Dr Maxwell Opoku-Afari Calls for Strategic Investments to Drive Ghana’s Structural Economic Transformation
The First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari, at the launch of the World Bank’s 2024 World Development Report, titled “The Middle-Income Trap,” underscored the pressing need for strategic investments to drive structural transformation in Ghana’s economy. Speaking in Accra on Thursday, Dr. Opoku-Afari called for a more intentional approach to investments, stressing the importance of transforming the nation’s economic structure as Ghana seeks to move beyond its current middle-income status.
“The key issue for Ghana is about investment,” Dr. Opoku-Afari stated, highlighting the need for a more targeted and transformative investment agenda. “We need to do more to ensure that these investments change the structure of the economy,” he said, emphasising that economic growth should be built on solid, sustainable foundations rather than short-term fiscal adjustments. His remarks align with a broader recognition of Ghana’s vulnerability to external shocks, as illustrated during the recent economic turmoil triggered by global commodity price fluctuations and a reliance on external financing.
Dr. Opoku-Afari’s comments also addressed the country’s need for stronger domestic revenue mobilisation. Despite efforts to reform tax policy, Ghana’s revenue mobilisation remains below the levels required to support long-term growth. “The quality of revenue mobilisation in Ghana is well below where it should be, and that is where the gap is coming from,” he said. He advocated for broadening the tax base rather than intensifying collections from existing taxpayers, proposing a more inclusive fiscal strategy as a cornerstone of the country’s social contract.
“We should not continue to scrape the bottom. We need to broaden the net and get more people contributing as part of the social contract that is necessary for structural transformation,” Dr. Opoku-Afari noted. He suggested that this would not only increase government revenues but also foster a stronger sense of civic responsibility and shared commitment to national development.
Fiscal inefficiencies were another focal point of Dr. Opoku-Afari’s speech. He stressed the need for greater scrutiny of public spending, noting that quality expenditure is just as important as revenue generation. “How do we ensure that our spending is done in a more efficient way to develop this country?” he asked. For Ghana, addressing the inefficiencies in public spending is critical if the government hopes to meet its developmental goals while maintaining fiscal discipline.
One of the core challenges Ghana faces, according to the Deputy Governor, is its lack of “infusion” — a term he used to describe investments that genuinely transform the domestic economy, particularly by fostering local talent and capacity. Drawing a contrast with South Korea’s rapid industrialisation in the latter half of the 20th century, Dr. Opoku-Afari argued that foreign investments in Ghana often fail to leave behind the skills and knowledge needed to support sustainable long-term growth.
“South Korea didn’t bring in foreign investors to take resources away,” he remarked. “They invested to ensure that, at some point, they could also continue to add value.” This, he implied, should be the model for Ghana, where foreign direct investment should contribute to the development of local industries, talent, and capacities. He also called for better enforcement of existing local content laws, which aim to ensure that foreign investments benefit Ghanaian businesses and workers.
Looking forward, Dr. Opoku-Afari underscored the importance of fostering both public and private savings. “Private savings are crucial because they provide the funds that can be intermediated and extended to small and medium-sized enterprises (SMEs) that account for 90% of employment in the country,” he said. These savings are essential for creating a robust financial ecosystem that can support the country’s growing economy and drive investment in critical sectors.
Public savings, meanwhile, are largely dependent on domestic revenue mobilisation. He highlighted the need for a stronger social contract between taxpayers and the government, where citizens are more willing to contribute to public funds if they see tangible improvements in public goods and services. This, in turn, would create a more conducive environment for private sector growth, benefiting both public and private stakeholders.
Ghana, as Dr. Opoku-Afari pointed out, cannot achieve sustained economic growth without increasing its domestic revenue base. “If we don’t raise domestic revenue in a way that is sustainable, how do we close that gap?” he asked. Borrowing, while an option, is not a long-term solution, especially given Ghana’s already substantial debt levels. For the country to break out of the so-called middle-income trap, the focus must shift to building a resilient, investment-driven economy that can weather external shocks and reduce its reliance on foreign aid and borrowing.
The World Bank’s 2024 World Development Report lays out a stark reality for the 108 middle-income countries (MICs) currently in a race to escape the so-called middle-income trap. According to the report, these nations must undergo critical transitions to move beyond their current status and achieve high-income status.
The first shift is from a strategy centred solely on investment, referred to as “1i”, to a more sophisticated “2i” approach, which integrates investment with the infusion of foreign technologies and their domestic dissemination. Only after navigating this initial transition can countries move to the final stage, a “3i” strategy that incorporates innovation alongside investment and technological diffusion.
South Korea serves as a model for this progression. In 1960, its per capita income stood at just $1,200. Following decades of robust public and private investment, South Korea moved into a second phase in the 1970s, marked by aggressive adoption of foreign technologies and an industrial policy aimed at enhancing domestic production methods. By the close of 2023, the country’s per capita income had soared to $33,000, exemplifying the success of this three-phase strategy.
However, for most middle-income nations, progress has been far more elusive. Although many have escaped low-income status since the 1990s, the broader picture is less encouraging. Of the 108 middle-income economies today, only 34 have transitioned to high-income status over the past three decades. As these countries look ahead, the challenge is not just sustaining growth but accelerating it, leveraging a mix of investment, technology, and innovation to avoid being permanently stuck in the middle.
