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The government of Ghana has initiated talks with the International Monetary Fund (IMF) for a potential bailout program. A delegation of the IMF concluded a week-long visit to Accra on July 13 and met with officials including Finance Minister Ken Ofori-Atta and Vice President Dr. Mahamudu Bawumia. The proposal has been severely criticized by the Ghanaian left, especially the Socialist Movement of Ghana (SMG), and trade unions.

In a statement released after the visit, IMF Mission Chief Carlo Sdralevich stated, “The IMF team held initial discussions on a comprehensive reform package to restore macroeconomic stability and anchor debt sustainability…The discussions focused on improving fiscal balances in a sustainable way while protecting the vulnerable and poor; ensuring credibility of the monetary policy and exchange rate regimes; preserving financial sector stability; and designing reforms to enhance growth, create jobs, and strengthen governance.”

The IMF has said that it will continue to engage with the Ghanaian government on the formulation of an Enhanced Domestic Program that could be supported by an IMF arrangement. According to reports, negotiations could result in Ghana being eligible for up to USD 3 billion under the Extended Credit Facility and Extended Fund Facility. The programme could extend over three years, the support being conditional on the government meeting certain economic and policy targets. 

“The high cost of living is killing us”

Talks were held just days after Ghana witnessed another round of protests against the spiraling economic crisis. The action was organized by Arise Ghana, which identifies itself as a pressure group, at the end of June to protest the “persistence and astronomical hikes in fuel prices by the Akufo-Addo/Bawumia government”, the “grabbing of State lands” by government officials, “increased rate of police brutalities and state-sponsored killing of innocent Ghanaians”, and the introduction of a 1.5% tax levied on all electronic transactions.

Protestors also demanded a full, bi-partisan parliamentary probe into COVID-19 expenditures and the cancellation of the controversial Agyapa Royalties Deal. 

Official figures show that the inflation rate in Ghana hit 29.8% in June, the highest since 2004. The price of food has shot up by 30.7% over the past year, with inflation of 59.3% in the price of vegetable oil and 65% in wheat flour. Housing, which includes electricity, water and gas, has registered an inflation of 38.4% and commuters are paying over 40% more for transport, with an inflation of 99.7% in diesel prices and 69.4% for petrol. 

The country’s currency, the cedi, has lost 23.5% of its value against the dollar since the start of 2022. Speaking on July 8, President Nana Akufo-Addo stated that the government had sought the collaboration with the IMF “to repair, in the short run, our finances which have taken a severe hit…while we continue to work on the medium to long term structural changes that are at the heart of our goal to create the Ghana beyond aid, that is building a resilient, robust, Ghanian economy.” 

A crisis decades in the making: Socialist Movement of Ghana rejects IMF engagement

The government’s move has been strongly opposed by the Socialist Movement of Ghana (SMG). A statement by the movement read, “The crisis the Ghanaian economy has been plunged into is only a symptom of the collapse of the neoliberal order which has been diligently enforced by the IMF, the World Bank, the centers of power in the colonial metropolis and neo-colonial regime spread across Africa, Asia, South America, and elsewhere.

“The enforcers of this order have insisted over the last 30 years or more that the path to economic recovery lies in the unbridled and doctrinaire privatization of state enterprises, the withdrawal of subsidies on social services, reckless devaluation of national currencies, and the massive retrenchment of labor in the public sector.” 

The movement stated that Ghana is currently spending 128% of its total national revenue on public sector emoluments and debt servicing. The country’s debt-to-GDP ratio is reportedly at a shocking 97%. 

Meanwhile, according to the SMG, food prices have skyrocketed by more than 400% in the past two years. The real value of wages and salaries is reported to be only around 40% of what it was six years ago. Young people are particularly vulnerable to the crisis as they form 36% of the country’s population. By the end of 2021, young people formed approximately three-quarters of unemployed adults in Ghana. 

