Economist and lecturer at the University of Ghana Business School, Prof Godfred Bokpin, has lamented the stereotyped notion some countries have concerning China, insisting that there is some consciousness on the African continent to make the Asian country come across as a bad lender.
According to him, China like any other country who gives out loans to support the economies of struggling countries, have the legitimate right to request for repayment.
Speaking in reaction to Ghana’s bid to securing a debt cancellation from China, Prof Bokpin stated that Paris Club creditors are all on the continent for what they can get and none of them is here solely for the country’s interest. He revealed that countries such as France, US and UK have all used Africa as a steppingstone in their developmental process.
“I think that we are majoring on the minor and my considered view is that this whole global geopolitics with Russia, China, India on one side and the West, particularly Paris Club creditors on the other hand is playing out in Ghana’s debt restructuring. The reason I’m saying so is that there is some consciousness to make China look like a bad lender on the continent and I think that is not fair. That view [and] that picture is not fair to be accommodated…”
Prof Godfred Bokpin
Prof Bokpin indicated that China only recently came on the continent “through debt and trade diplomacy”. He explained that at a time when Africa needed the West most, it was actually the moment when the West abandoned Africa and China stepped up to the plate.
In light of this, Prof Bokpin stated that China’s developmental footprint on the continent in the last 20 to 25 years is there for everyone to see. Nonetheless, he highlighted that this does not suggest that China is on the continent solely for the good of the continent, as it has its own interest.
“Unfortunately, it is only Africa that is in this with no clear strategy of what it wants from the rest of the world. The reason I’m saying so is that from the time when we needed a lot of developmental assistance, the Paris Club creditors were organizing send-off party for themselves. So, if you look at the composition, bilateral, Paris Club creditors, all of them put together, relative to China do you see the balance? China has more to forgive compared to any other Paris Club creditor. If you look at how China has stepped up in financing the infrastructure deficit on the continent, it’s huge.”
Prof Godfred Bokpin
Commenting on Ghana’s quest to restructure its debt, Prof Bokpin emphasized that Ghana is “majoring on the minor”, especially when the proportion of China’s debt is considered. He noted that beyond debt restructuring, the country needs assurance from its bilateral creditors or development partners that they will be committed to helping Ghana close its funding gap.
Furthermore, the economist emphasized that what Ghana needs from its bilateral creditors and multilateral partners is more than debt forgiveness. He underscored that when the IMF reached staff level agreement with Ghana, it indicated certain prior actions that the country needed to fulfill before the staff level agreement will go to the Board.
Among them, Prof Bokpin revealed that Ghana needed to take steps to comprehensively restructure its debt and also obtain assurance from the development partners, creditors, both bilateral and multilateral, that they will commit to closing the funding gap, which is critical to the deal.
“If you pick the 2023 budget and the outlook to 2023 as government has indicated, working under the inspirational framework of the fiscal adjustment process under the IMF programme has huge fiscal deficit for the next, two to four years. If you pick the 2023 alone, the deficit is over GHC30 billion… So, with that deficit, this year, next year and 2025, the same country has locked market access from the Eurobond market.”
Prof Godfred Bokpin
Addressing financial gap in the programme
Prof Bokpin disclosed that from the domestic market and the medium to long term end of the market, government has been priced out. He explained that due to this, merely approving the IMF programme without assurances of funding to close that gap will mean that the programme can only achieve limited effectiveness.
“On the other hand, IMF programme itself, if you cost it, it will require more than what the IMF can provide in translating the programme objective into actual. So, you actually need more than $3 billion in implementing the IMF programme. So, that is why the IMF will use its leverage to draw on their sister institution like the World Bank, and that is why they are asking for assurance from Ghana’s bilateral [and] multilateral development partners that they will help to close the funding gap.”
Prof Godfred Bokpin
Prof Bokpin iterated that the funding gap has to be closed because Ghana cannot go to the Eurobond market and the medium to the long-term end of the market if the domestic financial market is closed. He expressed that the country needs development partners to come on board.
“So, asking China to come on board goes beyond the $1.7 billion. We know that China doesn’t typically do budgetary support but given China’s influence on the continent and the rest of them, it is then imperative that China is on board within a certain common framework of burden-sharing at that level also…”
Prof Godfred Bokpin
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