23 Ghana

Smith

Ghana’s government, however, didn’t decide to inflate the debt away; instead it just defaulted. This was a wise move. 58% of Ghana’s government debt is owed to foreigners, so defaulting on this drastically lowers the country’s overall government debt burden even as it also makes the government less vulnerable to further downward currency movements. The default will hurt, for sure, but it will also restore confidence and make it much easier to get a bailout from the IMF — which Ghana is currently doing.

In other words, Ghana basically did a speedrun of its emerging market crisis, getting the pain over with and skipping to the recovery phase. Ghana defaulted before A) the exchange rate crashed severely, or B) the central bank was forced to hyperinflate.

It appears that Ghana’s leaders have become addicted to the cycle of debt and bailout — this is the 17th time the IMF has helped them out of debt

So much of the borrowed money was spent trying to start an oil industry. Ghana is a poor country that needs to escape poverty any way it possibly can, but at the same time, its fundamental challenge is escaping the Resource Curse. Investments should be focused on manufacturing — on infrastructure, education, and capacity building, and perhaps on export incentives. If Ghana’s oil industry had worked out, its economy just would have become a bit more like Nigeria’s — and that is not a desirable goal.

Noah Smith (2022) Ghana you were doing so well

Tooze

On December 13 Ghana reached staff-level agreement on a $3 bn IMF credit package. In addition it is seeking to negotiate a 30 percent haircut with private creditors on tens of billions in bonds. Already in September Ghana’s 2026 eurobonds plunged to a record low of 59.30 cents on the US dollar. By the end of October yields had surged to 38.6 %, up from less than 11% at the end of 2021. Meanwhile, inflation is headed to 40 percent and the cedi is the worst performing currency not just in Africa but of all currencies in the world.

You could shrug and say that this is Ghana’s second IMF deal in 3 years and its 17th since independence in 1957. Plus ça change. But it is more than a national crisis. It is the latest sign that the entire model of market-based development financing is in crisis.

The fact that borrowers like Ghana find themselves in trouble at this moment is not surprising. The hiking of interest rates occurs in waves and whenever it happens it hits the weakest. We don’t call it a global dollar credit-cycle for nothing. This year, as the Fed has hiked, the average emerging-market dollar yield has doubled to over 9%. Debt issued by stressed frontier market borrowers has seen yields surging to 30 percent or more.

But to treat the news from Ghana as “just another predictable crisis”, is to trivialize and to fail to grasp the significance of the current moment.

Ghana is an important African success story. In recent times it has been the site of sustained efforts to improve labour practices and the terms of trade for peasant cocoa farmers. In 2020 its stress-free elections contrasted favorably to the democratic anxiety in the United States. Ghana has been praised for its efforts to extend health insurance to 70 percent of the population, topped up with cash benefits for the poorest. Accra boasts a vibrant fashion and design culture. The interior is touted as destination for adventurous trekking tourists.

An ample flow of money was key to this success story. And not just the volume of funding mattered, but how it flowed.

The Ghana crisis matters beyond its immediate impact, because it was the poster child for this[development] model of private finance. Ghana issued its first eurobond for $750mn in 2007 and has since become a leading example of a country financing development through private borrowing abroad.

And beyond the resolution of any particular debt crisis the next question that must be top of the agenda is simply: what comes next? If debt is not sustainable, how is Africa’s urgent and huge need for capital to be met? The current level of poverty across much of Africa and the pressure of population growth can make calculations of debt sustainability and long-term viability seem quaint. Africa has no long-term, sustainable future without investment.

Ghana illustrates this pressure in microcosm. At independence in 1957, at the beginning of its trajectory of repeated renegotiations with the IMF, Ghana’s population was roughly 6 million. Today Ghanas’s population is 33 million, more than five times larger. Ghana’s capital Accra is now one of the hubs in a giant conurbation that stretches from Abidjan in Ivory Coast to Lagos in Nigeria. This huge and rapidly growing population desperately needs capital investment to meet basic needs, let alone keep up with rapidly-developing Asian economies.

Tooze (2022) Chartbook #181: Finance and the polycrisis (6): Africa’s debt crisis

Zaitchic

In early 2023, I spent several weeks traveling in Ghana’s far northern savanna and meeting with farmers who are the supposed beneficiaries of “improved” patented seeds. With a dry season that lasts up to eight months and worsening droughts, the region would seem a poster child for agricultural programs ostensibly motivated by climate and humanitarian concerns. Yet in village after village, farmers received and discussed the details of the new Western-backed seed regime with wariness, confusion, and anger.

Early one morning, I joined a gathering of seven farmers inside an adobe municipal building on the outskirts of Paga, a market town near Ghana’s border with Burkina Faso. The group had convened at the invitation of Isaac Pabia, the 45-year-old national secretary of the Peasant Farmers Association of Ghana. When he isn’t tending his cowpea and cassava crops, Pabia travels the country to update his fellow farmers on policy changes affecting smallholder agriculture, still the most common livelihood in sub-Saharan Africa.

At the top of Pabia’s agenda was a rumor about provisions in the country’s 2020 seed law. Early reports indicated that politicians in Accra had criminalized the saving, sharing, and trading of seeds among neighbors or at local markets. Word was spreading that farmers who shared seeds protected by patents—a concept as foreign to most of them as the genetically modified seeds the patents protected—could be sent to prison. Farmers were particularly worried about the government’s expected decision to green-light a genetically modified variety of the cowpea, a staple of West African diets. Was it possible, the farmers asked, that Ghanaian police could be empowered to imprison cowpea farmers for trading and refining “unregulated” native seed stocks?

“The law is real,” Pabia explained in the local language. “It was written by the companies to control how we use our seed.”

Picking up a copy of Ghana’s Plant Variety Protection Act—based on the same draft law as the proposed African Union protocol—he shifted to English and read Section 60, which stipulates penalties. “A farmer who willfully commits an offense,” he read, enunciating slowly, “is liable on summary conviction to a fine of not less than five thousand penalty units… or a term of imprisonment of not less than ten years and not more than fifteen years.”

Farmers in northeastern Ghana have been cultivating the cowpea—a protein-rich legume that North Americans know as the black-eyed pea—since the Bronze Age. How was it possible that people continuing to farm in that lineage, some 5,000 years later, could face 15 years in prison for infringing property claims on crop varieties based on the local original?

Ghana’s Plant Variety Protection Act is a national variant of a regional and global crusade to integrate every aspect of smallholder farming into the industrial food system.

Fuseini Bugbono, a 64-year-old cowpea and cassava farmer in northern Ghana’s Gundoug Nabdam district, laughs at the memory of Obama’s forays into African agriculture. “Obama came here saying GMOs are good, but his family had an organic garden behind the White House!” he recalled. “All of the Western leaders are like hunters who use poison. They don’t eat that meat. They sell it.”

Zaitchic (2023) The New Colonialist Food Economy](https://www.thenation.com/article/world/new-colonialist-food-economy/)