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External Co-Optation of a Less Developed Country's Policy Making: The Case of Ghana, 1969–1972

Published online by Cambridge University Press:  18 July 2011

Ronald T. Libby
Ronald T. Libby
Affiliation:
The University of Zambia
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Extract

The author advances the thesis that the World Bank, the International Monetary Fund, and creditor countries structured the context in which their client, Ghana—a less developed country—formulated its economic policy between 1969 and 1972. The intergovernmental organizations and creditor countries failed to take Ghana's domestic political situation into account, however. When the country became heavily dependent upon the IGO's and creditors for financial assistance to enable the government to survive a disastrous shortfall in foreign exchange earnings, it was forced to accept extreme and politically dangerous measures in order to secure assistance. The policies that were adopted were catastrophic, and destroyed what remained of the democratic government's public support. This dramatic change in public climate made the government fatally vulnerable to a military coup d'etat.

Type
Research Article
Information
World Politics , Volume 29 , Issue 1 , October 1976 , pp. 67 - 89
Copyright
Copyright © Trustees of Princeton University 1976

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References

1 In August 1966, the Bank's planning expert, Albert Waterston, wrote a report entitled “A Practical Program of Planning for Ghana.” The World Bank itself was not prepared to make the necessary consultants available; however, they suggested that Ghana could obtain the necessary technical expertise from the DAS.

2 Interview with E. N. Omaboe; Accra, June 27, 1974. The Harvard Development Advisory Service has since been absorbed into a successor institution, the Harvard Institute for International Development, under the directorship of Lester Gordon. DAS teams have been financed by the IBRD, the United Nations Development Program, and the Ford Foundation. The IBRD has had close working relationships with the DAS in Colombia, Liberia, Pakistan, Argentina, and more recently in Tanzania and Indonesia—all of them major clients of the Bank.

3 Interview with Peter Reitter, the IBRD's Resident Representative in Ghana; Accra, July 23, 1974. Research produced by DAS economists in the Ministry of Economic Planning was described by the Minister in charge, J. H. Mensah, as being “geared to the assumptions held by the IBRD.” Interview with J. H. Mensah; Accra, July 26, 1974.

4 Reitter (fn. 3).

5 Interview with Roger Selley, a former member of the DAS team; Legon, January II, 1974.

6 Dr. Adu was a former Fellow of the World Bank's Economic Development Institute; Ashiabor had left government service in November 1971 to join the staff of the World Bank; Dr. Amon-Nikoi was an Executive Director of the IMF before becoming Principal Secretary for Finance; Frimpong-Ansah was elected vice-president of the IMF's Group of Twenty shortly after the 1972 coup.

7 Interview with Dr. Amon-Nikoi, Governor of the Bank of Ghana; Accra, June 24, 1974.

8 Interview with Dr. Ofori-Atta; Legon, June 10, 1974.

9 Interview with S. E. Arthur, former Deputy Secretary to the Busia Cabinet; Accra, July 2, 1974.

10 Interview with Robert North, U.S. AID Director for Ghana; Accra, July II, 1974.

11 Killick's group produced periodic documents monitoring economic trends and recommending policies. These reports were presented in April, May, June, and July of 1971.

12 The 1970–71 budget introduced a graduated surcharge tax on the importation of certain commodities. It ranged from zero on pharmaceuticals, tinned fish, corned beef, and baby food, to 125 percent on clothing. A special development levy was placed on rice and sugar imports. However, the imports that had experienced the most dramatic increase—food items—were otherwise largely unaffected by the budget measures.

13 Pearson, Lester B. and others, Partners in Development (New York: Praeger 1969), 157–58Google Scholar.

14 The French were even more adamant than the British about having their debts repaid on schedule, but debts to the French were miniscule compared with those to the British. The Germans, on the other hand, who were owed a sizeable amount (second only to the British), were willing to consider the appeal, but deferred to the British as the major creditor.