The SMG has rejected the government’s claims that the current situation has arisen out of external factors like the COVID-19 pandemic and the Russia-Ukraine war. The movement has pointed out that the total COVID-19-related expenditure, as confirmed by the Finance Minister, was less than GH₵25 billion out of more than GH₵200 billion. The Country Director of the World Bank in Africa had stated last month that while “COVID did not help”, the signs of a crumbling economy had been visible long before the pandemic. The SMG also argued that the impact of the Russia-Ukraine war on Ghana’s economy had not been that profound.

“The IMF is anti-worker” 

The impact of the crisis is also manifest in the wave of labor unrest in the country. The Ghana National Association of Teachers (GNAT), National Association of Graduate Teachers (NAGRAT), Teachers and Educational Workers Union of the Trade Union Congress (TUC), and the Concerned Teachers Association of Ghana went on strike on July 4. They were demanding that the government pay a Cost-of-Living Allowance (COLA) amounting to 20% of their basic salary. 

The work stoppages were on the verge of spilling over to other sectors including health, where the Union of Professional Nurses and Midwives, Ghana Medical Association, Ghana Registered Nurses and Midwives, Health Services Workers’ Union and others had announced strikes. Over 27,000 workers in the public sector were also set to walkout as the Public Services Workers Union announced an industrial action on July 19.

Back in 2021, the Ghanaian government had reached a compromise with the TUC for a 4% increase in the base pay in 2021, and 7% in 2022. However, this was conditional on the government maintaining the rate of inflation below 8%. The government had also agreed to not declare redundancies in the public services and to continue to employ young people in the public service. 

However, in the beginning of 2022, official figures showed that inflation had hit 27% and the prices of goods and services had tripled, according to Public Services Workers Union leader Ken Tweneboah Kodua. “Anyone earning an income in this country could tell you that their current pay could not buy two-thirds of a basic goods basket, that is a wage loss,” he said. 

After the government refused to engage with the workers and respond to their demands, the unions began organizing for industrial action to demand a 20% COLA. Though the increase itself would not have been enough, it would at least be a gesture, argued Kodua, to provide a cushion for the workers. On July 12, the Finance Minister reportedly told organized labor that he would only meet with unions that were not on strike. All unions walked out in solidarity. 

After some unions had been on strike for over a week, the government finally agreed on July 15 to provide a 15% COLA allowance to all public sector workers effective from July 1. 

However, the struggle may not be over yet. The University Teachers Association of Ghana (UTAG) has already declared that it will “not tolerate any IMF conditionality that negatively impacts the existing agreements between the Government and the Association to improve the conditions of service” of its members. 

The TUC has also condemned the government’s decision to approach the IMF as a “tragic mistake and a sad one for Ghana.”  A statement by Secretary General Dr. Yaw Baah asserted that handing over the management of the economy to the IMF was not the solution: “These IMF programs have only imposed unnecessary hardships on Ghanaians with practically nothing to show for them. The solutions proffered by the Fund are not appropriate for our economy. They scratch the edges of the problem without tackling the fundamental issues…”

 “The IMF has ruled us for some decades now, history will tell you that in all the programs they have had, those who have tended to suffer the most are not only the workers but the potential workers. The IMF doesn’t come for the workers…their policies are anti-worker…all their programs tend to decrease the real income of the employees and tend to cut down the compensation for public service– its as if they just don’t care about the public worker- this worker who is the engine of the government, you tend to hold or slash his income,” stated Kodua.

The need for a transformation of Ghana’s economy 

The latest round of talks is at least the seventeenth time that the West African country has approached the IMF. The first time was after Ghana’s first Prime Minister and President – socialist and Pan-Africanist revolutionary leader Dr. Kwame Nkrumah – was overthrown in a CIA-sponsored coup in 1966. 

By 1971, the Ghanaian cedi was devalued by 44%. The next few years witnessed major political and economic crises and instability, including two military coups in 1972 and 1979. By the early 1980s, the situation in Ghana had become dire, with inflation soaring to 123% and a widespread famine caused by prolonged drought and bushfires. 

