ABSTRACT
Ghana has had a well-documented dalliance with many donor countries and multilateral donor agencies since the 1960s. However, in his Independence Day speech in March 2017, the President, Nana Addo-Dankwa Akufo-Addo signaled his intent to pursue the vision of a Ghana that is not dependent on aid. This led to the commissioning of the Ghana Beyond Aid Committee to draw up the roadmap for achieving this objective. The main objective of this study therefore is to examine the government’s new direction of taking Ghana beyond aid to know what it means, the options to foreign aid the government seeks to explore and how it intends to achieve this aspiration as well as the prospects and challenges that could result from this new direction. To achieve the set objectives, the study employed qualitative methods by relying on primary and secondary sources which include face to face interviews, books, journal articles, reports and internet sources. The study found that the approach to a Ghana Beyond Aid is not a radical rejection of aid. Rather, it takes a gradualist approach by building capacity to go beyond aid. It also found that aid will be leveraged alongside domestically mobilized resources to eventually go beyond aid. These alternative sources to aid include both foreign and domestic options like a 100 year sovereign bond, municipal bonds as is the practice in Rwanda, broadening the tax base, fiscal prudence in the public sector and leveraging natural resources as has been done in the 2018 Sinohydro agreement. The study concludes that although the vision of a Ghana beyond aid is a laudable one, it can be achieved when there is agreement among politicians on the direction of the nation when it comes to its development trajectory.
CHAPTER ONE INTRODUCTION
Background to the Study
Ghana’s circumstance at independence was marked with high optimism about its chances of development and economic self – sufficiency. According to Rooney (2007), “[the] way had been prepared.” Rooney based his assertion on certain institutions that were existing at the time. These included: a strong judicial system which had a good representation of Ghanaian graduates, a standing army although comprising mainly of British soldiers and a Ghanaian Civil Service that the British put a lot of effort into training. Economically, Ghana’s prospects were not bleak either. Although efforts to diversify the economy by the British had yielded little by way of results, prospective industries like bauxite and timber gave reason to be optimistic. Also, Ghana was the largest exporter of cocoa beans which sold on the international market at over $850 a ton from 1956 onwards (Gocking, 2005). Aside being the world’s leading exporter of cocoa, it also boasted $ 151 million in total foreign investment and an additional £182,622,000 in external reserves (Jonah, 1989). These figures give a clear indication of the robust economy Ghana had during independence.
This seeming advantage at independence however did not remain so since by the time Dr Kwame Nkrumah was toppled, the country’s economy was in crisis due to falling cocoa prices and almost depleted foreign exchange reserves due to it being used to finance developmental projects, especially the building of factories and the establishment of
statefarms. As a result, by August 1962, Ghana approached the IMF for $14.25 million to ease balance of payment deficits (Jonah, 1989).
Nkrumah’s removal from office through a military coup did not ease the economic crisis either. There was widespread cocoa smuggling from Ghana to Togo and La Cote d’Ivoire during the period of NLC rule (Gocking, 2005) and the country was in severe economic crisis such that Western countries gave food and medical aid to the country. The regime thus courted the IMF in a bid to secure the funding it needed by giving the assurance that it would honour all outstanding debts. The above notwithstanding, the Gross Domestic Product which was negative in the 1960s, further reduced by 3.2% per year from 1970 to 1981. Hyperinflation also had risen to 116.4% by 1975 (Ghana: A Country Study, 1995). By the early 1980s, Ghana’s economy was in an advanced state of collapse.
With the coming into power of the PNDC through a coup in 1981, the government began to implement the World Bank/ IMF prescribed Economic Recovery Programme following a severe drought. Over time, Ghana became a favourite in the books of the IMF/World Bank – a ‘star pupil’ (Whitfield & Jones, 2009). This was the period when aid became entrenched in the country’s economic planning. During this period, aid which in 1984 amounted to $400 million, was by 1989 almost $1 billion (Gocking, 2005). Also, Gross National Product (GNP) rose to 5.5% by 1984 and remained so for the rest of the decade (Gocking, 2005). This not only led to massive injections of donor support from the World Bank but also saw an accrual over time of debt that had to be paid with interest.
