Structural adjustment in sub-Saharan Ghana during the 1980s and its impact on the rural poor

This paper reviews the impact on the rural poor of a combination of an IMF/World Bank sourced structural adjustment program and two economic recovery programs as implemented by the revolutionary government in sub-Saharan Ghana over the 1983-86 and 1987-89 periods. From a pre-independence position in the mid-1950s of enjoying the highest per capita income in sub-Saharan Africa, over the next two decades, the Ghanaian economy was caught in a downward economic cycle owing to adverse external market conditions as well as inept and increasingly corrupt economic management. The virtual collapse of Ghana's economy by 1980-81, prompted a military coup in December 1981. Thereafter, an extensive structural adjustment program, underpinned by the injection of $US 1 billion by the IMF/World Bank, was undertaken in conjunction with a series of domestic-sourced economic recovery program measures with the objective of arresting further socio-economic decline. The neoclassical instruments of exchange rate devaluation as well as stringent fiscal and monetary policy measures were employed by the government to address the principal macroeconomic features of Ghana's economic crisis, as well as reliance on better terms of trade and export earnings to get the economy back on the road to recovery. While urban households were the worst affected by the adverse economic conditions and external shocks of the 1980s, at least two-thirds of those in rural Ghana lived in absolute poverty by the early 1980s. Stringent fiscal reform measures saw a virtual collapse of already very poor delivery of public sector services to the rural population. The ongoing structural adjustment program was directed to the recovery of export earnings from cocoa, so that its effects had a higly uneven impact on the rural population when the real income of cocoa producers recovered. Then when the government overcame its reluctance to implement measures to redress the worst effects of its adjustment program on the poor and vulnerable groups, little was achieved owing to inadequate funding, poor design and even poorer implementation. The decline in rural poverty actually achieved over the relevant period was due to economic growth, not expenditure-switching effects of the two economic recovery programs. Higher spending sourced in lower debt repayments, to maintain key social infrastructure services such as health and education, research, advisory and agricultural extension services as well as faster rehabilitation of economic infrastructure would have yielded high social and economic returns particularly in the rural sector, lifting income and well-being levels of the poor and other vulnerable groups.