Money, Finance, and the Political Economy of Development in Ghana

Akolgo, Isaac Abotebuno

Money, Finance, and the Political Economy of Development in Ghana

Abstract

Abstract: en This cumulative dissertation is both a study of development financing in post-independence Ghana and a response to recent International Political Economy(IPE) debates on the nature and operation of finance capitalism within countries and globally. My main argument is that since political independence in 1957, Ghana’s attempts for economic transformation have been primarily frustrated by a finance constraint. A financial constraint is used here to capture not only an insufficiency or mismanagement of development finance, but also the constrictive, anti-developmental, and exploitative tendencies of global and domestic finance, the financial system, and financial policy. In the three articles that constitute this dissertation, I demonstrate the financial constraint to Ghana’s development by responding to ongoing IPE debates that suggest that there has been a dysfunction of finance within the global capitalist system. This dysfunction, it has been argued, is that finance either has failed to support the real productive sector or has expanded disproportionately beyond the productive economy, domestically and globally. Particularly for countries in the global South, this dysfunction in finance has impeded their economic transformation. Methodologically, I employ a mix of quantitative and qualitative analyses across the three articles, drawing micro and macro level data from several sources including the Bank of Ghana, World Bank, IMF, the Ministry of Finance of Ghana, and primary data from interviews on the use of mobile money in Ghana. In the first article: Ghana’s debt crisis and the political economy of financial dependence: history repeating itself? I show a macro level dysfunction in finance that resulted in Ghana’s 2022-2023 sovereign debt crisis. I place the country’s public debt statistics in historical and political context, arguing that its fall into a debt crisis is a consequence of a weak and dependent economic structure inherited from colonialism and perpetuated by liberal economic policies; the exploitative transnational lending system under which it procures external debt; and recent government policy errors. In the second article, On the contradictions of Africa’s fintech boom: evidence from Ghana, I show a micro level dysfunction in finance under which the rollout of mobile money to promote financial inclusion faces the challenges of regressive taxation, exorbitant transaction costs, and customer indebtedness from digital microloans. In the third article, Banking and monetary policy in Ghana: has finance served the real economy? I show both a macro and micro level dysfunction in finance and financial policy under which commercial banks’ lending to the agricultural and manufacturing sector has significantly declined between 1999 and 2023. Collectively, I demonstrate that these various dysfunctions in finance have impeded Ghana’s development. On the basis of this, I make recommendations for reforms of Ghanaian financial and economic policy under each paper.; de Diese kumulative Dissertation ist sowohl eine Studie über die Entwicklungsfinanzierung im Ghana nach der Unabhängigkeit als auch eine Antwort auf die jüngsten Debatten der Internationalen Politischen Ökonomie (IPE) über das Wesen und die Funktionsweise des Finanzkapitalismus innerhalb von Ländern und weltweit. Mein Hauptargument lautet, dass seit der politischen Unabhängigkeit im Jahr 1957 die Versuche Ghanas, eine wirtschaftliche Transformation zu erreichen, in erster Linie durch finanzielle Zwänge vereitelt wurden. Der Begriff „finanzieller Zwang” umfasst hier nicht nur die Unzulänglichkeit oder Misswirtschaft der Entwicklungsfinanzierung, sondern auch die einschränkenden, entwicklungshemmenden und ausbeuterischen Tendenzen der globalen und nationalen Finanzwelt, des Finanzsystems und der Finanzpolitik. In den drei Artikeln, aus denen diese Dissertation besteht, zeige ich die finanziellen Zwänge für die Entwicklung Ghanas auf, indem ich auf aktuelle IPE-Debatten eingehe, die darauf hindeuten, dass es innerhalb des globalen kapitalistischen Systems zu einer Dysfunktion der Finanzwirtschaft gekommen ist. Diese Dysfunktion besteht laut diesen Debatten darin, dass die Finanzwirtschaft entweder den realen Produktionssektor nicht unterstützt hat oder sich überproportional über die produktive Wirtschaft hinaus ausgeweitet hat, sowohl auf nationaler als auch auf globaler Ebene. Insbesondere für Länder des globalen Südens hat diese Dysfunktion der Finanzwirtschaft ihre wirtschaftliche Transformation behindert. Methodisch verwende ich in den drei Artikeln eine Mischung aus quantitativen und qualitativen Analysen und ziehe dabei Mikro- und Makrodaten aus verschiedenen Quellen heran, darunter die Bank of Ghana, die Weltbank, der IWF, das Finanzministerium von Ghana sowie Primärdaten aus Interviews zur Nutzung von Mobile Money in Ghana. Im ersten Artikel: Ghanas Schuldenkrise und die politische Ökonomie der finanziellen Abhängigkeit: Wiederholt sich die Geschichte? zeige ich eine Dysfunktion auf Makroebene im Finanzwesen auf, die zur Staatsschuldenkrise Ghanas 2022–2023 geführt hat. Ich stelle die Statistiken zur Staatsverschuldung des Landes in einen historischen und politischen Kontext und argumentiere, dass der Absturz in die Schuldenkrise eine Folge der schwachen und abhängigen Wirtschaftsstruktur ist, die aus dem Kolonialismus stammt und durch eine liberale Wirtschaftspolitik aufrechterhalten wird, sowie des ausbeuterischen transnationalen Kreditsystems, unter dem das Land Auslandsschulden aufnimmt, und der jüngsten politischen Fehler der Regierung. Im zweiten Artikel, „On the contradictions of Africa’s fintech boom: evidence from Ghana” (Zu den Widersprüchen des Fintech-Booms in Afrika: Erkenntnisse aus Ghana), zeige ich eine Dysfunktion auf Mikroebene im Finanzwesen auf, unter der die Einführung von Mobile Money zur Förderung der finanziellen Inklusion mit den Herausforderungen regressiver Besteuerung, exorbitanter Transaktionskosten und der Verschuldung von Kunden durch digitale Mikrokredite konfrontiert ist. Im dritten Artikel, „Banking and monetary policy in Ghana: has finance served the real economy?” (Bankwesen und Geldpolitik in Ghana: Hat das Finanzwesen der Realwirtschaft gedient?), zeige ich sowohl eine makro- als auch eine mikroökonomische Dysfunktion im Finanzwesen und in der Finanzpolitik auf, unter der die Kreditvergabe der Geschäftsbanken an den Agrar- und Fertigungssektor zwischen 1999 und 2023 erheblich zurückgegangen ist. Insgesamt zeige ich, dass diese verschiedenen Dysfunktionen im Finanzwesen die Entwicklung Ghanas behindert haben. Auf dieser Grundlage gebe ich in jedem Artikel Empfehlungen für Reformen der ghanaischen Finanz- und Wirtschaftspolitik.

