GHANA'S POLITICAL AND ECONOMIC MALAISE

Created: 7/19/1967

OCR scan of the original document, errors are possible

Ghana's Political and Economic Malaise

CBHTRAL IHTELLIQBHCE AOEHCX OFFICE OF NATIOKAL ESTIMATES

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SPECIAL MEWJRAHDUM HO. 7

SUBJECT: Ghana'a Political and Econcraic Malalae*

SUMMARY

Sana's ruling militayy-pollce junta ie grappling withand political nes, left by Jfcrumoh. VecoLnlcJfun*ure of hov to return to

constitutional rule. The Junta relies heavily on US aid and advice,

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with greatly increased US aid, Ghana la not likely in the next several yeara to make substantial progreaa toward economic growth

to the US might cens to poweresult of tha slow pace ofreconstruction.

^ This memoranda waa produced solely by CIA, it waswith the Office

I. EfTRDXCTICS

1- Under Hkrumah, Ghana cctnnanded headlines so pacesetter of independence In West Africa, and aa one of the leaders of the radical nations of ths Third World. But in the process Hkrumah, like Sukarno and Ben Bella,hambles of his nation'sand economic foundation* before he vaa called to account. Re squandered0 Billion foreign exchange reserveslargely from cocoa sales at high world prices In the early andnd ran up new foreign debts of0 million for prestigeariety of unsound state enterprises, snd political and diplomatic activities designed to further his own continental ambitions, earalf after his ouster, the consequences of Ms follies have become clear, and Ghana iaharacter more in keeping with Its limited resources and prospects. Por Ghana, while better endowed with naturaland trained personnel than most of its hapless West African neighbors.till Isne-crop economy,er capita national Income of only about

2. From the outsat, the ruling national Liberation Councila military-police Junta, has sought aid and advice from ths USultitude of economic, financial, administrative, and

security Batters. In large measure, this at ens from the HLC'e strong pro-Western political Inclinations and from Itsover lack of support fron other Western countries. Its close rapport vlth the US was dramatically demonstrated during the abortive coup in April, vhen high ranking Ghanaian officials aought refuge or assistance in US official residences. More re-ctntly, the US haa considerably Increased its aid conmitasnts to Ghana and is considering the scope of future assistance.

II. THE CURREBT SITUATIOS AHD SHORT TERM OUTLOOK A. Economic

3< To some extent, Ghanaian political stability hinges upon tbe HLC'e success in attacking the national economic mess. Over the past five years, econesilc growth has barely kept pace with the Increase in populationercent per year). The KLC has mads sens progress. By trlanlng the budget, cancelling prestige projects, lopping off some notoriously unprofitable stateand tightening control over others, lt baa helped curb let the rehabilitation of Ghana's economy haa scarcely begun, and there was substantially no increase In economic output

<t. lhe most pressing problem le to obtain our fielent foreign exchange to pay for food3 millear) aad tba raw materials, spare parts, and machinery Deeded for the restoration of production and efficiency in Industry and transport. xport earnings0 million) vere no higher than ine end fell short of Imports byillion. Ghana's cocoa exports doubled in voltaae fremi the8 to thee, but earnings stagnated because of the decline of prices ia the vorld market. In recent years, production ha* failed to rise because pesticides and fertilizers have not been available and because prices paid to cocoa farmers by the government marketing board have been low. Other export industries (tiEber, gold, andare in the doldruna because of depleted resources, obsolete equipment, or rising production and transportation costs.

5. At the sons time, foreign exchange reserves are depleted and additional short term, borrowing is Halted by terms of anwith the International Monetary Fund (IMP). Loans of the type permitted by the DO? will help to reduce this year's foreign exchangeh* OS is providingillion in3 and commodity import loans, nevertheless, Ghana win probably not be able to afford the increase of laporta it has planned for

6. Economic prospects over the next few years are scarcely more encouraging. Though there will be somo improvements In the picture, In particular the Increased production of aluminum from the new Kaiser-Reynolda VALCO plant, there appears to be little prospect for any very substantial increase in export earnings. Moreover, Ghana novoreign debt of0 million, of which0 million is due In9 alone. It will need much more external assistance than is nov in sight to meet theseand at the same time finance essential imports. Some relief can be expected by the rescheduling of debt service payments, already envisaged by the IMF; but Ghana win almost certainly look to the US for increased financial support over the next few years.

