Debt cancellation: Will Ghana’s engagement with China be productive?
22nd March 2023 2:31:07 PM
3 mins read
Ghana is facing a severe economic crisis and seeking a $3 billion credit facility from the International Monetary Fund (IMF) to avoid a potential collapse. However, securing the support of its creditors is essential to obtain the IMF loan, and China is a significant creditor of Ghana.
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As a result, Ghana's President Akufo-Addo has appealed to Germany's Finance Minister Christian Lindner to encourage China's participation in the country's economic recovery programmes. <img alt="" class="wp-image-465933"/>Germany's Finance Minister Christian Lindner“We have good relations with China. We would like you to encourage China to participate in these programmes as quickly as possible,” President Akufo-Addo said.
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In response, German Ambassador to Ghana, Daniel Krull, advised that Ghana reduces the size of her government to reflect the current economic challenges.“I can only compare with the other countries like mine and I can come to the conclusion that there is a huge number, the number is much higher than in my country, so that may bring me to the conclusion that there is room for improvement,” he said.
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Ghana's Finance Minister Ken Ofori-Atta also initiated talks with China in February 2023 to discuss the former’s debt situation and explore possible solutions. <img alt="Ken Ofori-Atta" class="wp-image-465805"/>Finance Minister Ken Ofori-AttaHowever, some experts are sceptical that Ghana's engagement with China will be productive due to the country's unique debt circumstances.According to Dr.
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Ishmael Hlovor, an international development expert, Ghana's debt situation is more complicated than the debt of the 27 countries whose debts China cancelled in 2019. These debts were getting to maturity, and there was something small left on them, whereas Ghana's debt has more commercial lending components. “In 2019 for instance, about 27 countries’ debts were cancelled.
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But if you scrutinise those loans, they were loans that were getting to maturation and there was something small left on them, but our situation is a little bit complicated because of commercial lending,” he told JoyNews.
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Therefore, Ghana should lower its expectations about debt cancellation and seek other ways to restructure its debts, such as extending the repayment period, lowering interest rates, or swapping debts with other creditors.Moreover, there is another school of thought that believes that Ghana's stance on the Russia-Ukraine war could further complicate its negotiation with China, given China's friendly relationship with Russia.
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On February 24, 2023, Ghana supported a UN General Assembly resolution condemning Russia's invasion of Ukraine, along with Nigeria, Ivory Coast, Egypt, and Kenya. <img alt="" class="wp-image-465958"/>UN General AssemblyPresident Akufo-Addo emphasized that “great powers trampling on small nations is not something that we welcome,” and Ghana would continue to hold its position.
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However, China has not directly condemned Russia's invasion of Ukraine or otherwise and called for a cease-fire and peace talks instead. Prior to this, President Akufo-Addo ratted out Burkina Faso, accusing the neighbouring country inviting in mercenaries from Russian firm Wagner."To have them operating on our northern border is particularly distressing for us in Ghana,” he said in December 2022.
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China has close ties with Russia, as evidenced by the “no limits” partnership agreement signed between Beijing and Moscow in February 2022. More interesting is Chinese President Xi Jinping's visit to Russia and their subsequent signage of another partnership agreement that seeks to deepen China-Russia relations.
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<img alt="" class="wp-image-465962"/>Xi Jinping and Vladimir PutinIt remains uncertain how China will respond to Ghana's request for debt relief. However, Ghana's engagement with China could provide an opportunity for both countries to strengthen their economic ties and collaborate on infrastructure and development projects.
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Ghana could leverage China's Belt and Road Initiative, which aims to promote trade, investment, and connectivity between China and countries along the ancient Silk Road, to enhance its transport, energy, and communication infrastructure. Nonetheless, Ghana must balance its engagement with China's economic interests and its foreign policy objectives and ensure that it pursues sustainable and equitable
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development.
The Independent Ghana
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