Ghana drops in 2017 Economic Freedom rankings

• Posted on July 17, 2018
• by Nana Kwesi Coomson
• Comment

Ghana has scored 103 out of 159 countries in Economic Freedom of the World (EFW) ranking, taking the 16th position as the most economically free country in Africa.

Mauritius secured the first position, Rwanda was second, Seychelles came third, Botswana placed fourth with Liberia placing ninth. Ghana, however, beat West African neighbours like Nigeria, Cote d’Ivoire and Togo.

According to a commentary on the finding, Ghana’s economic freedom has declined recently.

“Ghana’s…economic freedom has been on the decline since 2009,” the commentary observed.

The rankings, spearheaded by IMANI Africa, were made according to five key areas of economic freedom, namely size of government, legal systems and property rights, sound money, freedom to trade internationally and regulation.

Below are the comments on individual areas of economic freedom in Ghana

1. Size of Government

The ‘Size of Government’ indicator is among the five areas studied under the Economic Freedom of the World Index. Overly large government spending and taxation can crowd out other economic activity and limit people’s economic freedom. Ghana appears to do modestly well in this area as Ghana ranked 55 out of 159 countries (this rank is based on data from 2015). However, undisciplined spending threatens Ghana’s fiscal future.

2. Legal Systems (Rule of Law) and Property Rights

Though Ghana’s score is ahead of both the West African and Other Africa averages, it is well behind other African countries such as Botswana, Rwanda, and Liberia and very far behind the top 10 in this indicator. An efficient market economy is not possible without a sound and predictable legal structure that protects property rights and contracting for all, equally and fairly. Despite the relatively good rank (69 out of 159 countries), improvement here may be Ghana’s greatest challenge and opportunity. No nation, except perhaps some petro states, has achieved rich nation status without a strong rule of law.

Unfortunately, the rule of law in Ghana has been up and down, but mostly down since 1995, and this is a significant danger signal.

3. Sound money

4. Freedom to Trade Internationally

Just as individuals and businesses in Ghana should be able to buy from and sell to whom they wish in their own nation, they should have the globe as their marketplace. Ghana’s score has declined in recent years and in 2015, the most recent year for which data are available, Ghana ranked 115th, creating a barrier to prosperity growth.

To become prosperous, Ghana needs to be able to sell to the 7.5 billion people on the planet, not only the 28 million citizens of Ghana. Ghana is well behind the top country of the EFW index, the world average, and Botswana and just ahead of the West and other African averages (See Table 1). Much of the problem lies in red tape and inefficiency, with Ghana getting low marks in non-tariff barriers, compliance costs, and regulatory barriers. However, formal barriers to trade are also too high. Foreign ownership restrictions and, particularly, capital controls weaken foreign direct investment, which was the engine of growth in their early years for some of the most advanced nations today.

Ghana ranks 90th in the world in red tape, which limits the dynamism of the economy. Its score has been mostly declining in recent years. The regulations indicator of economic freedom studies regulations in three main areas: regulations in credit, regulations in the labour market, and regulations in business.

Full report below;