World Bank devaluation syndrome - More for Ghana
By Ben Mensah
The view of Ghana's first president, the late Dr Kwame Nkrumah, was that countries which were under the control of inter- national finance capital were in the grip of neo-colonialism and had become client states.
In his Handbook of Revolutionary Warfare, President Nkrumah wrote: "The principle of mutual inter-imperialist assistance whereby American, British, French and West German capital extends joint control over the wealth of the non- liberated zones of Africa, Latin America and Asia, finds concrete expression in the formation of interlocked international financial institutions and bodies of credit'.
Listed among such bodies are the International Monetary Fund (IMF) in which the USA holds 25 percent of the votes and International Development Association (ISA) in which the USA again holds 41 per cent of the votes.
Notwithstanding these views, the Osagyefo himself, faced with the realities of Ghana's grave economic situation did not fail to resort to international capital, particularly from the Americans to finance the construction of Akosombo dam which today does not only provide Ghana with hydro-electric power but also rakes in substantial foreign exchange from the sale of power to Valco and some of Ghana's neighbouring countries.
Arguing further the case for international capital to restructure a country's economy, one could cite the example of Japan whose economy was transformed by American capital after the Second World War, into its present buoyant state. One could also cite the case of a Third World country, Brazil, where despite all the reports of doom, poverty and difficulties over the repayment of its colossal debts, the country is still miles ahead of most African countries in terms of higher standard of living for its people. A recent report says, "Brazil, the developing world's largest debtor, chalked up trade surpluses of $13.1 billion in 1984 and $12.45 billion in 1985. It has also built up its foreign reserves to about $9 billion after ending 1983 in the red."
If in the past, ideology has barred countries of the communist bloc from chasing after international capitalist finance, this policy has been reversed and countries like Hungary and Poland have become members of the World Bank drawing on imperialist sources of finance.
However, in order that this writer is not mistaken for an overzealous advocate of international capital some clarification has to be made here in relation to the usefulness of international capital to the economies of countries that face problems. For as can be seen from the experiences of the countries listed above, including Brazil, the emphasis of their economic growth is on the manu- facturing industry where items like aircraft, cars, ammunition, electrical gadgets, etc, are produced and exported at prices determined by the producer countries.
This situation is in sharp contrast with the economies of most African countries whose mineral and agricultural produce are sold on the international market at prices determined by the buyers and not the sellers. And it is this single factor which must be carefully considered by any government that requests for international capital to restructure its economy.
Dr Kwesi Botchwey, Ghana's Secretary for Finance and Economic Planning, despite his known tirades against the IMF/World Bank in his days as Ivory Tower academician is at liberty to follow the footsteps of Dr Kwame Nkrumah and borrow money from the Americans and other imperialist sources to rebuild Ghana's economy. But he has to do this without going to the extreme of taking so much money from the donors that he is compelled to subject Ghanaians to the serious deprivations that result from the implementation of the donors' condition..
Regrettably, Dr Kwesi Botchwey, the latter day apostle of the IMF/World Bank, who is noted for his extremism, has proceeded along the path of wholesale adoption of all the IMF prescriptions to Ghana's economic woes resulting, pre- dictably, in protests including the recent demonstrations in Accra and Tema by the normally docile Ghanaian workers.
Dr Kwesi Botchwey's embarrassment at these protests seems to have forced him away from the Americans and Europeans to distancing himself from the IMF. At his recent press conference in Accra Dr Botchwey said: "As for this problem of devaluation, I would like to leave the IMF out for the moment. I think and, without fear of immodesty, say that I understand the workings of the IMF and the World Bank quite thoroughly. If I may say so myself, that I took a course on that in the University. Rather than lambast the IMF emotionally, we have always insisted on a scientific analysis of whatever they are doing or not doing with us. But leave the Bank out for the moment."
