Reviewing Ghana’s Economic Policies Within the Context of Geopolitical Changes
By Professor Maurice Okoli
The Executive Board of the International Monetary Fund (IMF), after several stages of negotiations, has finally approved a 36-month arrangement under the Extended Credit Facility (ECF) in an amount equivalent to SDR 2.242 billion (around $3 billion or 304 per cent of quota) for the Republic of Ghana.
While this Credit Facility Arrangement for Ghana is presumably necessary for the country’s economic recovery, it is also necessary to examine the governance system adopted in the country.
In recent years, Ghana has found itself in an economic crisis – brought on by excessive borrowing – and a resulting need for debt restructuring. As the government seeks to navigate this difficult situation by returning to the IMF, it is important to outline economic restructuring, including structural governance.
As we all know that life after COVID-19 will never be the same, several reports monitored indicated that COVID-19, which began in 2019, combined with the current Russia-Ukraine crisis, have had devastating effects across the world. African countries are the hardest hit. Many West African states like Ghana, located on the Atlantic coast and a member of the regional organization, Economic Community of West African States (ECOWAS), are equally facing serious similar economic challenges.
But analyzing the implications of Ghana soliciting assistance from the IMF, the country is on the brink of entering a period characterized by market stability and diminished uncertainties following the International Monetary Fund’s (IMF) approval of the $3 billion deal.
Many experts have blamed political, economic and energy crises, which spiral negative sentiments and discontent on mismanagement. For example, a renowned American Professor of Economics, Steve Hanke, has chastised Finance Minister Ken Ofori-Atta for mismanaging the Ghanaian economy.
Professor Hanke, who is a hard critic of Ghanaian authorities, in a tweet, was surprised about Ofori-Atta’s position that he’s disappointed foreign lenders have been slow to act in supporting Ghana’s quest to get a programme from the International Monetary Fund.
“As 33 African countries suffer from record debt burden, Ghana’s Finance Minister, Ken Ofori-Atta is disappointed that foreign lenders had been ‘slow to act’, but instead of recognising mismanagement, he is blaming creditors for Ghana’s debt burden,” Professor Hanke concluded.
As an experienced Economist who have been teaching courses in economics or related subjects, I would like to suggest that Ghana takes advantage of the current economic challenges to reset interest rate to accelerate private sector growth and quicken the recovery of the economy. In this case, the private sector led the economic recovery process post the domestic debt exchange programme. It has further identified the opportunities in the current economic crisis that can leverage to spur private sector growth.
The next step supports the private sector and their performances as the engine and driver for long-term growth, despite the turbulent economic situation, particularly in the country and in the West African region and generally across the world.
Overall, the most critical step now is improving the quality of governance in Ghana, and that would require the government to address issues such as weak institutions, lack of accountability and ineffective public services. This would involve increasing transparency in government operations, strengthening institutions such as the judiciary, and improving public service delivery.
But one more significant question, as I have already pointed out, is to ensure good governance and build confidence in public institutions. It could be a positive indication and the trust that the economy needs to bounce back and attract foreign investment in the areas for public-private collaboration.
Quite apart from that, it is an additional advantage that Ghana hosts the headquarters of the African Continental Free Trade Area (AfCFTA), described as a unique and valuable platform for businesses to access an integrated African market. This could be the strongest dimension to build intra-trade and cooperation with neighbours in West Africa.
With economic growth and sustainability concerns, it is highly suggested that Ghana reviews its imports and attempts to focus more on import substitution policies and the areas it natural comparative advantages. It refers to the implementation of policies and measures that aim to address a country’s food security and self-sufficiency. It helps to cut import expenditures and redirect finances to support domestic food production. It reduces budget deficits and addresses financial imbalances leading to the improvement of economic sustainability.
One way to achieve this is by implementing policies and measures that reduce government spending and waste. This could involve a combination of measures such as rationalizing government programmes, reducing subsidies and cutting non-essential expenditures. The goal is to create a leaner, more efficient government that can better manage its finances.
This could involve strengthening budgetary controls, improving public financial management systems, and enhancing the transparency and accountability of government finances. By doing so, Ghana can ensure that public funds are used efficiently and effectively – and that the country’s fiscal position is sustainable over the long term.
As the IMF reported, the authorities’ economic programme, supported by the ECF arrangement, builds on the government’s Post Covid-19 Programme for Economic Growth (PC-PEG), which aims to restore macroeconomic stability and debt sustainability and includes wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth.
Securing timely debt restructuring agreements with external creditors will be essential for successfully implementing the new Extended Credit Facility (ECF) arrangement. The Executive Board’s decision will enable an immediate disbursement to Ghana equivalent to SDR 451.4 million (about $600 million). The authorities have taken bold steps to tackle these deep challenges, including by accelerating fiscal adjustment, revenue administration and public financial management, and steps to address weaknesses in the energy and cocoa sectors.
