The Politics of Reform in Ghana, 1982

Ghana and the Mutilaterals

The Economic Recovery Programme that the Ghanaians finally aunched in 1983 was technically a home-grown plan. However, the constant interaction among the IMF, the World Bank, and Ghanaian civil servants over the years inevitably meant that the PNDC's program had been heavily influenced by the thinking of the multilaterals. In addition, the immediate problems that Ghana faced in 1983 were so stark and so obvious that there was no way that any serious reform effort could avoid the problems of devaluation, pricing, and deficit reduction, issues of central concern to the World Bank and IMF.

In the early years of the ERP, especially between 1983 and 1986, the IMF took the lead in providing external finance for the ERP.^[1] Of the $1 billion in additional external assistance provided to the PNDC up to 1986, 60 percent came from the IMF. In contrast, the World Bank provided only 14 percent of the additional inflows. The IMF took such a prominent position because the early goals of the ERP centered on increasing exports, eliminating or reducing the extraordinary macroeconomic imbalances that had developed, and reestablishing Ghana's international creditworthiness. The IMF, as the provider of the international "Good Housekeeping seal of approval," was the obvious agency to help Ghana.

After 1986, the comparative advantage of the IMF in helping Ghana diminished while that of the World Bank increased. Three years into the recovery program the government had made substantial progress on some of the major macroeconomic imbalances and was increasingly turning its attention to rehabilitation of infrastructure, pricing decisions, and sectoral rehabilitation. Naturally, the World Bank would take the lead in all these areas. Also, the high interest rates on the money the IMF loaned to Ghana was beginning to create a debt-servicing problem. As table 3 indicates, while Ghana did receive large new inflows of aid, much of that money immediately left the country again to service old debts or to repay the IMF. The World Bank's terms were much easier, and increasing reliance on the bank has been one of the reasons for the jump in net inflows of aid to Ghana as the ERP progressed.

By the late 1980s and continuing into the early 1990s, the World Bank

[1] I rely here on John Toye, "Ghana," in Aid and Power, vol. 2, ed. Paul Mosley, Jane Harrigan, and John Toye (New York: Routledge, 1991), 159–63.

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TABLE 3 ACTUAL AND PROJECTED AID FLOWS (millions of U.S. $)
		1983	1984	1985	1986	1987	1988	1989	1990	1991
Capital Inflows
	ODA	110	258	224	358	437	499	569	629	622
	Medium-term debt	114	170	153	133	109	118	56	51	35
	IMF	340	218	124	38	149	210	188	131	62
Payments
	Debt	125	115	248	251	182	208	184	123	122
	Interest	82	101	106	105	126	142	115	106	105
	IMF	16	4	0	22	174	255	184	111	66
	Arrears	0	208	57	4	71	30	45	25	0
Net Position		341	218	90	147	142	192	285	446	426
SOURCES : World Bank, African Economic and Financial Data (Washington, D.C.: World Bank, 1989); Ghana, Towards a New Dynamism: Report Prepared by the Government of Ghana for the Fifth Meeting of the Consultative Group for Ghana (Accra: Government Printer, 1989), 30; and private communication from the Ministry of Finance.
NOTE : There is some disagreement between the sources concerning the actual level of disbursements in 1983.

had come to take the dominant position, not only vis-à-vis-the IMF, but also in regard to all other donors in Ghana. The bank's sectoral loans in particular came to be extremely prominent. The IMF's role was accordingly reduced to monitoring the exchange rate and other macroeconomic variables. The IMF did allow Ghana access to progressively cheaper money through the Extended Fund Facility and the Structural Adjustment Facility. In 1988, these relatively generous facilities were replaced by an Extended Structural Adjustment Facility, an even less restrictive IMF loan to which only a few countries in Africa enjoyed access.

Ghana's relationship with the multilaterals appears to be a success. Indeed, the study by Mosley, Harrigan, and Toye notes that Ghana actually implemented most of the agreed-upon conditions in the order they were proposed, a rare event in the study's sample of countries.^[2] Martin also notes the "astonishing degree of compliance" that Ghana

[2] Paul Mosley, Jane Harrigan, and John Toye, Aid and Power, vol. 1: The World Bank and Policy-Based Lending (New York: Routledge, 1991), 114.

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had with World Bank and IMF conditions during the 1983–1989 period.^[3] Ghana authorities, although they have had their disagreements with the multilaterals, some of which are detailed below, seem generally pleased with the relationship with the World Bank and the IMF.

Still, the actions taken in Ghana by the IMF and the World Bank are controversial: many have criticized the approaches of the multilaterals. These criticisms may not be completely fair to the Ghanaian experience because they are based on what we have learned since the imposition of the Economic Recovery Programme and therefore enjoy the benefit of hindsight. Still, examining these criticisms is important because they may suggest important lessons for other countries that want to implement elements of Ghana's ERP program. Also, examining these criticisms is necessary given the lack of any persuasive alternative to current reform proposals and because the World Bank's analytical framework still needs to be developed.^[4]