In 1983, under the leadership of Flt. Lt. Jerry Rawlings, the Provisional National Defense Council (PNDC) implemented a structural adjustment and economic recovery program sponsored by the IMF and the World Bank. This paved the way for neoliberal reforms including the liberalization of prices, privatization, and financial and public sector restructuring. 

In the span of one year, 300,000 public sector workers lost their jobs. Meanwhile, the workforce at the Ghana Cocoa Board (Cocobod) was slashed from 100,000 to 10,000, according to Kodua. Subsequently, subsidies were removed from social services including health, and a Cash and Carry system was put in place which required people to pay beforehand when seeking care at facilities: “access to healthcare became largely dependent on how deep your pocket was,” said Kwesi Pratt Junior, General Secretary of the SMG. 

“One of the conditions they [the IMF] gave us was that we should sell state enterprises, they told us that these enterprises are wasteful. Of the 400 factories that Nkrumah built, by 1992, we had sold more than 300. Out of all the enterprises and factories that we sold, only two appear to be working now. The others simply collapsed,” he added. 

The IMF also pushed for Ghana to devalue its currency. According to Pratt, cumulatively between 1982 and now, the Ghanaian cedi has been devalued by 38,000%. 

Ghana would continue to approach the IMF over the following decades.The most recent program was part of a three-year Extended Credit Facility arrangement signed with the IMF in 2015 under former President John Mahama. In exchange for a loan of USD 918 million, the government imposed reforms including cuts on energy subsidies, a 17% hike in fuel prices, and a freeze on jobs in the public sector. The nominal increase in the total wage bill was also restrained to 10%. 

Ghana exited the IMF program in 2019 (after it was extended by one year), this time under the administration of President Akufo-Addo and his right-wing New Patriotic Party. 

“What we got in return was an economy still overly dependent on production and export of raw materials and import of manufactured products. Most of our productive sectors such as mining, petroleum, and telecommunications are still being controlled by foreign companies,” argued the TUC.

Despite being one of the world’s largest exporters of gold, a report by the Bank of Ghana found that less than 1.7% of the returns from gold made it back to the government. Between 1990 and 2002, the government received only USD 87.3 million from the USD 5.2 billion worth of gold produced. 

As the government prepares to take the next steps, the SMG has stated that its expectations from the process are “not optimistic”, arguing that there is “no evidence that any country, anywhere in the world, has managed to improve its economic fortunes as a result of the implementation of measures under the marching orders of the Bretton Woods Institutions.” 

“The current crisis in the neo-colonies after 30 years of the rigorous implementation of the Economic Recovery and Structural Adjustment Programmes is the clearest indication that these measures have failed to address the crippling conditions imposed on working people,” SMG said. There are concerns that a new agreement will lead to further austerity measures, given that the IMF has already pushed fiscal consolidation for Ghana as part of its COVID-19 recovery strategy. 

“One thing is very certain,” argues the TUC, “the eighteenth IMF program will not solve our problems. Therefore, we should be prepared for the nineteenth, twentieth and more programm in the next few years, even though it is so obvious that IMF programm pay practically no attention to the removal of structural constraints to sustainable growth and development.” The TUC has called for policies and programs aimed at ending the domination of foreign companies in the most productive sectors of the economy, minimizing dependence on natural resources, and building a robust manufacturing base. 

“The IMF is not here to bring down prices, they are not here to ensure that we construct roads– it is not their business and they simply don’t care. They are not here to ensure that we expand access to social services like education and healthcare…The IMF’s primary concern is to make sure that we build the capacity to pay our loans, not to develop,” Pratt stated. 

The SMG has argued that removing Ghana from its current state of dependence will only be possible through a fundamental restructuring of the economy, hinged on socialist transformation. “We need to focus on building an economy in which the resources of Ghana are owned by its people and are exploited for their own benefit.” The organization has argued that referring to Dr. Nkrumah’s model of development based on massive industrialization could become a key factor. 

Under the current conditions, Pratt argued that “the government must listen to organized labor, and begin to build a national consensus so we avoid the calamity which is looming on the horizon.”