The Fault in Africa’s Stars and “High Debt Distress Countries”

Ghana's finance minister before the IMF in 2012 
[Image credit: IMF_The IMF's Debt Limits Policy: Three Years Down the Road (2012)] 

Ghana is upheld as a model of typifying “Rising Africa”. The Social Progress Index ranks Ghana as moderate, but among the best in Africa for nutrition, access to medicine and ‘basic knowledge’ (meaning access to primary and secondary schooling, and literacy). The Ibrahim Index of African Governance ranks Ghana as 7th in the continent under its measures of democracy, human rights, economy and development. The Global Peace Index, although charting a fall in ranking since 2013, still holds Ghana as the most peaceful place in West Africa, and among the top in the continent. It’s legacy as the first state to become free of European colonialism seems to fulfilled today in its starry position as lodestar of democracy and development. Even the Human Development Index, despite Ghana’s low-ish ranking here still fares well in the ‘medium’ bracket. A recent Al Jazeera documentary highlighted Ghana as a haven of ‘good governance’ where civil society is listened to producing one of Africa’s ‘most successful democracies’. And iWikipedia is anything to go by, then Ghana is oozing with success in terms of free press, purchasing power and utilization of natural resources, three characteristics uncommon to many African states. How then does one reconcile these broad strokes with the weight of debt and its burden in Ghana? Broadly speaking, they don’t.

In the early 1990s, leading up to the establishment of the Fourth Republic in 1993, the Provisional National Defense Council (PNDC- later becoming the NDC as it political party incarnation) opened Ghana’s doors to Bretton Woods’ institutions the World Bank and the IMF to perform their restructuring “magic”, whilst being simultaneously being pressured to politically liberalize, which the PNDC did by ushering in its very own Glasnost.

Since then democracy has evolved and accomplished much in terms of open civil society and relatively safe avenues for political dissent. Yet, the snowballing of IMF restructuring and competition international markets has taken its toll: currency devaluing, drop in prices of major exports, credit down-grading by Moody’s. The drop in currency value further impacts the ability to repay debt. Despite the cancelled of $7 billion of debt in 2005 (which 75% of the then current debt), Ghana plunged from $2.3 billion in 2006 to $12.6 billion in 2014. Of the current debt 43% is owed to institutions such has as the IMF. The latter forecasts that debt payments will double by 2020 from 15% to 30% of revenue. Consequently, Ghana is now classed as a ‘high debt distress country’ i.e. on the IMF’s naughty list. Ghana faces imposing further limits on its own economy in terms of higher taxes, cutting public subsidies and the civil service wages. Additionally, and historically, Ghana has had to service its debt through its loans. As its status as a middle-income country becomes cemented by the IMF, such loans will become limited.

What appears here is a complex, but predictable path commenced in the early 1990s. Ghana entered into the chains of debt by borrowing from the IMF, and has been backed into a corner, through its own handling of national debt and the structures of global capital that surround the country in terms of exports, commodity prices, and currency value. What remains, despite two decades of Bretton Woods “care” and “support” from the West, is crushing poverty, especially in the northern region of Ghana. Professor Mark LeVine adds this final comment,

It is the height of blindness and hypocrisy to declare that four centuries of slavery and colonialism, from which Europeans and the West more broadly benefited far more than local elites, are irrelevant. Further more it would be disingenuous to ignore the impact of decades of international loans that has bestowed a hard-to-service national debt that helps fuel the export of raw materials rather than developing indigenous industries that could create and keep more capital at home.

It seems that debt forgiveness is incongruent with repentance and recovery from the structures that produce debt and poverty in the first place. One can hope that the democracy and civil society pillars of Ghana of will do something to prop the crumbling economic one.

References and Further reading:

Ernest Aryeetey, Jane Harrigan, Machiko NissankeEconomic Reforms in Ghana: The Miracle and the Mirage (2000)

Kwame Boafo-Arthur, Ghana: One Decade of the Liberal State (2007)

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One thought on “The Fault in Africa’s Stars and “High Debt Distress Countries””

  1. This is a nice article. The irony is sad. The media hail Ghana. However the real indicators are not promising. Walk slowly rather running and fall off after few miles

    Like

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