Ghana Goes to the IMF
After promising to prosper without international aid, Nana Akufo-Addo’s government is seeking international financial assistance to address an economic crisis.
Welcome to Foreign Policy’s Africa Brief.
Welcome to Foreign Policy’s Africa Brief.
The highlights this week: West African leaders lift sanctions on Mali, protesters storm a legislative building in Libya, and Sierra Leone moves to decriminalize abortion.
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Ghana’s Government Reverses Course on Aid
Following protests in the capital, Accra, over rising inflation, the Ghanaian government has announced it will hold talks with the International Monetary Fund (IMF) on a support package—ending a policy of not seeking external assistance.
Strict lockdowns were imposed in the country during the COVID-19 pandemic, and growth slowed to 3.3 percent year on year in the first quarter of 2022. As a result, Ghana has been struggling to service a debt that has reached 78 percent of GDP—up from 63 percent in 2019.
If a new deal is reached, it would be Ghana’s 17th IMF program since it gained independence in 1957. Central bank governor Ernest Addison said in May that Ghana faced a balance-of-payments deficit of $934.5 million in the first quarter of 2022, compared with $429.9 million in the same period last year.
Seeking help from the IMF constitutes an abrupt policy reversal for Ghanaian President Nana Akufo-Addo, who took office in 2017 after an election campaign that focused on the idea of “Ghana Beyond Aid,” a promise that the country could prosper without international aid.
Ghana had enjoyed steady growth since 2010, boosted by oil discoveries in its Jubilee Oil Field. Even so, under previous President John Mahama, inflation and public debt soared. In early 2015, Mahama’s administration turned to the IMF for a $918 million loan to help stabilize the economy. The conditions attached meant the government had to freeze salaries and end oil subsidies.
In the run-up to the 2016 elections, Akufo-Addo’s New Patriotic Party criticized that decision. He promised to improve revenue generation and manage the country’s economy better. He made progress on that by ending the IMF bailout in 2019 and bringing inflation down to 9 percent from almost 17.5 percent in 2016. That honeymoon now appears to be over.
Inflation in the country rose to a record 27.6 percent in May amid a hike in fuel prices and a near 21 percent loss in the value of its currency, the cedi, against the dollar. In an attempt to curb state spending, Akufo-Addo approved a set of emergency measures, including a 50 percent cut to subsidized fuel for all ministers and heads of government institutions in April. Ministers’ salaries were temporarily cut by 30 percent. The central bank last month raised its main interest rate by 200 basis points to 19 percent—the second major increase this year.
But other policies to generate public revenue through taxation have proved politically unpopular, such as a levy, which targeted mobile money transactions. The 1.5 percent tax on all electronic payments above 100 Ghanaian cedi (or $13)— known as the e-levy—came into force in May. Critics argue instead of cutting or reshuffling his cabinet, Akufo-Addo’s administration was targeting the poor. The president may go down in “Ghana’s history as the only president to have almost never reshuffled his appointees,” suggested one editorial.
Of the 13 million people in Ghana’s labor force, only about 2.4 million Ghanaians work in the formal sector and pay income tax. “We cannot continue to allow less than 10 percent, specifically 7.8 percent, i.e., 2.4 million people, of the population [to] carry the direct tax burden of 30.8 million people,” Akufo-Addo said while defending the policy.
Nevertheless, some of the Ghanaian public took to social media to report their frustration over that levy coming on top of the rising costs of food and petrol. Adding to the pinch felt by Ghanaians, food prices were up 30 percent in annual terms in May, according to the country’s statistics agency.
In March, Foreign Policy predicted that Ghanaians might protest as a result of the economic pressures felt in their households. Last week, hundreds took to the streets in Accra for two days to demonstrate against spiraling costs. Police tear gassed and arrested around 29 protesters.
Like much of the world, the continent is seeing demonstrations against the high cost of living. In Sierra Leone, public transport workers went on strike on Monday over the high cost of fuel. Last month, striking nurses at Zimbabwe’s public hospitals demanded better pay.
Although some economists believe an IMF support program is the most pragmatic approach, Akufo-Addo’s government is facing some dissent over the decision. Ghanaian observers have warned that trade unions “won’t tolerate” any terms by the IMF that includes a freeze on wages. The head of Ghana’s Trades Union Congress, Anthony Yaw Baah, has voiced his opposition by suggesting industrial action if the government fails to honor a request in March for a 20 percent cost of living allowance for public sector workers.
Just a few days prior to the announcement, the chair of the Ghanaian Parliament’s finance committee, Kwaku Kwarteng, suggested the fiscal reforms the IMF would mandate could be achieved without the multilateral lender’s involvement. “I don’t think the investor community will look upon Ghana signing up an IMF program with any respect,” he said.
Even Akufo-Addo made similar arguments in February: “It is time we accepted the full implications of our goal of Ghana Beyond Aid and designed our fiscal profile accordingly. The Asian Tigers, whom we envy and want to emulate, financed their rapid development from their own savings. We need to do the same,” he said at the time.
Considering Ghana’s culture of democratic activism, Akufo-Addo will need to sell any tough measures demanded by the IMF to the Ghanaian public and civil society groups. If he does not, he can expect more protests and marches.