After attempting a rationalisation of the measures taken so far under his economic recovery programme Dr Botchwey concluded that it does not take the IMF to tell them to do something about. "We are not bogged down," he said. Unfortunately for Dr Botchwey, the lie to his statement can be found in the latest report of the World Bank, titled Ghana - Towards Structural Adjustment, which suggests that Dr Botchwey is merely implementing the Bank's blueprint for Ghana. The report begins with a summary of Ghana's econ- omic problems and concludes that, "given the still sad state of economic, social and administrative infrastructure, and the depleted manpower base, any pause in the reform effort at this stage risks erosion of the gains already registered. There is often no escape from a well-planned simultaneous attack on the country's underlying problems on several fronts."
What are the main elements of such a programme? On agriculture the World Bank notes that its recovery depends on the performance of cocoa. The multiplier effects of a cocoa sector recovery in incomes, employment, export earnings and government revenues far exceed the beneficial results from any other sector. Projections are that production will increase to 230,000 tons by 1988 and a stronger increase through 1995 to 300,000 tons. Timber is looked upon as offering high short-term potential provided the large investments planned for it materialise.
Revitalising mineral production is also said to need both substantial investments in rehabilitation and management reform in the public corporations. The potential is greatest for gold and bauxite, while manganese and diamond reserves may be approaching exhaustion. Manufacturing growth in the short run is heavily de- pendent on the availability of foreign exchange for production, maintenance and rehabilitation needs.
Though the report notes that food and industrial crops growth will also require improved incentives, the Bank's attitude amounts to casual analysis of an area whose proper management would mean the pro- duction of enough rice, maize, yam, etc, both for home consumption and export. The advantage here in food production is that unlike the cash crops whose prices are dictated by the buyers, Ghana's surplus rice or maize will sell on the world market at the same prices the Americans, British, French, etc, dispose of theirs.
Dr Kwesi Botchwey's embarrassment at these protests seems to have forced him away from the Americans and Europeans to distancing himself from the IMF.
On industry, the World Bank report notes that the principal tasks are to raise capacity utilisation while developing a policy framework that encourages a restructuring of the sector to correspond more closely to Ghana's comparative advantage by reducing import dependence and increasing export orientation. This strategy requires increased allocations of foreign exchange to help the sector utilize viable existing capacity more fully and carry through essential rehabilitation.
Ghana's manufacturing sector is dominated by food processing, wood products and textiles. With beverages, cigarettes and garments, they account for about 65 per cent of output and 74 per cent of employment, excluding petroleum refinery. The successful export of canned palm nuts, for instance, by the Nsawam Cannery to the European markets, should lead to an increased activity in this area. The World Bank's condemnation of the way the banking system has been undermined by policies of the PNDC is reflected in its recommendation that the banks and other financial institutions will need to be revitalised in order to aggressively mobilise savings and win back the trust of depositors through additional public assurances that bank confidentiality will be respected. This must be an obvious reference to the PNDC's seizure of savings beyond 50,000 cedis in the early days of the revolution and the rampant freezing of individual bank accounts as a means of punishment.
The World Bank also alluded to tensions in the Ghanaian society which have forced into exile many Ghanaian entrepreneurs with access to sources of private in- vestment. The report emphasized that the private sector will need to play a key role in the recovery programme but this will require policies designed to improve private sector confidence. This recommendation certainly explains a strange editorial comment in the People's Daily Graphic of November 8, 1985, appealing to exiled Ghanaian entrepreneurs not to allow stories of repression at home from their local representatives to deter them from returning home.
Speculations over further devaluation of the cedi from 90 to possibly 100 cedis to the dollar before the middle of the year are deeply rooted in the report of the World Bank which states that even though substantial progress has been made, given the large initial disequilibrium, considerable further adjustment is required before the exchange rate approaches appropriate level.
Compare this with a recent statement by the Governor of the Bank of Ghana, Mr J.S. Addo that the government will continue its flexible exchange rate policy and the message is that the value of the cedi which stood at 2.75 to the dollar when Flt-Lt. Rawlings overthrew the elected government in December 1981 will continue to tumble in accordance with the World Bank/IMF prescriptions and under the supervision of Dr Kwesi Botchwey. ...
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