Description

Full text: Money, Finance, and the Political
Economy of Development in Ghana

By
Isaac Abotebuno Akolgo

A dissertation submitted to the Bayreuth International Graduate School of African
Studies University of Bayreuth, in partial fulfilment of the requirements for the award
of the degree of Doctor of Philosophy (Dr Phil) in Political Economy

Supervisor: Professor Dr. Kai Koddenbrock

Mentor:

Professor Dr. Stefan Ouma

Mentor:
Professor Franklin Obeng-Odoom

May 2024

ii

DECLARATION
I hereby affirm that I have produced this dissertation without any inadmissible help from a third
party or the use of resources other than those cited; ideas incorporated directly or indirectly
from other sources are marked as such. In addition, I affirm that I have neither used the services
of commercial consultants or intermediaries in the past nor will I use such services in the future.
The dissertation in the same or similar form has not been presented to another examining
authority in Germany or abroad, nor has it been published.

Bayreuth, May 22, 2024, Isaac Abotebuno Akolgo

iii

DEDICATION
To the memory of Richard Ugochukwu Anyah, my colleague cluster-funded PhD student who
passed away in 2022

iv

ACKNOWLEDGMENT
I am grateful for the support of my mentoring team, which included Professors Kai
Koddenbrock, Franklin Obeng-Odoom, and Stefan Ouma. I am particularly grateful to my
supervisor, Prof. Dr. Kai Koddenbrock and the management of the Africa Multiple Cluster of
Excellence for offering me a position in the Junior Research Group on The Political Economy
of Monetary and Economic Sovereignty in West Africa Compared. I would also like to
acknowledge the wonderful support I got during my field trips in Ghana, especially the
assistance from Enock Kesse and David Agbadza.
Special thanks to Renate Crowe whose administrative assistance in the cluster helped me to
not only settle well in Bayreuth but to effectively navigate the administrative demands from
University and state officials. Lastly, I would like to thank all my friends and colleagues in
BIGSAS and other departments in the University of Bayreuth for their support all these years.

v

ABSTRACT
This cumulative dissertation is both a study of development financing in post-independence
Ghana and a response to recent International Political Economy(IPE) debates on the nature and
operation of finance capitalism within countries and globally. My main argument is that since
political independence in 1957, Ghana’s attempts for economic transformation have been
primarily frustrated by a finance constraint. A financial constraint is used here to capture not
only an insufficiency or mismanagement of development finance, but also the constrictive,
anti-developmental, and exploitative tendencies of global and domestic finance, the financial
system, and financial policy. In the three articles that constitute this dissertation, I demonstrate
the financial constraint to Ghana’s development by responding to ongoing IPE debates that
suggest that there has been a dysfunction of finance within the global capitalist system. This
dysfunction, it has been argued, is that finance either has failed to support the real productive
sector or has expanded disproportionately beyond the productive economy, domestically and
globally. Particularly for countries in the global South, this dysfunction in finance has impeded
their economic transformation. Methodologically, I employ a mix of quantitative and
qualitative analyses across the three articles, drawing micro and macro level data from several
sources including the Bank of Ghana, World Bank, IMF, the Ministry of Finance of Ghana,
and primary data from interviews on the use of mobile money in Ghana. In the first article:
Ghana’s debt crisis and the political economy of financial dependence: history repeating
itself? I show a macro level dysfunction in finance that resulted in Ghana’s 2022-2023
sovereign debt crisis. I place the country’s public debt statistics in historical and political
context, arguing that its fall into a debt crisis is a consequence of a weak and dependent
economic structure inherited from colonialism and perpetuated by liberal economic policies;
the exploitative transnational lending system under which it procures external debt; and recent
government policy errors. In the second article, On the contradictions of Africa’s fintech boom:
evidence from Ghana, I show a micro level dysfunction in finance under which the rollout of
mobile money to promote financial inclusion faces the challenges of regressive taxation,
exorbitant transaction costs, and customer indebtedness from digital microloans. In the third
article, Banking and monetary policy in Ghana: has finance served the real economy? I show
both a macro and micro level dysfunction in finance and financial policy under which
commercial banks’ lending to the agricultural and manufacturing sector has significantly
declined between 1999 and 2023. Collectively, I demonstrate that these various dysfunctions
in finance have impeded Ghana’s development. On the basis of this, I make recommendations
for reforms of Ghanaian financial and economic policy under each paper.