15 Confidential interview with a British diplomat; Accra, July 19, 1974.

16 There had been two abortive efforts at negotiating an agreement with the British.

17 One was held in Accra and the other in Britain. Bilateral talks were held in Accra between British and Ghanaian representatives on November 23–25, 1970, without resolution. The following month, another effort was made in London, beginning December 18. This meeting was between Mensah and Terence Higgins, British Minister of State at the Finance Ministry. It coincided with the World Bank Consultative Group meeting for Ghana, held in Paris.

17 The trip was arranged by Niculescu, who also prepared briefing papers for Busia. Mensah had originally been scheduled to accompany Busia's party; however, a day before the departure, he was informed that the Prime Minister had decided to make the trip without him.

18 According to the terms of the last debt conference held in 1970, the agreement was expected to be binding until at least 1972—the earliest another conference could be called. The British were the key in any decision to convene another debt conference. It took nine months, for example, before the British would agree to call the last conference, held in 1970.

19 One reason for the timing of Busia's trip was that Ghana's export debts had grown to the point where the British export-guaranteeing agency (ECGD) was threatening to cut off Ghana's credit just when the Christmas holiday was approaching. A shortage of imported goods at that time would have been the most obvious indication to the Ghanaian public of the failure of Busia's economic policies.

20 Interview with A. Ashiabor, Assistant Commissioner for Finance; Accra, August 6,1974.

21 Frimpong-Ansah, J. H., “Report to the Rt. Honourable The Prime Minister: Ghana's Short Term Debts—Report on Discussions in Washington and London,” October 28, 1971, p. 12Google Scholar.

22 In order to continue Ghana's ambitious development efforts, Mensah favored increasing the development budget to $199.9 million for 1971–72.

23 Shortly after these meetings, Busia sent letters to both President Nixon and Prime Minister Heath, indicating Ghana's willingness to accept the Fund approach in settling the debt problem, and asking confirmation of their willingness to assist in an international settlement of Ghana's short-term and medium-term debt problems at forthcoming conferences in early 1972. The letters also asked for confirmation of their governments' willingness to provide increased long-term concessionary aid at subsequent aid meetings chaired by the IBRD.

24 The fact that Bhatia headed the IMF mission to Ghana was a personal slight to Mensah, who had not renewed Bhatia's contract as IMF Resident Representative. Bhatia had therefore been asked to leave Ghana in 1968.

25 Members of the DAS team concluded, however, that it was unnecessary, and that the results were too unpredictable to have a devaluation as high as 50 percent in terms of dollars. They decided to resist such an extreme devaluation and to push for ancillary deflationary measures along with a lower rate of devaluation.

26 This strategy had initially been proposed by Stern and Killick in a paper prepared for an SDC meeting entitled “Draft Memorandum on the International Monetary Situation,” August 18, 1971. The paper argued that while the U.S. devaluation might not have a significant impact on Ghana, it might provide an opportunity to devalue without appearing to make an independent policy decision.

27 Mensah did not oppose devaluation on doctrinaire grounds. H e had, in fact, supported a major devaluation during October 1971 when the decision was made to peg the cedi to the U.S. dollar, in anticipation of the U.S. devaluation of 7.9 percent which! eventually occurred on December 24 of that year. Pegging to the U.S. dollar, plus the! fact that the currencies of Ghana's major trading partners would thereby appreciate] by an average of between 8 and 10 percent, would represent an effective cedi devalualtion of around 15 percent.

28 The Fund mission did not like being told to come back to finalize the standby agreement. However, they were told that the Ghanaians would have to sort things out I; for themselves before a standby could be arranged. The mission returned early in January 1972 to negotiate the final terms of the standby. Efforts to finalize the agreement were still in progress when the coup occurred.

29 West Africa, November 13, 1972, pp. 1528–29; Ghanaian Times, April 26, 1974; Africa Report, April 1972, p. 22.

30 Previously, the best terms Ghana had received from creditors was a repayment period of 7 to 8½ years, with a moratorium interest of between 5½ and 6½ percent; it applied to only a portion of the outstanding debt.

31 However, Ghana's long-term structural economic and political problems have not been resolved. Dependence on imported consumer goods, an excess of imports over exports, fluctuating prices of cocoa on world markets, lack of foreign investment, high population growth, and high urban unemployment continue to plague Ghanaian politics.