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How can Ghana be more developed in the future? Possible reasons why Ghana can be a MEDC?

Ghana is a poor country by global standards, but not compared to many of its neighbors in Sub-Saharan Africa. Moreover, their economy has been growing fairly rapidly lately; per capita GDP at purchasing power parity (PPP) has grown almost 50% in the last decade, about 4% per year. They have recently undergone debt forgiveness and a currency redenomination that seem to have yielded significant benefits. Their government is moderately democratic, which is very good by African standards.

Ghana has a relatively strong manufacturing base, but it has been too focused on import substitution instead of exports; that needs to change. Historically, the way countries such as Korea and Japan have lifted themselves from Third World to near First World status has been by manufacturing for export, starting with relatively low-tech goods such as textiles and then rising into higher levels of technology such as electronics.  Eventually they reach the level of full high-tech capital-intensive manufacturing such as automobiles. By focusing on import substitution, they have essentially locked themselves out from billions of potential customers. Being open to global trade is especially important for small countries; large countries can more or less provide for themselves, but small ones fare best when they are closely linked to the rest of the world economy. Ghana also does a lot of exporting of natural resources, which is mainly a short-run strategy. It's much better to use those natural resources for manufacturing, and then export products. Ghana has been hurt by the fall in oil prices recently; that wouldn't have been nearly as bad if they'd been using the oil instead of selling it.

Ghana definitely needs some serious fiscal policy reform as well. 39% of GDP in government spending with only 12% of GDP in tax burden is clearly unsustainable. They can cut spending or raise taxes or both, and they don't need to close the deficit completely (a deficit of 5% of GDP would be fine, and even 10% might be all right for the time being), but they're going to have to do something to avoid getting right back into the unpayable debt they had before the IMF gave them forgiveness. Developed countries should also give Ghana more aid, but they can't stay dependent on aid forever.

Education should also be a primary focus of policy; literacy in Ghana is still fairly low, and most people do not finish high school. Still, Ghana is doing better than most of Africa in this regard; in most neighboring countries most people don't finish elementary school.


So, I am cautiously optimistic about Ghana. They seem to be following the path of Botswana, which is now widely regarded as a high middle-income country and may even reach the level of a high-income country. It won't happen overnight, and there are many obstacles in the way; but if they can stabilize their fiscal situation while continuing to support improvements in education and infrastructure, Ghana has a good chance of reaching a high level of development.

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