21.07.2014 Feature Article

Why the IMF/World Bank are to blame for Ghana's economic crisis

Why the IMFWorld Bank are to blame for Ghana's economic crisis
21.07.2014 LISTEN

Readers will know that I have written many articles about the machinations of the World Bank and the IMF. These articles have been written in the main to inform Ghanaians that it is the World Bank and its affiliate institutions that have imposed very dubious policies on countries like Ghana and have consequently destroyed their economies.

This latest article is being written as an update to a front page article in the Public Agenda newspaper that had as its heading "World Bank Exposed", (August 16, 2010 edition).

As I have mentioned in many articles Ghana DOES NOT decide its economic policy, but rather it is the World Bank/IMF that DICTATES Ghana's fiscal, monetary and economic policies. The genesis of this began in the aftermath of the American and British orchestrated coup that led to the overthrow of Ghana's first president Dr. Kwame Nkrumah.

Before February 24 1966, Ghana was on the verge of industrial development that was spearheaded by Dr. Nkrumah's seven-year economic development plan which would have seen its fruition in 1970. See CIA de-classified documents.

By 1966 Ghana had virtually full employment because of the 500 or so industries that Dr. Kwame Nkrumah had established in the country as part of his drive for economic independence - as he said that political independence was meaningless unless economic independence was attained as well.

Some of the industries that Nkrumah built that gave the Ghanaian great employment opportunities included Tema Steel Factory, the sugar factory at Komenda, Ghana Airways and its subsidiaries, GIHOC and its subsidiaries, the Jute factory in Kumasi, The shoe factory in Kumasi, Takoradi Flour Mills, Tomato factories in Northern Ghana, The Akosombo Dam and state hotels like City Hotel and Ambassador Hotel.

Apart from these state industries Ghana's economy was not wholly driven by the dictates of the World Bank but by a government that knew that rapid industrialization was the only way for Ghana to emerge from the shackles of an enslaved colonial economy.

It is fair to say that the World Bank's influence on Ghana at the time of Dr. Kwame Nkrumah's government was nowhere as great as it has been since his overthrow.

Since his overthrow, the grand plans that Nkrumah had for making Ghana a developed economy were put in the thrash can forever when World Bank officials were invited to Ghana by the National Liberation Council in the aftermath of the 1966 coup.

By the way, let us remember that it was the West and their economic instruments that crippled the economy of Ghana between 1964 and 1966 by sabotaging Ghana's economy (because the West were opposed to Nkrumah's programme of transforming Ghana into a developed economy as it would jeopardize their so-called interests in Ghana and by extension the Afrikan continent by deliberately fixing the price of Ghana's main export and revenue generator, Cocoa).

This sabotage led to Ghana not being able to get credit as its revenue was not enough to continue the developmental projects that Dr. Nkrumah had initiated.

Fast forward to 1981-1982 when the PNDC took power it was at this point that the World Bank/IMF began to get its claws deep into the Ghanaian economy. Following the destabilization of 1970's,

Ghana's economy became very weak, the result of so-called advice from the World Bank.

This led to a situation where the PNDC were duped and manipulated by the IMF into accepting flawed economic policies such as the so-called Economic Recovery Programme (ERP) and the so-called Structural Adjustment Programs (SAP).

There were certain conditionalities that the World Bank/IMF inserted in the ERP and SAP's that the PNDC had no option but to accept in exchange for money to re-build Ghana after the mismanagement of the 1970's.The biggest of which was the divestiture or privatization of state enterprises. This meant that many of the aforementioned state enterprises built by Dr. Kwame Nkrumah were either sold off to private investors or just left to rot.

As a result of this callous policy imposed on Ghana by the World Bank/IMF, more than 350,000 Ghanaians lost their livelihood wiping out the full employment that Ghana enjoyed under Dr. Kwame Nkrumah.

This IMF/World Bank policy is the genesis of the mass unemployment that Ghana suffers from today. In addition to this, our strong manufacturing and agricultural base also suffered as many of these industries that were shut down or privatized were producing goods for export that brought in crucial revenue for the country.

