As noted by Albert Einstein, “For everything that is really great and inspiring is created by the individual who can labour in freedom.”
Over the years, the foreign policy decisions of weak economies have been sometimes directed to them by their rich and powerful donors or development partners. For instance, Ghana’s socialist policies and her strong ties with the eastern bloc states like Cuba, Romania, Yugoslavia, Libya and the erstwhile Soviet Union in the early 1980s, had to shift swiftly towards the western capitalists for financial assistance to develop her shambolic economy at the time, as the communists could not assist her to rebuild[1].
As admitted by President Akufo Addo recently, “…Our economy is in considerable economic difficulties. Our balance of payment and debt sustainability profile have been disrupted. We have gone to the International Monetary Fund (IMF) to seek its assistance to repair in the short term our public finances and restore our balance of payments…”
According to the World Bank’s April 2023 Africa Pulse Report, Ghana is yet to make progress with the G20 Common Framework Debt Treatment with its bilateral creditors. Thus, it is expected that “the deficit in Ghana will remain elevated throughout 2023-25, with the large deficit being compounded by severe financing constraints resulting from a limited ability to issue long-term domestic debt and a lack of access to international capital markets; with inflation expected to stay above 50percent, and accelerate by more than 3percentage points in 2023 from last year[2].”
Also, the International Monetary Fund (IMF) has raised concerns over a potential wave of debt restructuring requests and its handling at a time current restructuring cases are facing costly delays, as about 15percent of low-income countries are already in debt distress and another 45% face high debt vulnerabilities. As a result, the IMF has made a passionate appeal to richer countries to support weaker countries as about a quarter of emerging economies including Ghana are at high risk and facing “default-like” borrowing spreads[3].
It is from the foregoing and against this background that this article seeks to discuss the likely economic fallouts and implications for Ghana following recent attempts by BRICS nations to ditch the dollar and pursue a multipolar currency world.
Definition of Multipolar Currency World
A Multipolar Currency world is a world with other dominant trading currencies. Thus, a world in which the US dollar is not the only supreme or dominant universal currency. It denotes a world with multiple or equally acceptable universal currencies as legal tender for payment of goods and services. For instance, China and Brazil have recently struck a trade deal agreement to ditch the US dollar, while Malaysia has indicated that there is no reason to continue to depend on the US dollar, signalling a move towards a multipolar currency world.
Implications of Multipolar Currency World for Ghana
In view of the above, the likely consequences of Ghana ditching the dollar and following in the footsteps of the BRICS nations include among others:
- Cedi Appreciation
Over the years, Ghana has undertaken numerous international trade transactions in US dollars. Indeed, the US dollar is mostly considered as a major cause of Ghana’s cedi depreciation as retail payments for some goods and services are often undertaken in US dollars.
Also, considering that Ghana’s major trade import is undertaken with China and not the United States, a multipolar currency world with for instance, the Chinese Yuan, as alternate universal currency could go a long way to strengthen the Ghana cedi as the cedi-yuan exchange rate can be considered more favourable than the cedi-dollar rate; and thus could help to ensure increased international transactions leading to a boost in volumes of trade export, revenue, deficit and balance of payment positions.
2. Debt Forgiveness and/or Reduced Debt Stock
Ghana is also likely to benefit from huge debt forgiveness after announcement of decision to conduct international trade in alternate universal currency. This can be seen in Russia’s decision to cancel USD20billion of African debt accumulated since the era of the Soviet Union. Considering Ghana and China’s trade relations, and China being Ghana’s largest trade partner in terms of import, such a gesture from China could go a long way to bring Ghana’s debt stock to sustainable levels with improved debt to GDP ratio.
3. Economic Stability
Ghana is also most likely to benefit from Chinese technical assistance with respect to economic management. China’s growth and transition from third world to first world and from least developed country to highly advanced nation in the past four decades is testament to and shows the extent of Chinese technical expertise and superiority in economic policy management. Currently, China as the country with the second largest economy in the world is indicative of the principled economic management the country designs and pursues.
