Ghana’s finance minister says global investors are unfair to Africa

Ken Ofori-Atta 61, worked at Morgan Stanley and Salomon Brothers before returning in 1990 to Ghana, where he helped found Databank Group, a leading West African investment banking and fund management company.

In 2017 he became Ghana’s minister for finance and economic planning, focusing on cutting the country’s budget deficit to below 5% of gross domestic product and exiting an International Monetary Fund bailout program in April 2019.

Then the pandemic dealt a blow to GDP growth, which had exceeded 6% for three straight years. The government redirected its energies toward keeping its people healthy and safe.

Ofori-Atta has played a leading role in helping to negotiate a debt standstill for African countries. He spoke with Bloomberg Markets in early July about Ghana’s fiscal challenges, inequities he sees in the global financial infrastructure, and his reaction to the global racial justice movement sparked by the killing of George Floyd in the U.S.

EKOW DONTOH: What are the main challenges that Ghana is facing amid the Covid-19 pandemic?

KEN OFORI-ATTA: This is probably the phenomenon with the greatest economic impact since World War II, at least for Africa. Ghana started the year on an incredible note. We had expected 6.8% GDP growth, and now we realize there is going to be a steep drop—we are expecting growth of 1.2%. The deficit, which we had jealously guarded and kept under 5%, is now expected to widen north of 10%.

We had to respond very quickly to the economic impact of the virus. At the center of it was not economic development per se but the quality of life and dignity of our people. So the president [Nana Akufo-Addo] was swift and decisive and put together a $100 million program to ensure that we protect the sanctity of life. We [then created] another $219 million social intervention program and distributed 400,000 packets of food to vulnerable citizens. We gave health workers tax exemptions and 50% of their salaries as bonuses. We realized that about 90% of the Ghanaian economy may be informal, so [as part of the $219 million program] we put together the $120 million Coronavirus Alleviation and Business Support System, which seeks to impact about 250,000 lives with soft loans.

We have been charged by the president to put together a [post-Covid] stabilization and revitalization program [dubbed GhanaCares] for the next three and a half years. So the next six months will be the stabilization program to make sure that we don’t move from recession to a depression. We expect a steep drop in growth and a three-year slow slide before we come up again, what I call the trapezoid growth.

ED: Tell me about the African effort to win a debt freeze.

KO-A: I worked with African finance ministers, especially the South African finance minister, to try and push the G-20, World Bank, and IMF to look at the African situation as exceptional.

We were seeking some forbearance for three years in terms of debt servicing. We were also seeking over $100 billion to support the continent’s health infrastructure and another $100 billion for revitalization of African industries. The G-20 came up with the Debt Stand Still Initiative [DSSI], which most of the continent’s countries qualified for. It sought to give some breathing space for six months, and we hope they will extend beyond that. But there are some clauses in the agreements which impact other lenders, and therefore one needs to go to them individually to get a waiver, so it’s a little tricky and cumbersome.

What we are proposing now is somehow to get the SDRs [IMF-backed Special Drawing Rights] to be reactivated—or else quite a number of G-20 countries are not using their SDRs, so [we want to determine] whether that can be lent or put into a bucket so that it creates the liquidity we need.

We also want to create a new special-purpose vehicle which potentially could take all of Africa’s debt and have a triple-A wrap-around to make it cheaper. This may be a new mechanism for financing and getting to the capital market at a cheaper rate to de-risk the African risk, which we think is unfair: There is no basis for us borrowing at 6%, 7%, or 8% while other countries borrow at cheaper rates. Argentina has defaulted a number of times, but they are still able to come to the market and borrow at the same rate as African countries do.

One thing that is clear is that the current situation of the global financial infrastructure is not fit for purpose. It’s going to take some strong leadership and compassion to be able to redesign it to make it more effective for everyone. When you look at the risk premium put on African countries you just question, why? You question whether the philosophical economics are correct. What is an economy of mutuality that will make the world much more efficient and enable us to progress in a much more balanced way?

ED: What do you think about the racial justice movement spurred by the police killing of George Floyd in the U.S.?

KO-A: As they say, “In the end we may not remember the words of our enemies, but we will remember the silence of our friends.” The George Floyd thing has illustrated a whole kind of spiritual stupor in which people have accepted things as they are without realizing that they were being killed spiritually. The systemic racism is so deep that even the good White person is not aware of how the system is structured, so you will walk to a policeman as a White person to seek a resolution to a problem, and maybe a Black person won’t.

It’s a chance for the world to rethink and to recalibrate. Four hundred years after the first African slaves landed in Virginia, it’s an opportunity for Blacks in Africa and Blacks in the diaspora to begin to see ourselves as one people and really be restless until we take this yoke off our necks. It is depressing, it is sad. It is up to us to now see and ask: What is humanity? And all of humanity is at risk if we don’t rediscover ourselves as a people.