Finance Minister hits at "perverse effects" of SAP

The minister of finance, Dr Kwesi Botchwey, has criticized what he calls the perverse effects of conditionalities imposed on Ghana by international financial institutions, especially the World Bank and Western donors. He noted that these conditionalities have caused much harm to the economy for three consecutive years. Dr Botchwey's view is in an interview in the current issue of 'Africa Report', a publication of the New York-based African- American Institute. Cyril Akolaje gives you a summary of the interview.

[Akolaje] Dr Botchwey expressed frustration over the refusal to disburse a great deal of external resources meant for Ghana because of her inability to achieve an economic turnaround in 1983 [as heard].

He said last year, for example, some 200m dollars in loans and 100m dollars in grants were withheld. Dr Botchwey said although the success of the country's economic recovery so far is due to huge inflows of external aid, experience in the last two years has brought home the need for Ghana to rely more on her own resources. This in turn demands that Ghanaians promote more nontraditional exports, intensify revenue collection, and manage imports more prudently.

Dr Botchwey dismissed as simplistic the view that in spite of his repeated appeal for private investment to enable Ghana to break away from dependence on aid, the response of investors has been lukewarm. He said the country can boast of new investment of about 1.5bn dollars in the mining sector. However, the manufacturing sector is lacking in foreign direct investment. The minister attributed this to what he called the intense global competition for such investment which makes it imperative for Ghana to do more to project herself in strategic key countries.

Dr Botchwey was asked whether he had not implemented IMF and World Bank stabilization policies too far to the detriment of the very private sector he ceased to foster. He replied that government does not believe in levying high tariffs or banning imports to protect the domestic manufacturing sector which itself is so import-dependent. On the other hand, the microeconomic policies of the government to bring down the budget deficit are vital to lower inflation and cost of credit and to stabilize the exchange rate so that the private sector can plan ahead.

Dr Botchwey also reacted to a question on divestiture which some observers see as moving at a slow pace. He said the government will now involve merchant banks to do the sale of the enterprises concerned. This is because it is anticipated that the banks will operate much faster than the divestiture implementation committee.

Another critical issue raised with Dr Botchwey was whether Ghana's economic recovery programme had not worsened poverty instead of eradicating it. In reply, he said a living standard survey which looked at income and expenditure shows that the poor are not worse off. Besides, there is no evidence that the programme has created new classes of poor people.