B. Political

7- The April coup attempt, though it collapsed of its own ineptitude, raised questions regarding political stability and the role of the KLC. The Junior officers who directed the coup were Inspired by personal ambition, grievances over neglect of the army, and suspicions of corruption in the regime. Innofor as the public was awareoup, it aided with the HLC, thoughMxruosh supporters were subsequently Jailed for prematurely

"Jubilating" over Its demise. However, allegations of corruption are widely believed, and an undercurrent of disillusion pervades tbe scene.

8. By and large, toe political vacuum left by mmaaah's ouster persists. Ihe HLC appears uncertain of bow to regain public confidence. Host members are well-intentioned and fairly honest, and appear to understand generally the country's plight; yet they find it difficult to ignite anyof enthusiasm for civic or economic action. They are disappointed with the lack-lusterof the civilody well regarded by its British mentor* at Independence, but degraded and demoralized under rOcnsamh. The HLC isind of sub-cabinet of civilian special commissioner* to direct soma of the ministries, in the hop* that this will revitalize the bureaucracy and at the same time allay the mounting pressure from the educated eliteestoration of civilian rule.

9- Despite the HLC's ban on politics, some thinly veiled political activity goes on, but no figure ha* yet appeared who haa popular appeal or could lead the country. Most of th* older politician* either are tarred with the Wkrumah brush or, like

th* former leader of opposition toofi Baals, bare lost their touch and most of their following during their yean of exile - General Ankrah and one or two others In the KLC vould probably run for office if constitutional procedure* ware restored, but they would find It hard to overcoat* popular suspicions of corruption end criticism for the sluggish performance of the economy. For these reasons, lt Is now very difficult to foreseeivilian successor regime may re-emerge or who might lead lt.

nonetheless, there Is little likelihood that the NLC will be threatened by popular uprisings or civiliant least for th* next year or two. The current high lcvnl of urban unemployment poaea little immediate threat to the regime, for th* traditional African system of extended family obligations alleviates some Th* civil service and th* labor onions grumble, but are unlikely to formulat* or Join plats against th* government.

Problems posed by the army are more likely to trouble th* KLC or any civilian successor which might emerge. monargely created by Hkrumahrestige symbol, serves little useful purpose. The HLC has notole for the army to play in national development, nor is It willing to disband any aubstantlal pert of tbe force, in part because of the scarcity

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of Jobs elsewhere. Indeed, because of worries about the loyalty of the amy, the HLC say decide ts allocate even more funds to the militaryight national budget. The fact that acoup easily turned out Hxrumah, and that the haphazardcoup of last April against the HLC caught both tbe government and the bulk of the mllitery by surprise, may encourage other military figures to new adventures.

III. LCSGER TERM PROSPECTS

12. Over the next three to five yearsrospects for economic growth vill be largely dependentise in eocceubstantial increase in domestic foodreater popular acceptance of economic end civic tasks, prolonged forbearance by principal foreign creditors,ontinued high level of external economic aid.

13* It vould be unrealistic to expect all or many of these developments in Ghana during this period. Foreign creditors will probably reluctantly agree to debt postponement, because they will have little other choice. Continued large-scale external assistance, if forthcoming, vould further ease foreign exchange stringencies, political and economic rehabilitation vill have to come largely from

within, fiven If capable and dynamic national lcaderablp emerges, tbe economic malaise is likely to persist for some time. That is to say, there can be scant assurance that over the next few years even with greatly increased external economic assistance, Ghana will be much moreebt-ridden West African coastal state with uncertain political stability and orientation.

Ik. The KLC or almost any likely civilian successor will continue to look primarily to the US for helpariety of ways, but many Ghanaians have exaggerated expectations of what tho US can do for then. Hence part of the blame for alow progress will fall oo the US. Popular demagogues or disaffected military leaders will then lUely claim that the US la not sufficiently attentive to Ghanaian needs, and that more radical solutions are needed. In thoseegime leas friendly to the US, certainly more nationalistic, and probably more radical, could come to power.

TOT THE BCARDATICVJ. ESTIMATES:

)

REST Chairman

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