vi

TABLE OF CONTENTS

DECLARATION .................................................................................................................................... ii
DEDICATION ....................................................................................................................................... iii
ACKNOWLEDGMENT ........................................................................................................................ iv
ABSTRACT ............................................................................................................................................ v
TABLE OF CONTENTS ....................................................................................................................... vi
A STATEMENT ON THE CUMULATIVE DISSERTATION: ........................................................... 1
Introduction ..................................................................................................................................... 1
What is the alternative to the neoliberal explanation and prescription? ......................................... 4
The debate on finance capitalism .................................................................................................... 5
Connecting the three papers ............................................................................................................ 9
What are the implications for government policy in Ghana?........................................................ 15
References ..................................................................................................................................... 16
List of the cumulative dissertation articles.................................................................................... 20

1

A STATEMENT ON THE CUMULATIVE DISSERTATION:

Money, Finance, and the Political Economy of Development in Ghana

Isaac Abotebuno Akolgo

Introduction
If for many years (in Africa) financial policy was aimed at addressing issues
central to development and nation-building, in more recent years it has become
much more tethered to the objectives of stabilization and debt repayment.
Financial policy, together with other macroeconomic policy analysis, has
succumbed to `financierism' under which economic policy has given
overwhelming priority to financial policy instruments and objectives (exchange
rates, interest rates) relative to concerns for the `real' side variables and goals
that directly affect employment and growth (Thandika Mkandawire, 1999:321)

This dissertation is both an analysis of development financing in Ghana and a response to
ongoing debates about the nature and operations of finance capitalism in contemporary and
historical terms. While these renewed debates about finance capitalism serve as the entry point,
the three papers in this dissertation collectively speak to the broader, long-running discourse on
the opportunities for, and constraints to economic transformation in post-independence Africa.
Debates about Africa’s economic development in the year 2024 remain as active and relevant
as they were more than six decades ago in the 1950s and 1960s when most countries gained
political independence from European colonization. Although the context of the discussions
were much different in the 1960s compared to the present moment, the substance has
nevertheless remained unchanged – it has always been about economic transformation and the
quality living standards that are associated with it. In the early period of independence, the
academic and policy discourse was more positive, justifiably ambitious, and focused both on
what economic ideologies to follow, and on the kind of political system under which the new
nation states were to pursue their visions of creating prosperity for all citizens.
Regarding economic ideology, most African countries pursued a state-led
developmentalist agenda in the first decade of independence. Early African leadership
understood, rightly, that colonialism had shaped their economies to be heavily dependent on

2

European finished goods. The first order of business then was to establish a reasonable level of
self-reliance in the production of commodities they were capable of, especially food production.
Accordingly, import substitution industrialization (ISI) became the prominent policy choice
across the continent. In Ghana, Kwame Nkrumah’s government established state farms, built
factories across Ghana, invested heavily in social infrastructure, and constructed the Akosombo
Hydro-Electric Dam that continues to be the main source of electricity today. On February 24
1966, Nkrumah was overthrown in a military coup d'état, and by the early 1980s, the
developmentalist agenda was aborted and the subsequent decades marked by a cyclical pattern
of economic crises. Consequently, therefore, recent debates about economic development in
Ghana, in contrast to those of the early 1960s, have become diagnostic, seeking to explain and
hopefully, prescribe solutions to a systemic development problem. Two key questions have
dominated the discourse: one, why has Ghana, much like several other African countries, failed
to transform its economy, avoid the cycles of economic crises and provide quality, stable
standards of living for its citizens? Two, what is/are the solutions to the systemic crisis of
development?
There has been no shortage of answers to both questions on why post-colonial
economies are yet to achieve the economic transformation that they envisioned would come
with political independence as well the solutions to such a development constraint. The
dominant explanation and solutions have come from international finance institutions (IFIs),
notably the World Bank and International Monetary Fund (IMF), and the large clique of
neoclassical economists, and technocrats that justify, implement, and maintain the liberal
development doctrines that these IFIs advocate. The IMF and World Bank’s prominent
influence on economic and financial policy in Africa began in the midst of 1980s devastating
economic and debt crisis in the continent.
In the late 70s to early 80s when several countries run into balance of payment problems
and had accumulated debts they could not repay, the World Bank released a report now
famously called the Berg Report (named after Elliot Berg who led the Bank’s Africa Strategy
Review Group into the 1981 study). In that report, Accelerated Development in sub-Saharan
Africa: An Agenda for Action, the World Bank blamed the economic decline primarily on
government failures – fiscal indiscipline, too much government intervention and market-
destablising government regulation. The solution then was to pursue an economic reform
programme that will remove the bottlenecks (namely macroeconomic and financial imprudence
of government) to growth and transformation. Put differently, since government was the main
problem, the only viable reform based on the World Bank recommendations, was to roll back

