18. Governance

The significant decline of the Ghanaian economy between the mid-1970s and the mid-1980s, charted in detail in earlier chapters of this book (see Chaps. 3 and 4 in particular), is widely regarded as being due to the high degree of economic mismanagement which occurred during this period (Aryeetey & Fenny, 2017, pp. 46–52). This is not to say that economic management was of a high standard before the mid-1970s. There had been significant problems earlier, not least due to the difficulty in maintaining control of ministerial commitments to external borrowing with its associated indebtedness and debt service obligations (Cohen & Tribe, 1972). One of the key elements of the economic mismanagement in the 1970s and early 1980s was the inflexible, and rarely changed, official foreign exchange rate. For example, the 44 per cent devaluation introduced by the Busia government in late 1971 is usually regarded as being the ‘last straw’ which led to the overthrow of the government and the installation of the military government of Colonel Acheampong in January 1972 (Herbst, 1993, pp. 23 and 41). One of the first actions of the military government which took over from Busia was to revalue the Ghanaian cedi virtually negating the devaluation. Later in the decade the government of General Akuffo devalued the cedi (from ₵1.15 to US$1.00 to ₵2.75 to US$1.00) in 1978, but by early 1983 some estimates of the appropriate ‘shadow’ exchange rate suggested an overvaluation of the official exchange rate by about 1000 per cent (or by a factor of 10). The black-market exchange rate was about ₵70 to 80.00 to US$1.00 by this time, or about 27 times the official rate (Huq, 1989, p. 196; Chap. 12, Sect. 12.6 in this volume).