What are the Bretton Woods institutions up to?

Many well meaning Ghanaians are beginning to question the intentions of the Bretton Woods institutions, saying that the institutions appear to laud governments when they are in power, and turn to show their real shortcomings when they leave office.

Just before Ghana’s transition last week, a number of reviews presented on the country’s economy by experts from the World Bank and IMF described the economy as worse off than what the past administration had inherited in 2000.

In a report signed by the Bank’s Country Director in Accra, Ishac Diwan, the World Bank had warned that Ghana’s new government would inherit high Fiscal and Balance of Payment (BoP) deficits that were unsustainable, given the current state of international financial markets.

With reference to mid-December data provided by the Bank of Ghana (BoG) and the finance ministry, the document states that Ghana would have to spend 14% of its total Gross Domestic Product (GDP) to service its fiscal deficit, while the balance of payment deficit would be larger.

Dr Gobind Nankani, Former World Bank Vice-President, Africa Region paints an even gloomier picture in a write-up on challenges facing the new administration, saying that the situation is worse than it was in 2000.

According to him, fiscal deficit was 10% of GDP in 2000, fell to 3% in 2005 and rose to 10% in 2007. He noted that it would be about 12 - 14% as the new government assumes power.

He points out that the fiscal deficit threatens to increase the national debt to unsustainable levels, adding that from a current level of 55%, the debt to GDP ratio could rise to three digit levels, with serious consequences for inflation, which hits poor people the most.

He also indicated that expenditure levels set in 2008 are not sustainable since they were financed in part by drawing down on proceeds of the sovereign bond, by the sale of GT and other one-off sources of revenue.

Following the report, a number of social commentators in the country have indicated their surprise at the sudden turn of the stance of these institutions on the current health of the economy.

A renowned economist working with one of the local economic think tanks who wanted to remain anonymous stated that the Bretton Woods Institutions had assisted the NDC administration in implementing a number of economic recovery programmes, and hailed them all along.

“As soon as the NDC government left office in 2000, they were described as the, worst economic managers the country has ever had”, he said.

The same institution, according to him, had touted the NPP administration as doing the right things that had put the country on a sound footing, even in the wake of serious global imbalances in the global economy.

He therefore found it mind-boggling that the immediate past government is also now in the limelight as messing up the economy and leaving behind an even worse situation than they met it.

To him, the government should have rather been assisted to do the right things by these renowned partners.

Quizzed on his view of the recent assessment, Magnus Ebo Duncan, Head of Economic Statistics at the Ghana Statistical Service (GSS) stated that the report just considered one aspect of macroeconomic performance.

Mr Duncan was of the view that even though there are clearly some challenges at the fiscal front as the report indicated, it would have been a better examination if the report had also considered where the extra spending went.

To him, massive injections in a number of important projects in the road construction, electricity, and water sectors were of immense benefit to the overall development of the country.

His superior, Dr Grace Bediako, the Government Statistician, also answered this paper’s enquiry about the current situation of the economy, saying that indicators such as inflation and GDP estimates that the GSS works with point to the fact that the country’s economy has remained fairly resilient in the wake of the recent global turmoil.

“Inflationary tendencies have been calmed, and growth has also been sustained in recent times,” she noted.