“We move forward not backwards”

Wishing you weren’t a HIPC (highly indebted poor country) sadly doesn’t make it so.  Ghanaian officials seem to have read a few too many self-help books.

Here’s some background from a 2012 working paper by Todd Moss and Stephanie Majerowicz entitled No Longer Poor: Ghana’s New Income Status and Implications of Graduation from IDA.”

Ghana has long aspired to reach middle-income status. The Government’s Vision 2020 plan launched in 1995 targeted higher growth rates for the country with the aim ‘to transform Ghana from a low-income to a middle-income country within one generation.’  In November 2010 the country reached this milestone a decade early through a somewhat unconventional and in many ways unexpected way: a technical statistical adjustment. While Ghana’s real GDP growth rates had, according to the World Bank, steadily improved over the previous three decades—from 1.4 percent in the 1970s to 5.5 percent for the past decade—a GDP rebasing exercise recalculated how to measure the economy and Ghana suddenly found that its official GDP per capita was not under $800 as previously thought but rather $1,363. This accelerated leap put the country into a new income category overnight.

The joy of reaching middle-income status (albeit by technical shenanigans) was short-lived, as Ghanaian officials realized that the country was no longer eligible for the amount of aid that it had been (the day) before.  Now the country is undergoing the indignity of being officially classified by the World Bank as a Highly Indebted Poor Country (HIPC).  This was after the IMF had already labeled it a “high-risk, debt distress country.”  I’ve never heard of that classification but it certainly doesn’t sound good.

So what do officials have to say?

“Deputy Finance Minister, Mona Quartey in June ruled out the possibility of Ghana going back to HIPC status. We are not going to HIPC. We are going into a three-year IMF programme. We have been there [HIPIC] once and we are not going back there. ‘We move forward not backwards’ she encouraged, saying Ghanaians should “declare and decree” positive confessions.”

I don’t even know what “declare and decree” positive confessions means in this context, but I think the facts take issue with her assertion that “we move forward not backwards.”

“With make-believe data, the best you can achieve is make-believe results”

Thanks to Morten Jerven (@MJerven) for pointing me to this article questioning the credibility of the Ghana Statistical Service.  As the article notes, much of the criticism the agency has received comes from an Dr. Mahamudu Bawumia, an economist and banker who unit recently was the Deputy Governor of the Bank of Ghana.  Now he is a candidate for the opposition party, which means there might be a political agenda behind his criticisms.  Even given this, his criticism might still be right.

The article gives all the details and the back and forth between the critics and the agency, but here is the best part:

[Dr. Bawumia’s] lecture, last month, at the Central University College dubbed “The IMF Bailout: Will the Anchor Hold?,” among other things, pointed to the data presented to the IMF for the bailout. “If you have make-believe data, you will end up with counter-productive or inadequate responses to economic policies,” he said.  “If your data are not credible, the anchor cannot hold. With make-believe data as the basis, the best you can achieve is make-believe results, which will soon be exposed, as we are witnessing currently.” 

Ghan(a) in 60 seconds

Ghana is one of the star performers of Sub-Saharan Africa. It recently revised its GDP accounts and now, “Ghana is recognized as a lower-middle-income country rather than a poor country as it had previously been classified (World Bank 2011).”

And it’s starting to have middle income country problems!, its current account deficit was 12.3% of GDP last year, and inflation is running well over its not-too-stringent target of 9.5%.

Given the surge of foreign financial investment into Ghana (the flip side of the big CA deficit and the probably welcome emerging market problem I referred to), its currency should probably be appreciating.

But it isn’t, and the Central Bank has curbed currency trading and raised its discount rate to 18% to defend the Cedi.

Welcome to the world of being an emerging market, Ghana. For all the headaches that come with it, I wish more SSA countries achieve this status very soon.