Background to the research: Economic crisis and structural adjustment

After period of relative progress, the late 1970s and early 1980s were a period of economic crisis for many developing countries Ghana's economic decline began in the late 1960s. A positive growth rate of 2.1 per cent per annum between 1960 and 1970 declined to -6.1 per cent per annum between 1980 and 1983, and the inflation rate increased from 9 per cent per annum in 1970 to 122 per cent in 1983. Stagnation or decline characterised almost all sectors of the economy, while the population increased at a faster rate. The social impact was just as severe, with a deterioration in health and educational standards and a reduction in real incomes per head. The result of the economic decline was a general impoverishment of the nation as a whole, with about 50 per cent of urban households and 65-75 per cent of rural households living below the poverty line by the early 1980s (UNICEF 1988). Prolonged drought, bushfires and the expulsion of nearly 1 million Ghanaians from Nigeria in 1983 put severe strain on an already critical food and unemployment situation and exacerbated the crisis.

Faced with the desperate economic situation, the government of the PNDC adopted in 1983 an IMF/World Bank sponsored structural adjustment programme aimed at halting the economic decline and restructuring the economy to foster growth and development. The programme had as its guiding principle the "realignment of the price and incentive system in the economy in favour of the productive, particularly the export sectors" (Government of Ghana 1987).

The SAP adopted in Ghana was a fairly standard IMF and World Bank package and included the following policies: demand restraint through cuts in government expenditure, public sector employment and real wages; price decontrol involving the removal of subsidies on food, consumer items and agricultural inputs; introduction or increases in user charges for social services; trade liberalisation and currency for social devaluation; long-term supply policies aimed at raising the long-term efficiency of the economy through privatisation of state owned institutions; and credit reform.

The short-term impact of these policies, in comparison with 1982/1983 levels, was the recovery of the economy. Between 1984 and 1989, GDP average annual growth rates were restored to the levels of the early 1970s, registering growth rates of 5 per cent per annum, although it has been pointed out that much of this recovery was due to improved environmental factors and improved terms of trade rather than to specific policy (Toye 1991). Some sectors registered positive growth rates, with inflation falling by over 90 per cent between 1983 and 1985.

However, the wider social impact has been less positive. Despite the impressive macrolevel growth statistics, both absolute and relative poverty increased among both urban and rural populations during the period of adjustment. It has been pointed out that the costs of adjustment are borne most heavily by those with a relatively poor ability to withstand such losses, thereby deepening poverty. l