Democratic Socialist Movement

For Struggle, Solidarity and Socialism in Nigeria

By - DSM

Ghana’s Debt Crisis – Failure of Capitalism

Trade Unions’ Federation Must Provide Platform for United Actions against IMF’s Dictated Attacks and High Cost of Living.

Ghana is in a serious debt crisis. The country defaulted on its external debts in December 2022 shortly after it had imposed a restructuring programme of local government bonds in line with the dictate of the IMF. Also, as a condition for a $3billion IMF loan, it had to restructure the Eurobonds and bilateral components of the external debts. So, the country, whose President, Nana Akufo-Addo, had earlier vowed to keep the IMF at an arm’s length, went back to its vomits. It just exited the Bretton Woods institution’s dictated programme in 2019. Now, this deal makes it the 18th time Ghana has gone to the IMF, something which is a bold signpost of the failure of capitalism in a country once described as Africa’s shining star by the World Bank.

By Peluola Adewale

Indeed, the debt crisis is just a pronounced feature of the major economic problems currently afflicting the country, which is said to be the worst in decades. The economic indices are scary and unenviable. Inflation reached a record 54.1 percent in December 2022, the highest in 22 years. Ghana was ranked as the country with sub-Saharan Africa’s highest food prices by the World Bank’s 2022 Africa Pulse Report. The report which was released at the end of October 2022 indicated that food prices went up by 122 percent since January 2022. The fuel price shot up by over 140% in 2022. Ghana’s cedi lost nearly 52% of its value in 2022 and was ranked the worst-performing out of 148 currencies worldwide. Already before the impact of this IMF deal, the World Bank estimated that over 23% of Ghanaians live in poverty.

“Malevolent Forces”

Given the enormity of the crisis, President Akufo-Adodo lamented that he “cannot find an example in history when so many malevolent forces have come together at the same time”. But the “malevolent forces” are not unnatural. They arose from the corrupt system and profit-first nature of capitalism.

For instance, in the middle of an economic storm that rose from the devastating effects of the Covid 19 lockdown and Russian war on Ukraine together with the local economic policies, credit ratings firms such as Moody’s downgraded Ghana to junk status in 2022. As a result, Ghana was unable to raise money at the international market and only had a sanctuary in the domestic debt market whose borrowing costs soared. The interest rate was as high as 32 percent.

In December 2022, Finance Minister Ken Ofori-Atta revealed that interest payments were consuming between 70 and 100% of government revenues. Other than default-stricken Sri Lanka, that is the worst statistic in the world, according to credit rating agency Fitch (Reuters, December 9 2022). However, out of that amount a massive 75% went to domestic creditors (The African Report, February 16, 2023)

Home-Grown Solutions

In grandstanding to keep to its “Ghana Beyond Aid” mantra the Akufo-Adodo government initially did not openly welcome the IMF option even when everything indicated that the fiscal crisis was getting worse. The government did not approach the IMF until July, 2022. It preferred what the finance minister called “home-grown” solutions. But as expected, on the basis of capitalism especially in a neo-colonial economy, the so-called solutions only compounded the problem with measures that made working people and the poor, who were already under crushing cost of living pressures, to pay more for the crisis.

The “solutions” included new electronic transaction tax or E-levy, which was introduced in April 2022 and meant to help raise $900 million in much-needed revenue along with spending cuts. However, as of June 2022 the tax, which triggered some protests, had only generated 10 percent of estimated revenues (AFP, July 25, 2022). The electricity tariff and VAT were also hiked by nearly 60% and 20% respectively (The African Report, February 16, 2023).


Indeed, the “home-grown” solutions were like a demonstration to the IMF of the readiness of Akufo-Adodo government to force down the throat of the masses the IMF’s bitter pill in order to win its bailout. So, a trader was apt when he told the AFP during an anti-government protest in July 2022: “You can’t impose taxes on us under the guise of saving the economy and then overnight come and tell us you’re going to the IMF. I think they ran out of ideas.” (AFP, July 25, 2022).

The anti-poor IMF’s programme which is a condition to the $3 billion loan is expected to last for at least next five years having targeted to bring the debt level from the current estimated 105 percent of the GDP to 55 percent by 2028. This will mean a heavy package of tax burden and spending cuts on education, health care, etc. as well as an intensification of neo-liberal policies such as currency devaluation. The last such programme which ended in 2019 included freeze on salaries and removal of oil subsidies.

Beyond Covid 19 and Ukraine War

While it is correct that both the Covid-19 pandemic and Ukraine war were major contributors to the current economic mess in Ghana just like many countries, they are not the only one. The external shocks only compounded the effects of some actions taken by the governments in the interest of private profits but which constituted a deadweight on the economy. For instance, in 2021 Akufo-Addo’s government provided $3 billion bailout essentially to private power producers (The Exchange Africa, September 27, 2022). From August 2017 to December 2018, government spent more than $2.1bn on what it called the “banking sector clean-up”. (Al Jazeera, December 31, 2022). By 2022 the government had also lavished $58m of public money on national cathedral – a $100million prestige project – conceived in 2018 (Economist, December 24th 2022).

Fight Back

However, working people of Ghana have not just resigned themselves to fate over the economic hardship without putting up a fightback. In the last one year the country has witnessed a series of protests over cost-of-living crisis, fuel and electricity price hikes and outrageous taxes including the electronic payment tax. Public sector workers were also in action. 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. The government was also forced to exempt pensions from the IMF dictated domestic debt restructuring programme by the opposition from trade unions including a threat of general strike in December. Unfortunately, the Ghana Trades Union Congress (TUC) has not called a general strike and mass protest that would aggregate all the issues and unite different isolated actions. This would help build a formidable force to defeat many of the anti-poor policies. Workers and activists should call on the TUC to organize such an action.

There has also been opposition against the entire IMF deal within trade unions and the working people in general. A lesson learned from history has proved that the IMF deal cannot fundamentally resolve the crisis. Yaw Baah, Secretary General of the TUC, the federation of trade unions in Ghana, told the AFP that. “The solution to Ghana’s problems doesn’t lie in Washington. This is a tragic mistake by the government” (AFP July 25). By Washington, he meant the IMF and World Bank. What is missing, apart from a centrally organized programme of mass actions, is a genuine alternative to the IMF and building of a mass movement that will drive it.

Socialist Alternative

However, the needed alternative cannot be found in any form of “home-grown” solutions built on a capitalist model, something the TUC leadership themselves believe despite the failure of Akufo-Adodo’s “Ghana Beyond Aid”. Akufo-Adodo once talked about emulating the Asian tigers. But the prevailing international order dictated by cold war era politics that made the western imperialism support the state driven model that helped develop Asian tigers does no longer obtain. So, what is needed is socialist planning which will make possible the use of human and material resources for the development of the country and the needs of the vast majority. This is the task for the working-class people. Though at present there is no socialist consciousness, the continued failure of capitalism in Ghana and globally and resistance against capitalist attacks could make workers and youth in search of alternative reach a socialist conclusion.

By and large, the return to debt crisis as a result of the failure of capitalism is not limited to Ghana. 22 countries in sub-Saharan Africa were rated by the IMF to be in debt distress or at high-risk debt distress (UN Dispatch, January 12, 2023). The figure was up from just eight countries in 2015. The system that makes a continent that is enormously rich in natural resources to remain in a perpetual crisis has to be changed. But achieving this requires a socialist revolution together with international working class solidarity. Building forces for such a revolutionary task not only in Africa but globally is the major objective of the Committee for a Workers International (CWI).