Ghana’s rush to the IMF may compromise policy sovereignty, signal a break with a key electoral promise and undermine the government’s Beyond Aid message but could, if managed well, promote peace and security and yield positive economic, political and democratic dividends.
After months of posturing and dithering, the government of Ghana finally asked the IMF for a bailout. This support, which according to the government, will help restore macro-economic stability and maintain debt sustainability, has generated strong response from supporters and opposition alike, with some condemning it as a betrayal and break of a key electoral promise. Justified as these observations may be, it is also equally important that potentially positive outcomes are not ignored.
A request for a bailout was inevitable despite assertions to the contrary. Even prior to COVID, the economy was in dire straits. Inflation was high, revenues were lagging, the cedi was performing poorly against major currencies and GDP growth had not lived up to expectation. Access to global capital markets was also limited following credit downgrades. COVID 19, the Ukraine-Russia crisis, a bloated cabinet, inadequate expenditure controls, politicking, paucity of innovative ideas and indecision by policy and decision-makers made matters worse. With the masses seeking answers and an e-levy that was aimed at mobilizing revenue failing to deliver, the writing was on the wall and eating humble pie was not a question of if but when. In a restive West African region, delaying outreach to the IMF out of pride or political expediency would have been foolhardy. Recent events in Sri Lanka offer lessons in this regard.
The strong reactions elicited by the decision to seek IMF’s help is justified. In the lead up to the 2020 elections, staying away from the IMF was a key electoral promise. Going to the IMF was seen as a sign of incompetence. In fact, the previous government was tagged as such because of their engagement with the organization. Once in power, the government also articulated a Ghana Beyond Aid policy that emphasized fiscal sovereignty, trade over aid, and the use of indigenous resources to meet national needs. For supporters of this electoral and policy commitment, going to the IMF can be seen as a let down and a betrayal. For the opposition, this recent development can be seen as a vindication of the prudence of their decision to seek IMF support and the validity of their call for a critical look at the NPP’s sincerity and capabilities.
Beyond immediate economic benefits such as offering temporary relief, shoring up finances and winning back access to global capital markets and maintaining macroeconomic stability, the decision to go to the IMF, if handled well, could also yield dividends in many ways. This includes promoting peace and security, enhancing democracy and transparency, setting the stage for a vigorous policy-focused campaign in the 2024 elections and prompting politicians to be circumspect in making electoral promises.
Peace and Security matters. From street protests to labour actions, citizens continue to express frustration with the harsh conditions on the ground. Escalating food and fuel prices, just to name a few. Unaddressed, these complaints could escalate and affect peace and stability. This seems to be the case in Sri Lanka where perceived corruption, government inaction and insensitivity to the plight of the people have triggered chaos and the downfall of the government. Conditions in Ghana may be different but in a restive West African region threatened by many security concerns, allowing a potentially volatile situation to fester out of pride may not be prudent. It may not be a panacea, but by providing access to global capital markets, strengthening the central banks monetary policy, building buffers against economic shocks and restoring debt sustainability, the decision, all things being equal, may give the government the opportunity to dial down the rhetoric, and find ways to address the concerns of citizens and maintain peace. This will be even more effective if the engagement is complimented by actions aimed at downsizing the government machinery, reducing expenditures, promoting accountability and transparency, and engaging the opposition as well as civil society organizations in finding solutions.
In a highly partisan environment, seeking consensus solutions will not be easy but will be necessary. Until this trip to the IMF, the governing party had prided itself as better managers of the economy. Its Ghana Beyond Aid policy was also meant to give meaning to this mantra. With the IMF bailout, the government may need to address questions, including if and why they think their trip to the IMF is different or justified. Also to date, opposition parties have claimed their request to know the true state of the economy have been rebuffed or treated as politicking. With the IMF now in town and having access to the needed information, denying same to the opposition may be untenable.
Democracy, transparency and issues-based electioneering are here to stay and could be beneficiaries. The politics of insults have been the bane of African democracy. In this area, Ghana has fared relatively better than its peers as recent elections have focused more on issues, exemplified by debates around debt sustainability, IMF support and fiscal prudence. The government’s decision to engage the IMF now will provide a basis for issues-based conversation come 2024. It will permit the electorate to scrutinize and compare parties and create an opportunity for people including the opposition to see the true state of the economy. It will encourage citizens to question political pronouncements and also prompt politicians to be circumspect in their electoral promises. All this will augur well for democracy.
Belated and controversial as it is, the government’s request for IMF support may have come at an opportune time. Not only does it provide an opportunity to address economic concerns, including maintaining macroeconomic stability, but if handled well, could also yield dividends in other areas such as promoting peace and stability, enhancing transparency and accountability as well as democracy. In a highly partisan environment building the bridges and partnerships needed to develop consensus solutions and make things happen may not be easy but doing so with humility and with the welfare of the people at heart will make a difference.