The Week Ahead
Wednesday, July 6: Rwandan President Paul Kagame and the Democratic Republic of the Congo’s president, Felix Tshisekedi, will meet in Luanda, Angola, to discuss the armed conflict in eastern Congo. Talks will be mediated by Angolan President João Lourenço.
Thursday, July 7: The United Nations Security Council meets to discuss its political mission in West Africa and the Sahel.
Saturday, July 9: South Sudan celebrates its 11th anniversary of becoming an independent state.
Sunday, July 10: The first round parliamentary elections are scheduled to be held in the Republic of Congo.
What We’re Watching
ECOWAS post-coup sanctions. West African heads of state met on Sunday in Accra for a summit of the Economic Community of West African States (ECOWAS) to negotiate timetables for restoring democratic rule following military-led coups in Mali, Burkina Faso, and Guinea.
ECOWAS has agreed to lift sanctions imposed on Mali and accept the military rulers’ proposal for a two-year democratic transition period; they accepted a similar proposal from Burkina Faso’s junta. ECOWAS rejected the three-year transition proposed by Guinea’s coup leaders in September 2021 and called for its junta to propose a new timeline by the end of July or face economic sanctions.
Sierra Leone abortion law. Lawmakers in Sierra Leone have approved a draft bill that would decriminalize abortion in the country. President Julius Maada Bio told the 10th Africa Conference on Sexual Health and Rights held in the capital, Freetown, on Friday that his government was “proud” that Sierra Leone was implementing a “progressive reform” while women’s rights in sexual and reproductive health were being overturned or threatened in the United States and other countries.
Under Sierra Leone’s current law, abortion is banned unless the mother’s life is at risk. The country ranks among the highest in the world in terms of maternal mortality during childbirth.
Tunisian president seeks power extension. Tunisian President Kais Saied unveiled a new draft constitution that would increase presidential powers and further chip away at what analysts long viewed as the only democracy to emerge from the 2011 Arab Spring protests.
Under the draft charter drawn up by a committee handpicked by Saied and published weeks before a national referendum scheduled for July 25, the president would have the right to hire and fire the prime minister and parliamentary ministers. It would also establish a bicameral parliamentary system for the first time by creating a new “Council of Regions” as a second chamber of parliament.
Parliament stormed in Libya. Protesters in Libya stormed the country’s parliament on Saturday in the eastern city of Tobruk and set fire to part of the building. The unrest came a day after United Nations-brokered talks in Geneva aimed at paving the way toward democratic elections ended with little progress.
Presidential and parliamentary elections, were originally set for December last year as part of a U.N.-led peace process but never took place due to disagreements over the legal process for elections and several contentious candidates running in the polls.
This Week in Culture
Germany returns looted art. Germany’s Prussian Cultural Heritage Foundation will return a sacred Cameroonian statue known as Ngonnso that was stolen from the country by a colonial officer and given to Berlin’s Ethnological Museum in 1903. The foundation will also return stolen objects to Namibia and Tanzania. The journey toward return was sparked by Nigeria’s repeated requests to the German government for the return of objects stolen from the Benin kingdom during Britain’s razing of Benin City in modern-day southern Nigeria in 1897.
On Friday, Germany returned two Benin Bronzes after ministers from the two countries met in Berlin to sign an agreement formally acknowledging and guaranteeing Nigerian ownership of around 1,130 Benin Bronzes currently in German museums.
Not all of the artifacts will go back to Nigeria but will instead remain on loan in Germany, though no fees are expected to be paid as yet.
Negotiations on custodial agreements for individual items are still ongoing. Nigerian officials have maintained they do not wish to see a physical return of all stolen artifacts and would instead accept legal recognition of ownership. One idea suggested to me by the head of the Nigerian National Commission for Museums and Monuments, Abba Isa Tijani, was a traveling exhibition that would allow Nigerian citizens as well as museums globally to view the country’s historical works.
Chart of the Week
Inflation in Ghana has reached an 18-year high as food and transport costs continue to surge. Ghana has said it will seek financial aid from the IMF to help strengthen the nation’s economy after long resisting suggestions to do so.
What We’re Reading
South Africa’s racist populism. In Foreign Policy, Kate Bartlett profiles Nhlanhla “Lux” Mohlauli—the 35-year-old leader of extremist vigilante group Operation Dudula. Lux spearheads a popular xenophobic movement in South Africa that has become notorious for organizing deadly protests against foreigners and which could transform into a politically influential force.
Removing Qaddafi. According to an assessment obtained by Declassified UK, Britain’s military knew that fighters from a hard-line Islamist terrorist organization were benefiting from the overthrow of Muammar al-Qaddafi in 2011 but continued to support airstrikes in Libya. In response to Declassified, a spokesperson from the British defense ministry said, “Throughout 2011, the U.K. government was responding to a rapidly changing and volatile situation in Libya and sought to make timely decisions to protect Libyan civilians and U.K. national security.”
Vaccinating doctors. A deep dive by Arab Reporters for Investigative Journalism found that some doctors working in isolation hospitals in Egypt had requested to be vaccinated against COVID-19 but died from a coronavirus infection before receiving any vaccine dose. One expert suggested this was due to slow and poor implementation of the Egyptian Ministry of Health’s process for vaccinating priority groups.
Nosmot Gbadamosi is a multimedia journalist and the writer of Foreign Policy’s weekly Africa Brief. She has reported on human rights, the environment, and sustainable development from across the African continent. Twitter: @nosmotg
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