3

the state and allow the private sector and the operation of market forces direct resources to their
productive use. In the years that followed, the IMF and World Bank, under the guise of
providing financial and or technical support to help address the Ghanaian crisis, took control of
economic and financial policy. Through the structural adjustment programme, these IFIs
enforced deregulation of the economy, liberalization of the financial system and privatization
of previously state-owned companies and corporations. This transformation of the Ghana into
a predominantly capitalist economy was consolidated by the return to constitutional electoral
democracy in 1992, paving way for, among others, the enforcement of private land rights, the
institution of independent central banking, and the rise of private foreign banks. Advocates of
the neoliberal ideologies argued that liberalized economies would promote competiveness,
accelerate growth, open opportunities to international trade, create jobs and consequently end
poverty.
However, the prosperity that neoliberal capitalism promised has eluded African
economies. Particularly in Ghana, economic liberalization did not only truncate the promise of
the post-independence developmentalism; it also entrenched a systemic crisis of development.
Towards the end of the 90s, it was evident that three decades of adjustment had not only failed
to deliver significant transformation but had also weakened the state, generated poverty and
inequality, desecrated cherished social values, and bred a kind of greed that is systemic to
capitalism. The collapse of functional governance, the return of sovereign debt crisis, the
immiseration of the mass of Ghanaians and its attendant moral decay under neoliberal
capitalism was so vividly depicted in Benjamin Kwakye’s novel: The Clothes of Nakednes.
Publicized in 1998 and set in Nima 441, an urban slum in Accra, Benjamin Kwakye’s
Clothes of Nakedness tells a griping story of everyday struggles for survival in Ghana’s capital
city. It is a vivid expression of what post-independence neoliberal capitalism reduced Ghana to
– a theater of capital’s unregulated greed made sure by the exploitation of working class labour.
Its main character, the sinister, yet elaborately endearing Mystique Mysterious, enriches himself
by exploiting the labour of the poor and vulnerable of Nima. He simply acts as an intermediary,
connecting his jobless victims like Gabriel Bukari to employment opportunities and extracting
a commission on their earnings. To also extend his wealth and power, he corrupts the youth of
Nima 441, first offering them free Marijuana, and then when they have become addicted, his
trade in drugs booms. Those like Kojo Ansah who reject the co-optation into his exploitative
schemes pay the ultimate price – their lives. It is troubling to learn that not only had the state
become incapable of addressing the deplorable economic conditions in the country, it had been
so weakened by years of defunding under IMF/World Bank interventionism that there was no

4

legal remedy for victims of Mystique’s violence and exploitation. The timing of Kwakye’s
novel, 1998, was crucial. By portraying life in Ghana more than two and half decades after
structural adjustment, Kwakye’s work offers a non-technical and grounded account of the
failure of both the political and economic governance that neoliberalism had produced.
What is the alternative to the neoliberal explanation and prescription?
In contrast to the patrimonial explanation of the crisis of development in Ghana, are there
nuanced accounts? This dissertation demonstrates that there is more to Ghana’s development
challenges than an intrinsic incapacity or failure of government and the private sector as the
better alternative. There is a large of body of critical research showing the poverty of the
mainstream neoliberal accounts of development in Ghana. However, most of these studies have
paid little attention to the financial system. For instance, in his seminal work, Property,
Institutions and Social Stratification in Africa, Franklin Obeng-Odoom offered arguably the
most thorough critic of mainstream economic explanations of development in Ghana and
Africa. For Obeng-Odoom, the neoclassical explanation of relative underdevelopment in Africa
are excessively focused on an insufficiency of human capital. Such explanations, he contends
sound “… enticing, especially when they appear to explain the meteoric rise of the ‘Asian
Tigers,’ whose high levels of education, and commitment to a so-called culture of hard work
tend to be the focus of much praise” (Obeng-Odoom, 2020:ix). The problematic nature of this
diagnosis of the income differences between industrialised countries and those of Africa is well
set out in Obeng-Odoom’s work:
Explaining Africa’s unequal position requires even deeper analysis….neither African
culture, human capital, physical capital, nor the natural resource curse explains Africa’s
underdevelopment. None of these can sufficiently unravel the startling economic
inequalities in Africa between various social groups, nor those disparities between Africa
and the rest of the world. In this regard, the idea that new cultures of land would enhance
‘Africa’s catch up’ process is mistaken also. Although the reverse case – the idea that
African land cultures are pristine – might be used to counter this central thesis, I find that
similarly unconvincing. The tendency to express the African condition according to
trichotomy of either cultural pessimism, cultural triumphalism, or the scarcity of capital
is not only limiting, it is also obfuscating and diversionary (Obeng-Odoom, 2020:ix-x).

In the rest of his book, Obeng-Odoom proceeds to deconstruct the development
problem, re-centering land or more generally property as the foundation of stratification within
and across Africa. Ultimately, he contends that the dismal state of affairs in most African
countries is the result of the “contradictions and exploitation whether through trade, through
debt, or through land reforms” (p. 236). Neither neoliberal capitalism, which has failed
woefully, nor the appeal of socialism can address this systemic injustice. Instead, Obeng-

