THIS MONTH, Mr. Kwadwo Baah-Wiredu, the Minister for Finance and Economic Planning, announced Ghana's withdrawal from the International Monetary Fund's concessional loan scheme.
That's big news. The scheme, called the Poverty Reduction and Growth Facility (PFGF), provides loans to low-income economies at concessional rates of annual interest - generally 0.5 per cent - but comes with highly prescriptive conditions.
Ghana entered into a three-and-a-half year PFGF agreement in May 2003. By electing not to enter into a further such agreement, the government has signalled that it doesn't want the country to be treated by the international community as one requiring special assistance - that it is ready to stand on its own two feet in the game of global trade.
Following the IMF's sixth and final review under the scheme in October, the IMF Executive's Deputy Managing Director and Acting Chair Mr Takatoshi Kato lauded Ghana's recent economic development: "Growth is relatively strong, inflation is falling, and the external position has strengthened considerably."
Perhaps even more importantly, by withdrawing from the PFGF, Ghana takes a major step toward economic independence from the IMF - a 52-year-old organization that has come under increasing criticism for the past two-and-a-half decades.
PROBLEMS WITH THE IMF
Despite the IMF's ostensible mandate to reduce global poverty by creating the macroeconomic conditions for sustainable economic growth, its perceived problems, and to a slightly lesser extent those of its "sister" organization, the International Bank for Reconstruction and Development (better known as the World Bank), are well-documented.
Throughout the past decade, the IMF has been blamed for everything from the Asian financial crisis to political instability in South America.
In September, a Social Watch report was released in Singapore, which cast doubt on the IMF's financial viability, and the ethics of sustaining an organization, which appears increasingly reliant upon "financial instability and crisis in emerging markets".
The IMF's most outspoken critic is academic, former Clinton Economic Advisor and former World Bank Executive Joseph Stiglitz.
Stiglitz charges the two Bretton Woods institutions - so-called because they were formed out of a conference at Bretton Woods, New Hampshire, USA in July 1944 in an effort to oversee global rebuilding after the second World War, and to avoid a repeat of the global depression that swept the world during the 1930s - as prescribing "outmoded, inappropriate, if 'standard' solutions, without considering the effects they would have on the people of the countries told to follow these policies".
In his recent books Globalization and its Discontents and Making Globalization Work, Stiglitz makes clear his view that the Bretton Woods institutions were co-opted by extreme right-wing forces during the early 1980s, and have since pursued policies driven by hypocritical free-market ideology rather than economic and social understanding.
Stiglitz is fond of pointing out that the IMF and to a lesser extent the World Bank have often forced developing economies to substantially or completely remove trade barriers (such as tariffs and subsidies) while turning a blind eye to the anti-free trade policies of European and North American governments.
This is especially hypocritical, according to Stiglitz, who cites substantial state protection as a driving factor in the early development of western industries.
A STUDY IN FROZEN POULTRY
CorpWatch's Linus Atarah last year broke a story, which at first glance confirms the Stiglitzian opinion of the IMF. In 2003, the IMF effectively reversed a decision of Ghana's Customs and Excise Preventive Services (CEPS) to raise the tariff on chicken imports from foreign producers from 20 to 40 per cent, citing an ostensible concern for Ghana's obligations under the 2003 PRGF.
The tariff rise had been a response to the flooding of the local market by ultra-cheap frozen chicken offcuts produced by European Union poultry farmers who were generously subsidized by their governments. As Atarah reported, Ghanaian farmers had seen their share of the domestic chicken market shrink radically from 95 per cent in 1992 to just over 10 per cent a decade later.
At the time, the Director of the Centre for Public Interest Law, Dominic Avine, said that the government's reversal of its tariff decision two months after making it was an example of the "desperation" with which developing countries - including Ghana - seek to placate the Bretton Woods institutions.
Local rice farmers, who were reportedly well on the way to establishing self-sufficiency in rice production during the 1980s, were understandably miffed when the IMF similarly directed the withdrawal of subsidies.
The result is that the local industry now produces a mere 35 per cent of the country's total rice demand.
And, as is often remarked, the IMF, while being funded by taxpayers around the world, is hardly democratic: its voting structure is based upon relative economic power, meaning the United States and the EU hold most of the cards. Ghana has just half of one vote in IMF deliberations.
TO DEFEND THE INDEFENSIBLE?
For IMF insiders, this seems justifiable. Responding to Stiglitz's charge that the IMF takes a "market fundamentalist" position and is often blind to market failure, Kenneth Rogoff, the IMF's then Economic Counsellor and Director of Research, wrote in 2002: "We do not believe that markets are always perfect... But we do believe there are many instances of government failure as well and that, on the whole, government failure is a far bigger problem than market failure in the developing world."
On this view, the corruption rife in the governments of many developing nations is reason enough to have their economic decisions overseen - and often overturned - by a collective of developed-world finance ministers.
While corruption is often endemic in the South, at least by global standards, this view seems to ignore the vested interests Western governments have in the prevailing economic system.
At the very least, it ignores the maxim that justice must not only be done, it must be seen to be done. Those Ghanaian poultry and rice farmers, and the local retailers and hawkers who rely on the domestic industry, could be excused for suspecting a cozy deal when all is above-board.
On the other hand, Rogoff queries Stiglitz's certainty about the alternative prescriptions he suggests. Rogoff, who idolized the other's academic status while the two shared an office wall for a semester in the late 1980s, asked his former hero in an open letter whether he might have been "part of the problem and not part of the solution" when Stiglitz was publicly undermining confidence in the Bretton Woods institutions during times of global economic crisis during the late 1990s.
"Joe," wrote Rogoff, "you condemn the IMF because everywhere it seems to be, countries are in trouble. Isn't this a little like observing that where there are epidemics, one tends to find more doctors?"
HOW SHOULD WE INTERPRET THE IMF's ROLE IN GHANA?
If the Ghanaian government is unhappy about the IMF's prescriptions, it does not say so publicly. As Mr. Kwadwo Baah-Wiredu, Minister for Finance and Economic Planning, told Parliament recently: "Our disciplined management of the economy and the use of IMF resources have resulted in unprecedented economic stability and economic performance that has positioned the country for accelerated growth."
One possible interpretation of that statement is that by following the IMF prescriptions, Ghana has emerged ready to enter the international capital markets by next year (although according to visiting Canadian and OECD delegates, such a move is highly unlikely at this stage).
Mr. Baah-Wiredu's nod to the "long and fruitful relationship" Ghana has enjoyed with the IMF over the past two decades lends weight to such an interpretation. He intends Ghana to remain an active IMF member and to seek its ongoing advice and endorsement.
Of course, such official approval of the IMF's policies might simply be an example of old-fashioned diplomacy by a politician keen to not bite the hand that feeds - or, perhaps more appropriately, offend the bully with the biggest stick.
While the benefits of withdrawing from the IMF's concessional loan scheme might be great in terms of improving national confidence and attracting foreign investors, the greatest benefits to the country may indeed flow from Ghana having as little to do with the IMF as possible.
*The author is a probationary PhD candidate at the University of Melbourne, currently an intern with The Chronicle.