The Minister for Finance, Ken Ofori-Atta, has told Asaase Radio how, for Africa in particular, events of the past six months since the advent of the coronavirus have reset global finance and trade.
“It’s just an extraordinary period in all of our lives,” the Finance Minister told Kwaku Sakyi-Addo in an exclusive, one-on-one interview for the station’s prime-time Sunday Night talk show. The conversation was recorded the day after Ofori-Atta presented his landmark 2020 Mid-year Budget Review to Parliament in Accra.
“It is said that nothing of this nature has occurred, in a non-wartime period, since 1870 [the start of the Franco-Prussian War]. For Africa, it may be the first recession in 25 years,” he said. “That’s sobering, because we were on a really positive trajectory in the past two decades.”
Trade system “in shock”
Even more startling, Ofori-Atta said, is the way developments have forced experts to tear up the rule book on how economics works.
“It’s just been amazing how all sorts of norms of classical economics have been jettisoned. [The German Chancellor] Angela Merkel is [saying], ‘Don’t talk to me about deficits.’ And this is Germany, you know!
“So far I think about US$11 trillion has been pumped into [OECD G20] economies. Because they have a reserve currency, they can do that.
“So, what are the lessons? I’m sure the global trade system is in shock at how global supply chains have been disrupted. Therefore [there is a] need to diversify the whole production base, so that the world is better balanced.”
The Finance Minister pointed to the way the health-care industry is evolving and might lead to prosperity for agile entrepreneurs prepared to work with the grain of the COVID-19 crisis. The ruinous effects of the disease have created a revolutionary moment, he said.
“From Africa to America to Italy, [the coronavirus] clearly sees a vulnerability that we had not anticipated. So I think it’s now causing … a reimagining of how everything should be done.”
The long-term consequences of COVID-19 will be even more profound, Ofori-Atta said, pointing to the challenge posed by Africa’s debt. The Bank of Ghana’s Monetary Policy Committee announced yesterday that public debt for Ghana reached GHC258 billion at the end of June 2020 (67% of gross domestic product), up from GHC218.2 billion at the end of 2019 (62.4% of GDP). The World Bank and International Monetary Fund have warned repeatedly that Ghana is at high risk of encountering debt distress.
The Government of Ghana is taking a lead role in confronting this challenge. As chairman of the joint World Bank-IMF Development Committee, Ofori-Atta has been speaking up for Africa in world forums, negotiating ways the wealthier countries can restructure their relationship with the world’s fastest-growing continent.
“A number of us [African] finance ministers and the UNECA [Economic Commission for Africa] and some African Union envoys are seriously looking at this whole global financial architecture and saying … that there has to be a tectonic shift if this [world financial system] is going to be fit for purpose and for the future.
“So we’re working on the issues of Special Drawing Rights and debt forgiveness and debt cancellation … and finding a way in which our entry into the capital markets could also be credit-enhanced, so that instead of this borrowing at 8% that we do, it can be 2% or so.”
Assume the position
Despite the daunting odds, the Finance Minister is quietly confident of the silver lining in the clouds.
“For us in Africa, an increased 1% in trade could result in $70 billion new revenue,” he told Sakyi-Addo. “So, how do we position ourselves?
“With the African Continental Free Trade Area being here [in Accra], how does Ghana pivot off of that to create a regional hub, so that we can be a lot more self-sufficient?”
He welcomes the opportunities on Ghana’s doorstep offered by the sub-regional market. And he can still hear the promise behind the raging of the coronavirus storm.
“It’s caused us to step back and say, ‘Hey, this thing about being a regional hub and about trading – about reducing high imports in rice, sugar and poultry – are things that we should really take with a lot more seriousness than we have in the past.’
“I think everybody is recalibrating.”
* The “Sunday Night” special with Ken Ofori-Atta is rebroadcast tonight, Tuesday 28 July, starting at 7pm on Asaase Radio (99.5 Mhz). Also streamed on TuneIn and Facebook.