5

Odoom suggests a collection of strategies that are rooted in what he calls Africanisms or African
socialism. This recourse to African socialism will allow countries to break the cartels and
monopolies of transnational corporations that control and expropriate the continent’s natural
resources. Obeng-Odoom’s work is grandiose, commendable and will be relied on and debated
for the bold critical foundation it has laid. Yet, a major blind spot of Property, Institutions and
Social Stratification in Africa is its neglect of the role of finance and the financial system. I
think a sufficient anaylsis of the development problem today demands similar or even more
attention on the financial system as Obeng-Odoom places on land or property generally. This
dissertation therefore should serve as a complement to Obeng-Odoom and others’ works as it
organizes a comprehensive political-economic explanation of the financial constraints that
impede Ghana’s economic transformation.
Across the three papers in this dissertation, I demonstrate that within the global financialised
capitalist order into which Ghana has been integrated, the development problem can fairly and
squarely be reduced to an issue of ‘ a financial constraint’. A financial constraint is used here
to capture not only an insufficiency or mismanagement of development finance, but also the
constrictive, anti-developmental, and exploitative tendencies of global and domestic finance,
the financial system, and financial policy. Take for instance the conditions under which external
sovereign debt is procured such that it creates indebtedness or how the constitution of Ghana’s
domestic financial system facilitates the extraction of domestic resources including the
exploitation of natural resources, which Obeng-Odoom deplores. In whatever facet of Ghanaian
society for which capitalistic struggles have facilitated accumulation by a few foreign and
domestic interests, and visited suffering on the masses, the operations of money and finance
has always generated or facilitated such exploitation. It is therefore crucial to organize a
comprehensive explanation of the nature and operations of money and finance that have limited
Ghana’s transformation. This will pave the way for us to proffer alternatives to navigating the
development finance constraint. Thankfully, the renewed debates about finance capitalism and
particularly its insidious tendencies in developing and emerging economies offer a unique
opportunity do a serious analysis of development financing in Ghana.
The Debate on Finance Capitalism: from financialisation to international financial
subordination
Debates about capitalism and its discontents are not new, at least not since the 19th Century
when Karl Marx wrote Das Kapital, a treatise on the capitalist mode of production and
accumulation. The last decade and half has witnessed a resurgence of intense debates about
globalized capitalism. In particular, there has been an explosive rise in the volume of research

6

on financialisation, a term coined by researchers to study what is often seen as ‘changing
financial relations and practices of economic agents in contemporary capitalism’ (Bortz &
Kaltenbrunner, 2018:377). Between 2010 and 2018 alone, research on financialisation more
than quadrupled from less than 100 publications per year to 400 publications per year (Mader,
Mertens & van der Zwan, 2020). Across various traditions of radical political economy, from
Marxists and post-Keynesians to other heterodox perspectives, the evidence in the literature is
that the definition or significance of the term varies (Lapavitsas, 2011; Epstein, 2005). However,
one feature uniting these studies is ‘a view of finance beyond its traditional role as a provider
of capital for the productive economy’ (Van der Zwan, 2014:99). While it was used long ago by
Magdoff and Sweezy (1987), the popular understanding of financialisation is built on the
conceptualisations of Epstein (2005) and Krippner (2005). For Epstein, finanicialisation implies
the increasing role of financial motives, markets, actors and institutions ‘in the operation of the
domestic and international economies’ (Epstein, 2005:3). Before Epstein, Greta Krippner
argued that financialisation is a ‘pattern of (capitalist) accumulation in which profit making
occurs increasingly through financial channels rather than through trade and commodity
production’ (Krippner, 2005:174).
Since Esptein and Krippner, the fine-grained but inconclusive research on financialisation
has been wide-ranging, covering as Van der Zwan (2014:99) categorises, ‘the emergence of a
new regime of accumulation’ (Krippner, 2012; Crotty, 2005; Milberg, 2008; Stockhammer,
2012); ‘the ascendency of the shareholder value orientation’ (Boyer, 2005); and ‘the
financialisation of everyday life’ (Erturk, et al., 2007; Aitken, 2007). Koddenbrock,
Kvangraven and Sylla (2022) suggest an alternative categorisation based on a dichotomy
between two themes (divorce and expansion) in financialisation literature. One, that in the
finance-production nexus, finance now takes precedence (divorce); and two, that contemporary
capitalist economies have witnessed as Epstein posited, an unprecedented expansion in
financial institutions, actors, motives and practices (expansion). The manifestation of this dual
role of finance in capitalist accumulation and exploitation has received wide theoretical and
empirical research attention (see for instance Palley, 2013; Lapavitsas, 2013, 2011, 2009;
Foster, 2007; Karwowski & Stockhammer, 2017). Within International Political Economy, there
is now a large of body conceptual and empirical literature on what Jain and Gabor (2020) have
described as digital financialization. In this strand of the focus has been to interrogate how,
under the arguments of financial inclusion, an alliance of international development agencies,
philanthropies, financial institutions, telecommunication companies and governments has

7

paved the way for global finance to extend its influence to, and extract profits in the global
south.
In other fields such as Economic Geography, where the concept of financialisation has
received critical scrutiny and application, the literature has equally been robust, offering
insights on the financialisation of nature and agriculture (see Ouma, 2020, 2015, 2014; Ouma,
Johnson & Bigger, 2018; Asiyanbi, 2018; Sippel, 2015; Fairbairn, 2015).There were always
concerns that the literature overly focused on core capitalist economies (CCEs) to the neglect
of ECEs in the global south (Bortz & Kaltenbrunner, 2018; Bonizzi, 2013),and also failing to
take a historical approach to understanding the role of finance in capitalist exploitation
(Koddenbrock et al., 2022; Arrighi, 2010).
Thankfully, recent research is focusing on the process and implication of financialisation
for ECEs. This new strand of the literature variously referred to as ‘subordinate financialisation’
(Bonizzi, 2013; Powell, 2013; Kaltenbrunner & Paincera, 2018) and recently as ‘international
financial subordination’ (Alami et al., 2023), is providing a nuanced analysis of finance
capitalism in the south. Subordinate financialisation holds that ECEs encounter financialized
capitalism from a subordinate position in two ways: one, firms in ECEs are subordinated in the
global production networks, ‘providing cheap labour and raw, or at best, intermediate inputs’
(Bonizzi et al., 2020:177/178). Two, structurally, ECEs are subordinated to advanced capitalists
economies (ACEs) in the currency hierarchies that characterize the global capitalist financial
system (Kaltenbrunner & Lysandrou, 2017). IFS takes this further and synthesizes dependency
theory, post-keynesian economics and Marxist scholarship to the make the case that developing
and emerging economies in the global south have been persistently, structurally, and unevenly
integrated into the world capitalist order (Alami et al., 2023). Crucial to IFS and of particular
interest in this briefing is its reliance on Dependency theorisations to explain financialisation in
the south. This is important to understanding the role of global finance in Africa’s development
problems.
Samir Amin for instance provided significant theorization on financial dependency and
his ideas appeals to many. Kvangraven, Styve and Kufakurinani (2021) are particularly
impressed by the ability of Amin’s work to inspire a commitment to both rigorous research and
radical change. Amin posited that in globalized capitalism, money is the dominant instrument
for extracting capital from the underdeveloped periphery of the world system to developed
countries (Amin, 1974). He then argues for a delinking of the economies of the global south
from the capitalist order. For Amin, countries of the South could delink by refusing to submit
their national-development strategies to the imperatives of globalization (Amin, 1987). But as

