Ghana’s Journey with the IMF: A Critical Review of Foreign Aid

Abstract

Ghana is the first country in sub-Saharan Africa to gain political independence. The development of Ghana chalked during colonial rule under the Nkrumah government (1951-57) was tremendous, and the soon-to-be independent nation’s future looked bright and hopeful. The country experienced massive socioeconomic development after gaining political independence from the British between 1957 and 1960 and was seen as the rising star of Africa. However, after the attainment of the republican status and experiencing total political independence, the State began being saddled with financial difficulties, culminating in the seeking of financial assistance from the International Monetary Fund (IMF). However, between 1960 and 1965, the economy of Ghana wintered, causing hyperinflationary issues, deteriorating balance of payment, and foreign reserves. The wintering caused the first military coup in Ghana and the need to seek financial assistance from the International Monetary Fund (IMF) under the new regime, the beginning of Ghana’s exodus from the IMF, seeking SDR 53,400,000 to reverse the economic crisis. This also made Ghana the first sub-Saharan State on the African continent to pursue broad economic and structural reforms aided by external financing and technical assistance. The experience of Ghana with the IMF during its financial turbulences is important to understand the effects of external financing and technical assistance as it illustrates the need for financial prudence and discipline. Between 1966 and 2019, Ghana has been assisted by the IMF sixteen times with more than US$4 billion in the form of assistance. The study employed a multidisciplinary approach, employing economics and history. The research employed inferential statistics and archival methods relying on primary data. The research explored the journey of Ghana and the IMF to better understand the implications of IMF conditionalities on the Ghanaian economy and social services delivery (government spending on education, healthcare, and reducing unemployment). A critical examination of IMF loans as conditionalities revealed that such loan disbursements have statistically significant consequences on economic performance (per capita and annual GDP), government spending on education, and unemployment.

Keywords: Ghana, Africa, IMF, bailouts, assistance, socioeconomic development