However, it is focused on restoring macroeconomic stability and debt sustainability and implementing wide-ranging reforms to build resilience and lay the foundation for stronger and more inclusive growth. Ms Kristalina Georgieva, Managing Director, explicitly said in her message that “An ambitious structural reform agenda is being put in place to reinvigorate private sector-led growth by improving the business environment, governance, and productivity.”
Ghana has an economic plan known as the “Ghana Vision 2020”. This plan envisions the first to become a developed African country between 2020 and 2029 and a newly industrialized country between 2030 and 2039. As of 2019, it was the 7th largest producer of gold in the world. It is a leading producer and exporter of cocoa to Europe. The Republic of Ghana, with a population of over 32 million, is located on the coast of West Africa.
Professor Maurice Okoli is a fellow at the Institute for African Studies and the Institute of World Economy and International Relations, Russian Academy of Sciences. He is a fellow at the North-Eastern Federal University, Russia
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Russia not Addressing Sustainable Development Goals in Africa—Nyongesa
By Kestér Kenn Klomegâh
liThis short but insightful interview conducted by Kestér Kenn Klomegâh with George Nyongesa, a Senior Associate at the Africa Policy Institute in Nairobi, Kenya, and a Tutorial Fellow and PhD candidate at the University of Nairobi, focused concretely on Russia and Africa relations, Russia’s ineffective policy strategies and challenges in implementing its policy goals in African countries. Here are the excerpts.
Historically, Russian influence on African countries has largely pivoted around hypersonic anti-Western rhetoric; but does such still have relevance in post-colonial and independent African countries
Russia has long had cordial relations with many African countries thanks to ties established during the Soviet era, where their shared mistrust of the West and similar economic and ideological goals frequently led to alignments. However, the nostalgia for the former Soviet Union is waning along with the generation of African leaders who benefited from it. This fact continues to undermine Russia’s relevance and perceived usefulness to Africa, especially among the new crop of leaders.
Generally, the younger African generations, who make up a sizable portion of the continent’s population, grew up when Russia had only a semblance of the gravitas of the former Soviet Union. This is noteworthy because the African continent is fast transitioning towards democracy and development. Against this background, the invasion of Crimea and Ukraine has not done much to win Russia the respect of African countries. Besides, numerous new issues arose following the fall of the Soviet Union, and this seems to have overshadowed Russia’s strategic position to work with Africa. Since then, a lot has been lost, and no doubt other powers, especially the Westerners, Europeans and Asians, jumped in to fill the void.
What next for Russia in Africa?
In a nutshell, it is imperative that Russia takes its foreign economic policy initiatives seriously as it seeks an assertive posture on the global stage, even as it juggles its efforts to regain influence in Africa. In the past, anti-western rhetoric worked easy magic in building alignment, but currently, the majority of the continent is largely focused on democratization and economic emancipation.
For this reason, representatives from the United States, the European Union, and even the Gulf States discuss Africa from various angles, but their main focus is on how to establish their economic presence on the continent. For instance, following their previous EU-AU summit, both parties reached a consensus on a number of infrastructure and investment projects. In particular, the EU already has an investment program that they claim would create links, not dependencies, at a cost of €300 billion ($340 billion) to finance new investment initiatives that are similar to China’s Belt and Road Initiative.
As competing global powers continue to court Africa, it is interesting to note that Russia rarely discusses the African Continental Free Trade Area (AfCFTA). The AfCFTA could, at the very least, provide a framework for economic diplomacy towards resetting commercial ties between Russia and Africa. As things currently stand, Russia’s geopolitical stake in the continent of Africa is barely noticeable. For instance, Russian direct investment into Africa is significantly less than that of Europe and North America, totalling less than 1%. Also, Russian direct assistance is scarce, largely symbolic and frequently takes the form of in-kind donations to humanitarian crises or forgiveness of debt. In addition, compared to Africa’s large trading partners like Europe and the United States, trade between Russia and Africa in 2020 totalled $14 billion, or about 2% of the continent’s overall trade.
In summary, it seems the strongest aspect of Russia’s relations with Africa should be robust economic cooperation. If Russia’s foreign economic agency paid attention to AfCFTA, which promises to create a single borderless market, they would find numerous potential opportunities for “win-win” cooperation. It is the Chinese strategic style which challenges Western and European powers even as it capitalizes on localization, production and marketing of consumer goods and services across Africa.
Adesina Says Climate Finance Dearth “Choking” Africa
By Adedapo Adesanya
The President of the African Development Bank (AfDB), Mr Akinwumi Adesina, has lamented that a lack of adequate financing for tackling climate change in Africa has become dire and is “choking” the continent.
He made this known while addressing journalists at a media lunch organized to kick off the 2023 Annual Meetings of the lender in the Egyptian resort city of Sharm El Sheikh.