8

Amin points out, that should not be confused with autarky, which can portray self-sufficiency
and an avoidance of engagement with the other markets. Far from this, delinking should focus
on
…the organization of a system of criteria for the rationality of economic choices based
on a law of value, which has a national foundation and popular content, independent of
the criteria of economic rationality that emerges from the domination of the law of
capitalist value that operates on a world scale (Amin, 1987:436).

African economies failed to delink as Amin admonished, and have increasingly
submitted national policy priorities to the dictates of neoliberal capitalist finance. On the
contrary, the success of the East Asian development model in South Korea, Taiwan and China
has been credited to their delinking from the global order (Pérez, 2021). Prior to Amin, Kwame
Nkrumah recognised the potentiality of financial dependency and warned of imperialist
domination of Africa through the financial system (Nkrumah, 1965). On the methods of
neocolonialism, Nkrumah observes that it may take military forms, but ‘more often, however,
neocolonialist control is exercised through economic or monetary means…by monetary control
over foreign exchange and through the imposition of a banking system controlled by the
imperial power’ (Nkrumah, 1965:1). Recent conceptualisations of dependency include
Kvangraven (2021), Sylla (2021), Pigeaud and Sylla (2021), and Koddenbrock, and Sylla
(2019). Koddenbrock and Sylla posit that African countries face a chain of monetary and
financial dependency induced by internal and external monetary repressions. Externally, they
argue that African countries with their subordinate currencies face US Dollar and Euro
hegemony. Additionally, international pressures on free capital flows enable capital flight from
African economies and keeps them dependent on the global north for the money needed to
finance national policies. Internally, this dependency is sustained by a foreign-dominated and
oligopolistic banking system that repress credit. These banks do not sufficiently lend to small
and medium scale enterprises (SMEs) to support employment creation. At the same time,
internal political elites who benefit from the chain of dependency sustain it by supporting
neoliberal policies of free capital flows rather than domestic-oriented development policies.
As the preceding summary of the debates show, the literature on finance capitalism is rich
and expansive, with differing perspectives on the exact manifestation of the phenomenon. The
standpoint in this dissertation, demonstrated across the three papers, is that the kind or the
origins of financialised capitalism do not matter as much as the essence of it. Accordingly, I
choose to focus on the substance of the debate, refraining from the disagreements over time
frames within which financialisation has been occurring. Rather, I argue that there has been a

9

dysfunction of finance in historical and recent times at the national and global levels. It for this
reason that I emphasize the financial constraints that post-independent African economies have
faced. The three papers in this dissertation explore these constraints and offer alternative
pathways to financing development in Ghana.
Connecting the three papers: from debt and financial technology to central banking
The three articles that constitute this dissertation tell a common story about the nature and
operations of money, finance and or the monetary/financial system in Ghana. The dominant
theme across these articles, much like the wider literature on the subject matter, is that there has
been a dysfunction of finance within the predominantly capitalist economy that Ghana has
become. More importantly, the papers collectively show that the prevailing policy prescriptions
have failed to address the financial constraints to economic transformation, necessitating
alternative developmental approaches to public finance, financial technologies, banking and
monetary policy.
The first paper: Ghana's Debt Crisis and the Political Economy of Financial Dependence
in Africa: History Repeating Itself? is an account of sovereign indebtedness in post-
independence Ghana. When the COVID-19 pandemic was receding in late 2021, it became
clear that Ghana’s public finances were strained. Two years earlier in 2019, Ghana had just
completed a medium term economic reform program it began with the IMF in 2015. Initially
intended for three years (April 2015 – April 2018) with a loan of $918million, the program was
extended by an additional year to April 2019. The aim of the program as the IMF set out in its
press release was to “…to restore debt sustainability and macroeconomic stability to foster a
return to high growth and job creation, while protecting social spending” (IMF, 2015:1). Shortly
after completing the IMF program, the government began to sharply accumulate further
external debt. Between February 2020 and April 2019, seven new Eurobonds, totaling over
$6billion were issued. At the same time, numerous other domestic bonds were issued. By the
mid to late 2021, debt-servicing costs had risen so significantly to unsustainable levels that
Ghana was cut off from issuing further debt in the international capital market. Simultaneously,
increased spending to address the pandemic and then later the rise in energy costs from the
Russia-Ukraine War, were enough impair debt repayments and push government to return to
the IMF for financial support in July 2022.
The ensuing crisis, the rising costs of living it fueled, the socio-economic pain and suffering
it visited on Ghanaians, and resulting national despair and tension provoked debates about how
the country had so quickly descended into a crisis whose consequences had defied historical
precedence. Most media, academic and political (especially from the government) discussions

