Ghana’s once golden economy plunges to ‘ground zero’

Expectations of a windfall from the discovery of oil have been dashed by a weakening cedi, with ordinary citizens feeling the pinch.

“Prices of ingredients in the market have been changing almost every month,” Anastancia Bokpe, who runs a restaurant in the east Legon suburb of the capital, complained to Reuters. “We are already in a severe hardship and things are only getting worse.”

Ghana’s modest oil-boom growth has been outpaced by its debt obligations to banks, global lenders and national governments. The government of President John Mahama finds itself in the unenviable position of signing for new loans and taking on new debt. The currency–the cedi–is now rated “the poorest performer in the global market.”

In less than a year, the cedi lost 30 percent of its value against the dollar, reported Bloomberg News.

“That’s the biggest drop in the world today after Somali shilling among more than 150 currencies tracked by Bloomberg. Its year-to-date loss of 21 percent is the worst in Africa.”

Finance Minister Seth Terkper, in his recent mid-year budget review, cited falling prices for coffee and gold and rising debt obligations.

“Ghana’s total public debt stock, which stood at US$19 million at end-December 2012, increased to US$24 million at the end of December 2013," he confessed.

“Assuming economic growth of five to eight per cent a year, annual foreign debt payments are still projected to reach 15 per cent of government revenue by 2020 and over 20 per cent by the mid-2020s,” observed the UK-based Jubilee Debt Campaign.

To keep up with the payments, Ghana has borrowed from the World Bank and IMF, private lenders and foreign governments – all of whom demand an onerous rate of interest. In May, besieged by citizen protests, President Mahama promised that Ghana would adopt a “home grown” stabilization policy rather than an IMF financial assistance program with spending cuts and reduced public sector wages. That pledge, it seems, could not be met.

Accepting an IMF loan erases all achievements from previous years, warned Afro-China academic, Dr Lloyd Amoah.

“Once we go to the IMF and conform to its policy prescriptions, the final nail will have been driven in the (past president John) Kufuor’s legacy… it is all but gone… in effect we [are] back to economic ground zero,” he wrote on his Facebook page.

Speaking recently to a summit of Young African Leaders, President Obama said there was a legitimate discussion to be heard around debt forgiveness.

A proposal to cancel the trillions in debt owed by Ghana and other African nations may be coming up before the Group of Seven rich nations, he said.

“I think there’s genuine openness to how can we help make sure that countries are not saddled with debts that may have been squandered by past leaders, but that now hamstring countries, making them unable to get out from under the yoke of those debts,” Obama said.

Critics, such as the Jubilee Debt Campaign, insist on 100 percent cancellation of Africa’s debt, and to switch to a system of grants for poor countries, rather than loans.