Another policy that the PNDC/NDC implemented following 'advice' from the IMF/World Bank was the devaluation of the local currency, the cedi. This was made possible as a result of the importation policies that were adopted by the PNDC/NDC following advice from the IMF/World Bank.

As a result with foreign currency completely drying up for all import transactions, the government was forced to begin a process of gradual devaluation of the Cedi and a liberalization of its strict price controls. This process ended in 1990 with a free float of the cedi against foreign currencies.

Again by accepting the ERP and SAP policies, the influence that Ghana had on its core commodities like gold slowly began to erode culminating in the near total sale of the Obuasi Gold Mines (that has enough gold for the next 500 years) to AngloGold by the NDC 1 administration.

This meant that Ghana as a country did not have any gold reserves on which it could fall back on in times of economic difficulty but more importantly, its receipt of revenue income from gold was substantially decreased, meaning that today Western multi-national gold mining companies like Newmont and AngloGold take up to 98% of the profits from mining outside of Ghana whilst leaving Ghana with a paltry 2%.

It is these very subtle but dangerous conditionalities that Ghanaians are not aware of that have destroyed the Ghanaian economy over time that has created the very precarious situation Ghana finds itself today.

This can be summed up nicely by a quote from Mr. Kwamena Bartels, a former minister of the NPP, who said in May 2001 that "After 20 years of implementing structural adjustment programmes, our economy has remained weak and vulnerable and not sufficiently transformed to sustain accelerated growth and development. Poverty has become widespread, unemployment very high, manufacturing and agriculture are on the decline and our external and domestic debts much too heavy a burden to bear".

Therefore the Ghanaian public must realize that the World Bank despite ALL the hype and its "sincere words" ARE NOT going to help Ghana but cripple it and have crippled it as we painfully witness today.

To buttress this point the above article pointed out that a report entitled Conditionality in World Bank crises-lending to Ghana which stated that the conditions for the receipt of {paltry} loans are increasingly being pushed in through the side door. For example, by being stipulated outside of the loan agreement itself and inserted into Letter of Policy Document thereby contravening responsible financing principles. This (clearly) contravenes the principles for responsible financing as detailed in the Eurodad Charter.

The Charter states that "all details in relation to the loan must be contained within one document. Side letters are NOT permitted".

Therefore if details of 12 conditions upon which the loan is agreed is being concealed then one could interpret this as something sinister going on that is

(a) not in the national interest and
(b) does not help in the issues of transparency and good governance.

I for one have known all along that there are sinister conditions in accepting loans or financial assistance from the World Bank/IMF that cripple a country's economy and as we have seen since the early 1980's conditions that have been attached to the various economic programmes that various administrations of Ghana have embarked upon have had serious consequences on the overall state of Ghana's economy that we witness today with the high costs of importation, a weak manufacturing base, a weak currency, high inflation and high unemployment.

This assertion is confirmed by the Eurodad research that states unequivocally that Low Income Countries (LICs) like Ghana remain under the (significant) influence of the World Bank, especially regarding the management of their primary industries and natural resources and in relation to the design of sensitive policies areas such as fiscal policy and public sector reform.

These areas such as fiscal policy and public sector reform are two of the main reasons why the average Ghanaian and the business community generally speaking have no confidence in the state of our economy despite the hype about GDP and Foreign Direct Investment (FDI).

In terms of the hidden conditions that are inserted into these dubious arrangements one of the things that Ghanaians are not being told of is the possible sale of CORE State assets like Tema Oil Refinery, Agricultural Development Bank, Ghana Commercial Bank, Ghana Broadcasting Corporation and Bank of Ghana.

As far as Public Sector Reform is concerned, this will entail putting a freeze on non-core public sector recruitment as it is the case now, restructuring the public sector that will result in mass unemployment and the decentralization of power.

As I have said on many occasions, Ghana will NEVER SEE real CHANGE and development under the policies prescribed by the World Bank/IMF.

The real change that Ghana needs is revolutionary leadership that will detach itself from the economic enslaving chains of the World Bank/IMF and enact policies that ARE in the national interest.

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