10

blamed the Ghanaian crisis primarily on the increased spending induced by COVID and the
Russia-Ukraine War as well as macro financial imprudence associated with African
governments’ usage of external debts to finance consumption or unproductive investments.
More than that, there were many Ghanaians, including opposition politicians, who wondered
why COVID the Russia-Ukraine War had so disproportionately affected them more than other
neighboring West African countries who had managed to avoid a crisis. As such, they blamed
the crisis on government’s incompetence, fiscal indiscipline, and corruption. While it is hard
to dismiss all of these claims, I was of the view that there was more to Ghana’s fall into debt
distress than the failure of governance and or the global shocks brought by COVID and the
Russia-Ukraine War. Contrary to these simplistic narratives, I argue in this paper that Ghana’s
2022-2023 debt crisis is the result of historical, structural, systemic, external and internal
constraints. Specifically, I suggest a triple argument as to how Ghana got into its debt crisis and
a 17th debt-restructuring programme with the IMF:
…this article situates Ghana's 2022–23 debt crisis in the context of its post-independence
political economy and makes three arguments. First, the rise and fall of the developmental
Ghanaian state in the 1960s and 1970s ushered in the Structural Adjustment Programmes
(SAPs) which in turn disrupted early independence attempts at structural economic
transformation. The disruptive role of the SAPs not only returned Ghana to reliance on
raw commodity exports based on the notion of comparative advantage; it also promoted
liberalization, de-industrialization and Ghana's continued reliance on external
development finance. Second, in the post-structural adjustment financialized order,
Ghana remained reliant on a narrow set of primary commodity exports, and resorted to
market-based development finance. The recourse to financialized strategies for
development exposed Ghana to an exploitative transnational lending system dominated
by Western private commercial lenders (mostly banks and pension funds). A third
contingent argument regarding Ghana's indebtedness is that the underlying structural and
external factors that cause vulnerability and financial dependence leave government with
a small margin for policy error. As such, every fiscal slippage or idiosyncratic policy
decision exacerbates government's financial distress (Akolgo, 2023a:1266).

Expanding this argument, the paper goes ahead to show that pre-independence
enslavement and colonialism did not only deprive Ghana of material and human resources, but
it also created a structural disarticulation of the domestic economies. That is to say that
enslavement and colonial rule shaped economies to ‘consume what did not produce, and to
produce what they did not consume’ (Shivji, 2009). The structural dependence on primary
commodity exports to finance imports meant that colonized and later independent countries
were exposed to liquidity constraints in their attempts to develop. Consequently, when the
developmentalist era began after Ghana’s independence in 1957, it was no surprise that a decade
later the country run out of the foreign currencies it needed to sustain its capital imports.

11

Moreover, without patient, long-term and affordable credit, the industrialization was halted and
the country subsequently descended into crisis. World Bank and IMF interventionism during
the structural adjustment collapsed the existing state and industrial capacities and returned
Ghana to reliance on cocoa and gold exports, which then regenerated the liquidity crisis. At the
same time, structural adjustment’s deregulation and financial liberalization allowed
transnational corporation to extract capital from the Ghanaian economy. The only option for
government was to debt-finance its development. Sadly, transnational lending by the end of
structural adjustment had shifted from multilateral and bilateral credit to predominantly private,
market-based finance. Private sector finance from international capital markets is both short to
medium term and expensive. The higher borrowing costs and short repayment terms drove
Ghana into a vicious cycle of debt refinancing.
Therefore, Ghana’s fall into debt crisis in 2022-2023 was not unexpected; it was one
instance in the cycle of debt crisis and restructuring that had characterized post-independence
Ghanaian political economy. Of course, COVID-19, fallout from the Russia-Ukraine War and
to some extent government’s fiscal policy errors quickened the country’s fall into crisis but
these factors were hardly the cause of the crisis. The crux of this first paper is therefore that
postcolonial developmentalism is yet to break out of the historical fragilities Ghana inherited at
independence. Foremost among these fragilities is the structural dysfunction of commodity
dependence compounded by the institutionalization of liberal economic ideologies and policies.
Even the attempts to solve the development problem within the neoliberal order is not only
failing, but also continues to generate new forms of exploitation, and fragilities. This is exactly
the point where the second paper in this dissertation enters the narrative. The incapacitation of
the state due to IMF/World Bank intervention, and the poverty and precarity that neoliberalism
has produced are simply treated as problems resulting from a lack of access to formal financial
systems.
In the second paper: On the contradictions of Africa’s fintech boom: Evidence from
Ghana, I confront a novel, revolutionary and problematic attempt to address underdevelopment
with financial technology (FinTech). When the World Bank/IMF reform policies had evidently
failed to produce the shared prosperity they had postulated, the narrative began to shift from a
denigration of government to complaints about systemic bottlenecks to development and
poverty eradication. Since free market capitalism was said to be the best way to generate
significant wealth, which would trickle down to the masses, the key thing for government and
development partners was to simply get as many Africans to participate productively in the
economy. If citizens had resources, primarily financial resources, they could be entrepreneurial

