From past many old ages, Ghana along with other African states has been having support for the development from the Washington based Bretton forests Institution ( BWI ) . BWI fiscal support conditioned on the footing of application of policies recommended by the establishment, which would convey reason to the beneficiary economic system. The policies recommended by BWI were largely instructed by the states ruling the establishment and the states were chiefly the western industrial states. But the chief purpose of these policies was economic development.
In the twelvemonth 1989 economic expert John Williamson had framed a policy prescription for the development of the state, which was termed as Washington consensus. This policy was chiefly framed for the economic development of Latin America. The policy Washington Consensus advocated 10 commandments as a policy reform for the state. This policy considers ‘free market ‘ and ‘Privatisation ‘ as the necessary constituents for the success of the economic system and considers economic restrictions and controls as barriers in the growing of the economic system. This policy was criticised by many research workers and was questioned whether this Washington consensus policy would be good for the economic development. Fischer ( 2003 ) , was a sort perceiver of this policy and has widely interpreted this policy as being a good policy prescription for economic development. But execution of this policy has costs and benefits attached to it.
This study would concentrate on the execution and rating of the Washington Consensus as a policy prescription in Ghana and it would besides discourse about the costs and benefits in implementing this policy.
Economic Profile of Ghana
Harmonizing to universe economic study by IMF, Ghana is considered as one of the emerging economic system. The economic system of Ghana has been fortified by good concern environment, efficient direction and decrease in poorness degrees. Ghana is gifted with the good natural resources and agribusiness histories about 28 % of the state ‘s gross domestic merchandise ( GDP ) and more than half of the state ‘s population is employed in agricultural activities. The service sector of Ghana histories to about 50 % of the GDP. The major beginning of foreign exchange of the state comes from the production of gold and chocolate. The recent offshore oil production in Ghana is expected to hike the state ‘s economic system every bit good. Harmonizing to the informations released by Ghana Statistical Service ( GSS ) , the growing rate of the state ‘s GDP was expected to turn due to high production of oil in 2012. There has been a good growing in the non-oil bring forthing sector every bit good. There is a diminution in forestry and logging activities but it is offset by the production of chocolate.
The overall GDP growing rate of Ghana has been systematically turning. It can be shown from the undermentioned chart: –
Degree centigrades: UsersLBBSStudentDesktopghana-gdp.png
( Beginning: The World Bank )
From the above chart it can be seen that there has been a consistent growing of GDP from the twelvemonth 2004. Although there was a diminution in 2010 to 25.97 US $ billion as compared to 2009 which was 28.5 US $ billion, the growing of GDP showed a considerate growing in 2011 and 2012, which was 32.17 US $ billion and 39.2 US $ billion severally.
The overall part to GDP is done by agricultural sector ( 28 % ) , service sector ( 50 % ) and industry ( 22 % ) about. The per capita income as of 2011 information was 3100 US $ and the entire figure of population below the poorness line was 28.5 % as of 2007. The labour force in Ghana is about 11.44 million as of 2011. 56 % of the labour force is employed by agribusiness sector and services sector employs 29 % of the population. The remainder 15 % histories to industry sector.
hypertext transfer protocol: //www.tradingeconomics.com/charts/ghana-gdp.png? s=ghanagdp
hypertext transfer protocol: //www.indexmundi.com/ghana/economy_profile.html
hypertext transfer protocol: //www.cepa.org.gh/publications/Flagship118.pdf
Washington Consensus and Ghana
The Washington Consensus policy was foremost framed by John Willamson. He believed that this policy was desirable for economic development of all the states in Latin America. Later it was believed that this policy would turn out good for the economic development of the states of the remainder of the universe or the emerging market economic systems. The policy prescribed by Williamson, consisted of 10 commandments. These commandments can be evaluated as follows: –
Measuring the policy
1. “ Budget deficitsaˆ¦small sufficiency to be financed without resort to the rising prices revenue enhancement. ”
It was widely assumed that macroeconomic stableness is an indispensable demand for growing and sensible monetary value stableness is necessary for macroeconomic stableness and that monetary value stableness was destabilized by utmost financial shortages. Hence it was compulsory to reinstate the financial subject. Williamson preparation focused on, the demand for equal financial subject to avoid the necessity to fall back rising prices revenue enhancement.
Joe Stiglitz argued this peculiar position of Williamson and stated that, moderate monetary value rising prices has no assessable growing consequence and hence it has no public assistance significances. So, one should be prepared for rapid rising prices and greater budget shortages.
2. “ Redirecting [ public ] outgo from politically sensitive countries [ that ] aˆ¦ receive more resources than their economic return can justifyaˆ¦toward neglected Fieldss with high economic returns and the potency to better income distribution, such as primary wellness and instruction, and substructure. ”
The Washington consensus policy did non recommend decrease in public outgo, but it instead advocates reassigning the public outgo to basic societal service and for the development of the substructure. Williamson states that, a batch of public outgo determinations are non made in a rational manner and decrease in the public outgo does non offer a method for raising the mean value of disbursement and cut downing waste. He besides believed that the key for effectual public outgo is to make a concatenation of bid which involves people in the disposal, who believe in the terminals of plan being pursued and there are no cutoffs.
3. “ Tax reform [ to broaden ] the revenue enhancement base and cut fringy revenue enhancement rates. ”
This peculiar thought was established on the footing of, “ Bradley-Kemp revenue enhancement act in the US in 1986 ” . The public outgo is straight related to high revenue enhancements rates and for better and more public outgo there is a demand for consistent addition and widening of the revenue enhancement base, with the gradual lessening in the fringy revenue enhancement rate. Williamson ‘s basic concern was approximately, how the excess gross of the state can be raised with the given status of rectifying budget shortages, increasing public outgo and replace the income lost by trade reform. The first signifier of revenue enhancement reform which was introduced was the VAT. But harmonizing to Williamson VAT was really regressive and it did non relieve basic demands like nutrient and medical specialties.
4. “ Fiscal liberalisation, [ affecting ] an ultimate objectiveaˆ¦of market determined involvement rates. ”
Williamson and Mahar ( 1998 ) , illustrated six dimensions of fiscal liberalization. These six dimensions are whether the recognition is allotted by the market or the authorities, whether Bankss function independently or the authorities regulates the Bankss, whether the entry limitations and barriers to the fiscal sector is imposed by the authorities, whether the market sets the involvement rate or it is set by the authorities, whether the Bankss are possessed by the authorities, and whether there is a ordinance on the international capital flows or it is liberalised. The chief purpose of Williamson sing fiscal liberalization was traveling to the market determined involvement rates, which meant that the Bankss would make up one’s mind the involvement rate instead than the authorities.
Subsequently it was concluded by William and Mahar that fiscal liberalization can hold many societal benefits with respects to improved distribution of investing, but it could be unsafe as good. Lastly it was stated by many economic experts, that fiscal liberalization should be done in a right sequence, which means the gap of the capital history should be allowed along with the influx of capital investing. But Williamson argued that gap of the capital history should merely be allowed after successful execution of other reforms.
5. “ A incorporate exchange rate at a degree sufficiently competitory to bring on a rapid growing in non-traditional exports. ”
Costss and Benefits