Global Economic Positioning

The rich economies are prepared to spend $2 trillion to rescue their financial infrastructure. For nearly a decade now, Africans have been demanding extra funding to the tune of $60 billion a year to accelerate its development – a mere 3% of what is being pumped into the western financial systems today to maintain socio-corporate standards there. The UN Under-Secretary General and Executive Secretary of the Economic Commission for Africa, Abdoulie Janneh, said the current economic downturn could cost Africa $251 billion in 2009 and $277 billion in 2010 in export earnings, despite earlier predictions that the continent would not be hard hit. So whatever is on offer to countries like Ghana by the IMF and World Bank only follows the old pattern of development assistance never matching what is taken out from Africa. Unfortunately, once again, (a little over a year after Ghana issued its first sovereign bond on the international capital market) we have been forced by exogenous circumstances to make a u-turn to over-dependence on the Bretton Wood institutions for our development spending. And we are being told to adopt a kind of fiscal discipline which the developed world is also finding to be fundamentally contradictory to their programme for stimulating their economies today.

Much noise has been made both in Ghana and elsewhere about Ghana’s ‘extraordinarily huge’ 2008 budget deficit of 11.5% of GDP. Indeed, the Ghanaian government has allowed it to serve as a roadblock in the way of maintaining, let alone increasing, the momentum of development Ghana has experienced in the last seven years. It is worth noting that in America the Congressional Budget Office estimates that the U.S. budget deficit will reach $1.85 trillion this year, 13.1% of GDP. Furthermore, they project deficits averaging over $1 trillion a year for the next 10 years, which will raise the U.S. public debt-to-GDP ratio to over 80% by 2019. Ghana’s total public debt stood at $7,742.4 million in May 2009, representing a debt-to-GDP ratio of 49.2%. Both huge budget deficits were necessary responses to national crisis and imperatives. In Ghana’s case the energy crisis of 2007 and the urgency with which Ghana needs to invest in its infrastructure and respond to a rising cost of living contributed to our unusually high deficit.

In July 2005, when heads of the world’s leading industrialised countries (the G8) pledged to step up development aid by $50 billion by 2010, with half of the increase going to Africa, African leaders hailed it as a significant high-gear shift in development aid from the developed world. Barely four years later, what we know today is that a lot more money can be found for productive investment to push millions of Africans out of poverty. U.S. development assistance to Ghana in 2007 – about $55 million – was nowhere near that befitting a nation carrying the kind of strategic weight that contemporary Pentagon thinking suggests. In real terms it is little improvement on the 1994 assistance of $38 million, plus $16 million in food aid. President Bush contributed an extra $547 million support from the Millennium Challenge Account. But this was given when America’s strategic flirtation with Ghana was purely based on its interests in Ghana as a geographical location for AFRICOM rather than the additional oil value it has today.