borne out of ineffective delegation � The status quo is not desirable and cannot support and sustain a higher broad-based growth agenda
F ISCAL D EVELOPMENTS - CONTD F ISCAL D EVELOPMENTS - CONTD � Government’s fiscal space remains rather limited 6/2 � Recent studies suggest that the only potential areas 8/2011 of fiscal space are ‘improving efficiency of public spending and to a limited extent increase tax revenue p g � The structure of public expenditures is inflexible making it difficult to reduce – and so the high budget deficits b d t d fi it � As a result of HIPC, external debt went down from 120 5 per cent of GDP in 2001 (US$6 325 6 from 120.5 per cent of GDP in 2001 (US$6, 325.6 million) to about 17.6 per cent (US$2,637 million) of GDP at the end of September 2007 (Budget St t Statement, 2008) t 2008) � New debt has started to accumulate recently due to rapidly increasing fiscal deficits to rapidly increasing fiscal deficits 14 14
CURRENT ECONOMIC SITUATION IN GHANA ( M ONETARY D EVELOPMENTS ) ( M ONETARY D EVELOPMENTS ) � Bank of Ghana is now more independent 6/2 8/2011 � The BoG has operated an inflation targeting regime since 2002 � This has coincided with declining inflation and relatively low depreciation in nominal exchange rate. t � More recently, the country has recorded single digit i fl ti digit inflation � There is concern about the real exchange rate – businesses argue that it is hurting them businesses argue that it is hurting them � This is also reflected in the poor performance of the manufacturing sector g 15 15
F OREIGN A ID TO G HANA � Ghana has enjoyed considerable aid 6/2 inflows since the 1990s. 8/2011 � Net ODA to Ghana has increased from under US$300million in 1990 to over US$800million in 2009 (based on data $ ( from OECD-DAC) � However both the level and the ratio (% of � However both the level and the ratio (% of GNI) have been decreasing since about 2007 2007 � The ratio of grants to loans has decreased over this period (based on GoG data) over this period (based on GoG data) 16 16
G HANA ’ S DEPENDENCY ON AID REMAINS HIGH 6/28/2011 17 17
B UT THE GRANTS COMPONENT IS DIMINISHING IN SIGNIFICANCE IN SIGNIFICANCE 6/2 2000 8/2011 1800 1600 1400 1200 1000 Grant 800 Loan Total Aid 600 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* 18 18
P RIVATE C APITAL F LOWS TO G HANA P RIVATE C APITAL F LOWS TO G HANA 6/2 � Total private capital inflows which consists of 8/2011 FDI and other private investment have shown increasing trend since 2000 h i i t d i 2000 � From about US$500 million in 2000, it has reached about US$2billion by 2009 h d b t US$2billi b 2009 � This very significant increase can be accounted for by private remittances and FDI d f b i i d FDI with other equity flows being less important 19 19
P RIVATE C APITAL F LOWS TO G HANA P RIVATE CAPITAL FLOWS AND GROWTH CORRELATIONS P RIVATE CAPITAL FLOWS AND GROWTH CORRELATIONS 6/28/2011 20 20
Recommend
More recommend