Thus, unlike most western capitalist societies today, China can help spur Africa’s industrial, technological and economic growth to significant heights, and aid immensely in the achievement of the objects as set out in Agenda 2063 and Article 36 of the 1992 Constitution. This growth can help bring inflation, interest rate, and unemployment to low or appreciable levels, and thus, help to attain economic stability in the short to medium term. As such, in effect, China can offer the incentives the IMF programme offers and go on to facilitate massive infrastructure development across the country.
4. Improved Political Climate
Again, economic stability when realized will lead to improved political climate. This can often be seen in favourable ratings for the presiding administration due to the high standard of living, low cost of living, low unemployment, reduced inflation and significantly low interest rates. Thus, economic stability will help to achieve improved or positive outcomes for economic units, thus, individuals, firms and government as a whole. It is in such environment that governments often enjoy close collaboration, goodwill and support from the citizenry and opposition parties.
Conclusion
In conclusion, as noted by Michelle Obama “History has shown us that courage can be contagious, and hope can take a life of its own.”
Although, a decision by Government to opt for or choose an alternate multipolar currency may provide short-medium term relief for the Ghanaian economy, this may also come with implications which may be political, economic and security in nature, among others. For instance, whereas Ghana may not be likely to chair the UN Security Council in the foreseeable future as an implication of such decision, due to the likely lack of solidarity and support from western countries; the country may also be unable to secure access to loans, trade partnerships and agreements with certain or multiple global economies such as the European Bank and European market.
Furthermore, regionally, this could also be the perfect time period to fast-track implementation of the ECO currency for West African countries and indeed for the entire African continent, as this may prove critical in light of the coming into force of the AfCFTA, in order to guarantee African countries favourable exchange rates, a stronger currency, and much impactful trading agreements/ partnerships. Thus, the time for us to determine for ourselves our collective future and neither be victims nor pawns of the global system may be well upon us.
For Ghana, just like the decision to choose or move away from eastern bloc nations to western capitalist countries as a result of the latter’s economic assistance in the 1980s, perhaps the time has come for reassessment of our foreign policy and economic alliances in order to maximize the benefits for our people and economy. As noted by Osagyefo Dr. Kwame Nkrumah, “It is clear that we must find an African solution to our problems.”
The writer, Andrews Joojo Maxford, has background in Management Studies from the University of Cape Coast, and is an economic policy analyst, researcher, evaluator and student of defence and international politics. Andrews has a Master of Arts degree in Economic Policy Management from the University of Ghana; and currently pursuing Master of Science degree in Defence and International Politics at the Ghana Armed Forces Command and Staff College (GAFCSC). Andrews has interest in Leadership and Governance, Foreign Policy and Public Policy Formulation and Implementation, and can be contacted via email at [email protected].
The writer, Sedinam Esi Wilson, has background in Political Science from the University of Ghana, Legon; and currently pursuing Master of Science degree in Defence and International Politics at the Ghana Armed Forces Command and Staff College (GAFCSC). Sedinam is an experienced Administrator with interest in Organizational Leadership and Governance. She is enthusiastic about Public Policy and Humanitarian Development, and can be contacted via [email protected].
[1]Asah-Asante, K., & Brako, I. (2016). International Relations An Introduction. Digibooks Ghana Ltd.
[2] Report, W. B. (2023, April 6). Ghana yet to make progress with G20 Common Framework Debt Treatment. doi:https://www.myjoyonline.com/ghana-yet-to-make-progress-with-g20-common-framework-debt-treatment-world-bank/
[3] IMF. (2023, April 7). IMF raises concerns over wave of debt restructuring requests; worried about “borrowing spreads”. doi:https://www.myjoyonline.com/imf-raises-concerns over-wave-of-debt-restructuring-requests-worried-about-borrowing-spreads/
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