Mr Adesina called out developed nations for not honouring the $100 billion climate finance pledge they made to developing countries.
“Africa is being short-changed in climate finance. Africa is choking,” he told newsmen.
“Your role as the media is very important to help carry the news – the news of efforts being made, challenges being faced, and the fierce urgency of now in getting much-needed climate finance to Africa,” the bank chief said.
The bank group’s Annual Meetings will allow the bank’s Board of Governors, African leaders and development partners to explore practical ways of “mobilizing private sector financing for climate and green growth in Africa,” in line with the theme of this year’s meetings.
Mr Adesina said the theme was chosen to draw attention to the urgent need for climate finance, hammering that Africa will need $2.7 trillion by 2030 to finance its climate change needs.
“Anywhere you look in Africa today, climate change is causing havoc,” Mr Adesina said. “In the Sahel, hotter temperatures are drying up limited water, causing water stress for crops and livestock and worsening food insecurity.”
The former Nigerian agric minister said that in vast areas of East and Southern Africa, and in the Horn of Africa, a combination of droughts and floods is causing massive losses of people and infrastructure, leading to rising numbers of refugees.
“There is still much to do, as Africa’s private sector climate financing will need to increase by 36 per cent annually,” he said.
Mr Adesina said, “If Africa had that money, the Sahel would have electricity. If Africa had that money, we would recharge the Chad basin, which has provided livelihoods for millions of people in Chad, Nigeria, Niger and Cameroon. Everything will change in all those countries; we will green the Sahel. We will insure every single African country against catastrophic weather events.”
Mr Adesina told the journalists, “Africa’s measured natural capital alone is estimated to be worth $6.2 trillion,” which, if well harnessed, can spur more rapid economic growth and wealth generation.
He spoke about the Bank’s flagship Technologies for African Agricultural Transformation (TAAT) scheme that provides heat-tolerant seed varieties to increase yield in crops such as wheat.
He also gave the example of Ethiopia, which is now self-sufficient in wheat production and plans to export the surplus to neighbouring countries.
AfDB is spearheading climate adaptation efforts across the continent and has devoted 63 per cent of its climate finance, the highest among all multilateral development banks.
It plans to support millions of farmers, enabling them to access climate-resistant seeds. The institution has also launched the Desert to Power initiative to develop 10,000 megawatts of solar power to benefit nearly 250 million people across the Sahel.
The bank and the Global Center for Adaptation have launched the African Adaptation Acceleration Program (AAAP) to mobilize $25 billion to support Africa’s adaptation to climate change.
It has also established Alliance for Green Infrastructure (AGIA), in partnership with other institutions, to mobilize $10 billion in private investment for green infrastructure in Africa.
Nigerians Worry as UK Changes Student Visa Policy to Cut Net Migration
By Adedapo Adesanya
New government restrictions to student visa routes that will substantially cut net migration by restricting the ability for international students to take family members to the United Kingdom have raised worries among Nigerians.
Under the new proposals made on Tuesday, only students on postgraduate courses designated as research programmes can bring dependants to the UK while they study.
The UK Office of National Statistics (ONS) estimated that net migration was over 500,000 from June 2021 to June 2022.
Nigerians have always sought the UK as a prime destination, and many use the switch role, the UK claims to have seen an unprecedented rise in the number of student dependents being brought into the country with visas.
Although partly attributed to the rise in temporary factors, such as the UK’s Ukraine and Hong Kong schemes, last year almost half a million student visas were issued while the number of dependants of overseas students has increased by 750 per cent since 2019, to 136,000 people.
“Last year, 59,053 Nigerian students brought over 60,923 relatives,” the report noted.
The UK government on Tuesday announced the measures that will prevent students from switching “out of the student route into work routes” before their studies have been completed.
There will also be “improved and more enforcement activity” and a clamp down on “unscrupulous agents” using education as a cover for immigration, according to a government statement.
The UK Home Secretary, Ms Suella Braverman, said in a written statement to the UK parliament that overseas students played an important part in supporting the UK economy but added that it should not come at the cost of the government’s “commitment to the public to lower overall migration and ensure that migration to the UK is highly skilled and therefore provides the most benefit”.
Ms Braverman said the proposals struck the “right balance” and would likely see net migration “fall to pre-pandemic levels in the medium term”.
The new reforms will come into effect for students starting in January next year.
The UK government said it would, however, work with the higher education sector to explore alternative options to ensure the brightest and best students can continue to bring dependents when they study at the UK’s world-leading universities.
Following the UK leaving the European Union, the Tory-led government introduced a points-based immigration system, giving the government full control of the country’s borders.
This was designed to flex to the needs of the economy and labour market and ensure the country has the skills and talent needed by UK businesses and the National Health Service (NHS).
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