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Ghana’s ‘Addiction’ to Foreign Aid
Posted on: July 26, 2016 at 12:07:03 CT
Spanky KU
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http://africanworldpolitics.site.wesleyan.edu/2015/10/22/ghanas-addiction-to-foreign-aid/
Once known as a state of good governance, Ghana is now struggling against a lot of economic problems, such as increasing public debt and the currency crisis. And yes, Ghana receives foreign aid, despite of its image of good and stable politics, and its dependency rate is higher than the average rate of Sub-Saharan countries. Here, I will first analyze the status quo of foreign aid in Ghana, and then discuss whether it is working well or not. In order to deepen my discussion, I will compare the Ghanaian data with the one of Cote d’ivoire or Nigeria, neighbors in West Africa.
Ghana’s Foreign Aid Situation
According to the World Bank, Ghana received $1.3 billion worth of foreign aid in 2013. Unlike Cote d’ivoire, whose total amount of aid has fluctuated drastically every year, Ghana has been constantly receiving about $1.5 billion for (at least) a decade. This stability might be due to the social and political stability in Ghana; what and how much it needs do not change very quickly. I could not find resources that clearly stated the foreign aid donors to Ghana, but IMF might be the most important donor, with USAID following. In fact, IMF recently announced that it had launched a $918 million aid program in Ghana.
Breaking down the 2013 USAID package to Ghana, we can see that 50.4% ($63 million) of the total aid was for health assistance, 22.4% for economic development, and 15.4% for education and social services. Although the proportion of the health assistance was high, this was not very noteworthy compared to other West African states like Nigeria (81.2% for the health assistance in 2013).
Dependency on the foreign aid has been a problem in Ghana, just like other African states. In 2005, Ghana depended 20.2% of its revenue on grants from foreign states or organizations.
Is Aid Good Thing for Ghana?
Although “Ghana has long been the darling of the international development community for its record of two-decades-plus of “reforms” and … macroeconomic stability,” Dambisa Moyo’s negative argument toward foreign aid can partly be applied to the current situation in Ghana.
As I mentioned above, the foreign aid influx to Ghana is very stable and the dependency rate is high. This means that the Ghanaian government can easily (and unfortunately) take the aid for granted when they plan expenditure for the next year. One article in the Economist described this current condition as an ‘unhealthy addiction to the IMF.’ I argue that two major problems are triggered by this addiction.
First, the aid-dependency results in the less autonomy of the government. Unlike tax revenue, it is hard for the Ghanaian government to decide when and where to use the aid money. For instance, Robert Osei argues that “[Ghanaian] government seemed to place a high premium on infrastructure investment while donors where keen to support social sectors.” Depending too much and too long on the aid can be a great danger for the autonomy of Ghana.
Next, it can also reduce the government’s accountability to Ghanaian citizens. The amount of foreign aid that the government obtains is almost irrelevant to the public opinions of Ghanaians. Moreover, since foreign aid does not come from domestic source, the government has less accountability to citizens when using aid than when using tax. Therefore, the aid-dependency would cause less transparency of the government policies, which makes corruption even worse.
http://www.socialwatch.org/node/15651
http://www.socialwatch.org/node/11001
http://data.worldbank.org/indicator/DT.ODA.ALLD.CD/countries/GH-CI?display=graph
https://results.usaid.gov/ghana#fy2013
https://results.usaid.gov/nigeria#fy2013
http://www.reuters.com/article/2015/06/30/ghana-imf-idUSL8N0ZG3Z020150630
Once known as a state of good governance, Ghana is now struggling against a lot of economic problems, such as increasing public debt and the currency crisis. And yes, Ghana receives foreign aid, despite of its image of good and stable politics, and its dependency rate is higher than the average rate of Sub-Saharan countries. Here, I will first analyze the status quo of foreign aid in Ghana, and then discuss whether it is working well or not. In order to deepen my discussion, I will compare the Ghanaian data with the one of Cote d’ivoire or Nigeria, neighbors in West Africa.
Ghana’s Foreign Aid Situation
According to the World Bank, Ghana received $1.3 billion worth of foreign aid in 2013. Unlike Cote d’ivoire, whose total amount of aid has fluctuated drastically every year, Ghana has been constantly receiving about $1.5 billion for (at least) a decade. This stability might be due to the social and political stability in Ghana; what and how much it needs do not change very quickly. I could not find resources that clearly stated the foreign aid donors to Ghana, but IMF might be the most important donor, with USAID following. In fact, IMF recently announced that it had launched a $918 million aid program in Ghana.
Breaking down the 2013 USAID package to Ghana, we can see that 50.4% ($63 million) of the total aid was for health assistance, 22.4% for economic development, and 15.4% for education and social services. Although the proportion of the health assistance was high, this was not very noteworthy compared to other West African states like Nigeria (81.2% for the health assistance in 2013).
Dependency on the foreign aid has been a problem in Ghana, just like other African states. In 2005, Ghana depended 20.2% of its revenue on grants from foreign states or organizations.
Is Aid Good Thing for Ghana?
Although “Ghana has long been the darling of the international development community for its record of two-decades-plus of “reforms” and … macroeconomic stability,” Dambisa Moyo’s negative argument toward foreign aid can partly be applied to the current situation in Ghana.
As I mentioned above, the foreign aid influx to Ghana is very stable and the dependency rate is high. This means that the Ghanaian government can easily (and unfortunately) take the aid for granted when they plan expenditure for the next year. One article in the Economist described this current condition as an ‘unhealthy addiction to the IMF.’ I argue that two major problems are triggered by this addiction.
First, the aid-dependency results in the less autonomy of the government. Unlike tax revenue, it is hard for the Ghanaian government to decide when and where to use the aid money. For instance, Robert Osei argues that “[Ghanaian] government seemed to place a high premium on infrastructure investment while donors where keen to support social sectors.” Depending too much and too long on the aid can be a great danger for the autonomy of Ghana.
Next, it can also reduce the government’s accountability to Ghanaian citizens. The amount of foreign aid that the government obtains is almost irrelevant to the public opinions of Ghanaians. Moreover, since foreign aid does not come from domestic source, the government has less accountability to citizens when using aid than when using tax. Therefore, the aid-dependency would cause less transparency of the government policies, which makes corruption even worse.
http://www.socialwatch.org/node/15651
http://www.socialwatch.org/node/11001
http://data.worldbank.org/indicator/DT.ODA.ALLD.CD/countries/GH-CI?display=graph
https://results.usaid.gov/ghana#fy2013
https://results.usaid.gov/nigeria#fy2013
http://www.reuters.com/article/2015/06/30/ghana-imf-idUSL8N0ZG3Z020150630
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Ghana’s ‘Addiction’ to Foreign Aid - Spanky KU - 7/26 12:07:03