Economic Planning
Senior 6 · Economics
Economic Planning
Lesson 3 of 4
25 min
In March 1964 Ghana launched its Seven-Year Development Plan for National Reconstruction and Development, covering 1963–64 to 1969–70. It aimed to diversify an economy that depended on cocoa, and much of its finance was expected to come from cocoa exports. World cocoa prices then fell, the government borrowed and ran deficits to keep projects going, and in February 1966 the government was overthrown in a coup. The plan was abandoned after about three years.
A 2023 review of Ghana's planning history found the same pattern repeating: long-term plans prepared under one government were shelved or cut short when another took office (Ghana Compact, National Development Planning, May 2023, pp. 2 and 6). Think: which of the problems in this story could a better-written plan have avoided, and which lie outside the planner's control?
Most development plans pass through the same stages, and the last stage feeds the first stage of the next plan.
Definition
Financing gap: the part of a plan's cost that the expected sources of finance do not cover. Monitoring: the regular tracking of indicators during implementation. Evaluation: an assessment, at mid-term or at the end, of whether the plan achieved its objectives, and why.
Implementation gap: the difference between what a plan sets out to do and what is actually carried out.
Worked example 1: how is NST2 to be financed?
NST2 estimates total financing of Frw 63,559 billion over the five years 2024–25 to 2028–29. Of this, 43% is to come from the private sector and 57% from public resources, "with tax and non-tax revenues making up about 74% of the total" (MINECOFIN, NST2, p. 10). Calculate the private and public parts, and the public money that must come from sources other than revenue.
Step 1 Private: billion. Public: billion.
Step 2: read the 74% carefully. If it meant 74% of the whole Frw 63,559 billion, revenue (74%) would exceed all public resources (57%), which is impossible. So it must mean 74% of the public part: billion.
Step 3 Other public sources (grants and borrowing): billion, about 26% of public resources.
Interpretation. About Frw 12,700 billion a year is needed (). The plan relies on private investors for 43% of its finance, which the state can encourage but not command; this is indicative planning in practice. It also depends on grants and loans for about Frw 9.4 trillion, so a fall in aid or a rise in interest rates would open a financing gap.
Worked example 2: monitoring the jobs target
NST2 aims for 250,000 jobs a year (p. 23). NISR's Labour Force Survey counted 4,445,000 employed people in 2024 and 4,773,000 in 2025, including 157,000 and 223,000 contributing family workers (unpaid helpers in a family business or farm) (LFS 2025, Table 4.1, p. 29). Did employment grow fast enough?
Step 1 Net change in employment: thousand, which is of the annual target.
Step 2 Contributing family workers rose by thousand. Excluding them, employment rose by thousand.
Judgement. On either measure employment rose faster than 250,000 in 2025. But NST2's target is for "productive and decent" jobs, and unpaid family work is unlikely to count, so the indicator chosen changes the verdict. A good monitoring system defines each indicator precisely before the plan begins (lesson 2).
| Condition | Why it matters |
|---|---|
| Political stability and long-term commitment | Plans take years; a change of policy halfway wastes what has been spent (the Ghana case) |
| A competent, honest administration | Plans are only as good as the people who carry them out |
| Reliable, timely data | Targets need accurate baselines and regular measurement |
| Adequate and predictable finance | Above all domestic revenue, which the country controls |
| Realistic, consistent targets | Over-ambitious targets discredit the plan |
| A strong link between plan and budget | Money must follow the plan's priorities each year |
| Public participation and support | Citizens, firms and local leaders who helped shape a plan are more likely to carry it out |
| Response from the private sector | Under indicative planning, firms must find the incentives attractive |
| Flexibility | Mid-term reviews allow the plan to adapt to shocks |
| Accountability | Named institutions report results, and poor performance has consequences |
Warning
Don't list limitations without judging them. At A-level, "Evaluate the limitations of planning" needs a verdict: which limitation matters most, in which country, and can it be reduced? For example, weak data can be fixed by investing in statistics; a collapse in commodity prices cannot be prevented, only cushioned by diversifying exports and holding reserves.
Tip
Conditions for success and limitations are two sides of one coin. Learn the conditions, then turn each into a limitation ("stable politics" becomes "political instability"). That gives you two lists for the effort of one, but always add a real example to each point.
Important
The planning process runs from data and diagnosis, through objectives, targets, projects and financing, to approval, implementation and monitoring and evaluation, which feeds the next plan. Plans succeed with political stability, capable and honest administration, reliable data, predictable finance, realistic targets, a link to the budget, participation and accountability. In developing countries the biggest problems are usually in implementation, finance and external shocks.
Practice
Sources and credits
Written by Ganzaa: the text, the diagram, the tables, the worked examples and the practice items. The figures in practice item 3 are illustrative.
