Robert B. Zoellick is the current president of the World Bank
by Bright B. Simons, Kofi Bentil & Franklin Cudjoe
The Honourable Minister of Finance and a high-powered five-person Ghanaian delegation are in Washington D.C. attending the World Bank – IMF Spring Conference as we write.
Information trickling down to us suggests that the Ghanaian team will be exploring prospects for expanded assistance to Ghana from the Bretton Woods institutions. Government of Ghana would love to receive a huge, flexible, grant-heavy IDA-type concessional package that will require only a few politically painful adjustments in its preferred policy positions.
So, alas, we may have to settle for a less than concessionary assistance package than we would have thought acceptable just a few months ago, if broad budget support, rather than piecemeal sector-focused measures, is the short to medium-term government objective. That is where the IMF comes into the picture.
The International Monetary Fund, unlike its sibling the World Bank, specializes in crisis resolution rather than long-term development financing. For that reason, perhaps a bit unfairly, it has become permanently tagged with the phrase, “shock therapy”.
In 2002 Ghana was kicked out (euphemistically: “suspended”) from the Fund’s Poverty Reduction & Growth Facility program until Government of Ghana reaffirmed commitment to structural reform by doubling petroleum prices in 2003 among other measures.
So Government of Ghana has to return like the prodigal son to the IMF, and the fine points of this “entente” turn on whether the IMF will view Ghana as a “dropped-out pupil” and will insist that Government returns to complete its “pupilage” in structural reform, i.e. conclude any unfinished business from the 1980s era structural adjustment program, as it were.
If the IMF was to view things in that way, it is not too difficult to anticipate where they will concentrate THEIR priorities.
I. The Fine Points
1. So called “unsustainable” subsidies will come under attack. Which is why Government has already embarked on efforts towards reducing the brunt of the assault. Expect the more audacious IMF officials to take a swipe or two at Government’s policy concerning cost-sharing.
2. In recent IMF literature, African governments have been counselled to adopt “stabilisation” measures on the revenue side to rein in fiscal degeneration, while at the same time guarding against “distortionary” taxes.
3. We also suspect that some impetuous IMF analyst will raise that most sacrilegious of issues: currency devaluation. That is to say, she will float the idea, pretending as if it is all some kind of after dinner thought exercise, whether Bank of Ghana shouldn’t halt any open market operations, actual or supposed – this is after all hypothetical – designed to steady the Ghana Cedi.
II. Our Own Thoughts
1. Government should not make the mistake of entering into preliminary discussions of any official kind, without a comprehensive proposal of its own.
2. . It should argue long, bold and comprehensively that NEARLY ALL our current and ongoing economic ills stem from the current Global Economic Crisis.
Helpfully, Dr. Duffuor refused to succumb to pressure to initiate a fiscal stimulus for Ghana. This would have made us vulnerable to the charge that given the high import intensity of capital investment in this country.
3. For the negotiating method we suggest to work well, we will need to embrace a new era of economic discourse in this country.
4. Of course, it will be wise that we don’t ourselves get too “wrapped up” in our own negotiating gambits and begin to believe that we shouldn’t undertake reform at our own pace and according to our own priorities,
III. Summary
1. Ghana left the IMF’s flagship program for the developing world, the PRGF, because the Fund appeared to be using sanctions to compel Government of Ghana (GoG) to adopt policies at the Fund’s rather than the GoG’s pace.
2. Ghana could leave because it could borrow on the long end of the international capital markets. That option is less viable now, and because Ghana’s program with the World Bank is quite stretched, Ghana is being compelled to look at the IMF, which is now awash with cash or soon will be.
4. Government of Ghana should skilfully waylay the IMF by entering into discussions with its own comprehensive “Economic Stabilization & Growth Restoration” plan, rather than allow such a plan to emerge from the dialogue.
5. To do so convincingly will require that at the same time Government embark on the creation of a national consensus on economic growth and stabilization based on the principle that the only enemy to economic growth in Ghana is external.
6. We should endeavor to really “grow out” of the Aid box sooner rather than later.
The Authors are affiliated with IMANI-Ghana (www.imanighana.com), a think tank based in Accra and www.africanliberty.org
.."6. We should endeavor to really “grow out” of the Aid box sooner rather than later."
ReplyDeleteMany thanks for this article, BB Simons, Franklin Cudjoe and Kofi Bentil. I couldn't agree more with point number 6. It really sums up the urgency of self sufficiency. This has been my point all along.
To my mind, the IMF and World Bank have very serious credibility problems when it comes to Africa. We didn't even need the current global crisis to remind us of the unmistakable failures of American inspired neo liberalism .Ghana and other developing countries are living examples of this.
ReplyDeleteEven America has shunned the free markets because we all know what Obama is doing with the banks, the auto industry and the stimulus package. Instead of the IMF publicly admitting the limitations of a system which is in its throes, they continue to feign its utility especially in Africa. But why blame them…that’s exactly what happens to a continent full of weak, incompetent and incredibly gullible leaders.
..Hugo Chavez of Venezuela, Castro of Cuba and China's Hu Jintao are "laughing all the way to the bank" as Obama makes a clown of himself by nationalizing private enterprise.
ReplyDeleteI mean you have a fundamentally flawed structure; whereby BBB rated tranches of mortgage back securities are repackaged, credit-enhanced with some equity and sold off to investors as collateralized debt obligations (CDOs) with AAA tranches. How can sub-prime debt be repackaged and sold as investment grade debt?
Instead of allowing the excess leverage to wash out of the system by encouraging savings, he's come up with TARP, TALF and other investment vehicles to buy things that are already toxic. This will only defer (not cancel) the ultimate collapse of the financial system. Until, the root cause of the problem-the lack of savings and the unprecedented levels of debt in the system is fixed, this problem will not go away.
Etse, I agree with you that this is a very flawed system. And the IMF/World Bank should be ashamed. But it is our lazy, "lack of vision" leaders that make the problem worse by accepting handouts from the IMF hence giving them the leeway to interfere.
As echoed by the authors of this article, my position is for Ghana to steer clear of these organizations. They will only screw things up for us.
..one thing I must point out is that Ghana cannot unilaterally wean itself of this dependency syndrome on the IMF/World Bank. The economy is too small to withstand a shock of such magnitude. Such a unilateral move will be like a drop in the ocean. It will yield nothing.
ReplyDeleteIt will only be successful if all African countries make the move simultaneously and in sync. I know it sounds awkward but that is not just the best way; it is the only way.
Of course; I'm concerned about the Arabs to the north of the Sahara and their "attitude" towards the rest of us; and I'm even more concerned about the "Frenchie" African countries and how they allow France and Belgium to manipulate them so much. Those are the biggest obstacles to our unity. And of course the petty religio-cultural differences that others have alluded to on this blog. I really find it ridiculous that these independent Francohpne countries allow their former colonial masters to dictate the very core of their political and economic lives to them.
Anyhow; this one of the rare instances where I commend the British. Once they're forced to grant independence; they really stay out of their former colonies' internal affairs as much as possible.