By the end of the PNDC/NDC regime, aid and donor agencies had become entrenched in national economic planning. The coming into office of the New Patriotic Party (NPP) did not alter things significantly since aid agencies had not only become vital to the state
machinery but also, 40% – 50% of government expenditure was financed by donors (Whitfield & Jones, 2009). The inability of successive governments, including the NPP, to manage the debt led to Ghana signing onto the Highly Indebted Poor Country (HIPC) Initiative during the presidency of John Agyekum Kufuor. This initiative as well as it signing on to the Multilateral Debt Relief Initiative (MDRI) when it came into existence in 2005 resulted in Ghana’s external debt falling from $6.6 billion in 2003 to $2.3 billion by 2006 (Jones, 2016). The debt relief notwithstanding, Ghana had to make concessions regarding the formulation and implementation of economic policies.
This economic model has proven difficult to overcome. Rather, it has grown. The country’s dependence on foreign aid has also seen more Chinese aid in the form of project financing in building major infrastructure such as roads, zero interest loans, grants and technical assistance in the field of agriculture, health and telecommunications (Davies, Edinger, Tay, & Naidu, 2008). In recent times, barter – natural resources in exchange for infrastructure have also formed part of the aid environment in Ghana.
However, the second NPP administration under the leadership of Nana Addo Dankwa Akufo-Addo has signalled its intent to change the status quo. In his speech during Ghana’s 61st Independence anniversary on 6th. March, 2018, Nana Addo Dankwa Akufo-Addo made it clear that continually receiving aid was not the path that any country could use to develop. In that speech, he makes it clear that aid would never be sufficient to spur growth to a developed status.
Based on this speech, one can say that there seemed to be a genuine desire by the President to see the country gradually wean itself off aid and all the terms and conditions they come
with and in this regard, what Ghana Beyond Aid means, the options to aid the government seeks to explore and how the current administration intends to implement it will be probed.
Statement of the Research Problem
Ghana, like many African countries, has its own fair share of problems. The most prominent among them being its financial challenges. Though at independence Ghana could boast of having of considerably high foreign reserves, she lost the ‘advantage’ that she had with her modest foreign reserves. Consequently, in the years following the overthrow of Dr Kwame Nkrumah, the nation’s first president, Ghana was heavily reliant on foreign injections of cash into its economy to not only stabilize it, but to also stimulate its growth.
The result of this continual dependence on aid is that it has left the country at the mercy of these foreign ‘donor partners’ since there were conditionalities that came with these financial aid packages. These have included over the years currency devaluation, retrenchment of Civil Service staff, the Economic Recovery Program I & II under the PNDC/NDC and the Highly Indebted Poor Country (HIPC) Initiative during the first New Patriotic Party administration. The more recent phase of the dependency has been some form of barter for infrastructure, mainly natural resources with the Chinese. The above aside, the country’s budget is significantly supported by donor partners to address budgetary shortfalls. All these point in no small terms to Ghana’s dependency on other nations and monetary organisations especially the Western ones for aid in every form it comes.
The Presidency of Nana Addo Dankwa Akufo-Addo, however, has seen the issue of aid dependency gaining traction due to his stated desire to end the country’s aid dependency. There is therefore the need to give particular attention to Ghana Beyond Aid and assess it to know what it means, how it will be implemented and the alternatives to foreign aid that the current administration is considering as well as the likely effects – both positive and negative that could arise from its implementation.
Research Questions
- What is meant by Ghana Beyond Aid?
- What is the extent of Ghana’s aid dependence?
- What are the alternatives to aid dependence?
- What are the prospects and the challenges that could arise from the execution of this agenda?
Research Objectives
- To interrogate the Ghana Beyond Aid agenda
- To ascertain the extent of Ghana’s aid dependence
- To examine the alternatives to foreign aid
- To determine the prospects and the challenges that could arise from the execution of this agenda on Ghana