12

and therefore contribute to personal and macroeconomic growth. However, since state-led
banking broke down in the 80s, most parts of the country did not have banks and as such a
larger population had no bank accounts. IFIs, their development partners and African
governments, including Ghana, began to encourage and fund the establishment of microfinance
institutions. It was hoped that these institutions will provide access to the formal financial
system and therefore access to financial resources for businesses. In short, the development
intervention shifted to financial inclusion of unbanked population. By the early 2000s,
microfinance had failed to both bring most people into the formal financial and or to mitigate
the finance constraint to social entrepreneurship and poverty eradication.
However, the financial inclusion agenda was revived in 2007 starting with the premier
of a novel technology in Kenya. A an alliance of philanthropies, development agencies,
investors and the Kenyan government showed that it was possible to provide financial services
to unbanked citizens through telecommunication systems, particularly mobile phones. The birth
of Mobile Money services in Kenya soon spread across the continent and more so in Ghana.
Mirroring a global agenda for increased financial inclusion in developing and emerging
economies, Ghana became a fintech hub, beginning in 2009 when MTN introduced mobile
money services in the country. Unlike traditional banks, Mobile Money based Fintech was easy
to access and use. Transactions costs were initially cheaper and since most Ghanaians had a
mobile phone, and had subscribed to mobile money services, the fintech paved a pathway to
financial inclusion (defined loosely to mean ownership of a transaction account). Initially
subscribers could send and receive remittances, as well as make payments for basic purchases
and services. The growth in the mobile money subscription was exponential. For instance
registered mobile money users rose from about 3.7 million registered accounts in 2012 to about
48 million in 2021. Similarly, the value of transaction values grew from less than $1 billion in
2012 to $158 billion in 2021 (Akolgo, 2023b). In addition, mobile money services expanded to
include digital micro lending.
Overall, the emergence of mobile money brought significant relief in terms of the ease
of transactions, particularly for informal workers. However, as I show in this second paper, the
postulated goals of financial inclusion, beyond access to an account for payments and receipts,
have evaded most mobile money users in Ghana. The promise of low cost transactions for
instance is no longer existent as operators hiked and introduced multiple transaction fees. Micro
lending which was intended to offer microcredit for social entrepreneurship is generating
private household indebtedness given the unbearable interest rates fintechs charge on such
loans. The paper documents evidence of a pattern of predatory lending based on personal

13

interviews with mobile money users – both subscribers and agents who operate on behalf of the
fintechs. Compounding users’ troubles with mobile money is the government’s introduction of
an electronic transactions levy. The paper’s arguments can be summed up as follows:
Collectively, the findings show…that there is significant evidence of customer
exploitation accompanying Ghana’s fintech boom, and that this negates the good news of
fintech-led development. …On the one hand, the fintechs continue to accumulate profits
through (1) predatory micro lending which creates customer indebtedness and (2) high
transaction fees. On the other hand, government, instead of taxing the profits of the
fintechs, shifts its financing needs to citizens through (3) excessive taxation of MoMo.
As the state supported fintech exploitation grows and the low-income MoMo users cannot
afford transaction fees, loan interests, and digital finance taxes, (4) MoMo transaction
accounts increasingly lie dormant. These results are discussed below (Akolgo, 2023b:
1649).

Ultimately, the paper shows that the vision and rollout of fintech for financial inclusion
and development misconstrues, just as the first paper had shown in relation to public finance,
the source of the development problem. The main problem for most poor Ghanaians is not
simply access to formal banking services; it is access to descent jobs or resources (including
finance) to run viable small and medium-scale enterprises. It is not enough to simply create
transaction accounts and assume that people will naturally leverage them to fight their way out
of poverty. The microloans offered by fintechs are not sufficient to start the smallest business,
and borrowers only use them to mitigate daily financial constraints. Sadly, the excessive interest
rate draw them into further debt. Therefore, just like external debt accumulation, digital finance
has failed, in its current state, to address the development finance constraint.
In the third paper, Banking and Monetary Policy in Ghana: Has Finance Served the
Real Economy? I extend my inquiry to the domestic banking system to see whether it has helped
to address the development finance constraint which external debt accumulation and fintech
were shown to have failed in the first and second papers. Like the other papers, I situate this
paper within the debates on finance capitalism but quickly acknowledge that it is important to
go beyond discourse on the Ghanaian crisis to focus on unpacking the structural weaknesses in
the country’s economy:
Nevertheless, the initial sense of national despair that attended Ghana’s 2022–2023 debt
crisis has retreated, and it is now time to refocus research attention on the structural and
systemic constraints to development financing in Ghana. One place to start this kind of
inquiry is the domestic financial system. (Akolgo, 2025:1).

Specifically, I ask: has the operations of commercial banks and the central bank’s
conduct of monetary policy supported the private sector productively? To answer this question,
I draw financial data on overall domestic bank credit to the private sector as percentage of gross

14

domestic product (GDP). That data shows that in Ghana is performing below the average for
African countries and that of lower middle-income countries. I then proceed to examine the
sectoral distribution of bank credit to the private sector. Between 1999 and 2023, bank credit to
productive sectors such as agriculture and manufacturing significantly declined. In contrast,
banks concentrated in lending to import trade, mortgage financing and to other financial
institutions. More than that, banks now invest predominantly and speculatively in government
bonds and bills. This pattern of commercial banking, I contend, is dysfunctional and thus is not
supportive of overall economic development. Nevertheless, why are commercial banks failing
to lend to productive sectors like agriculture and manufacturing? I show that central bank
monetary policy plays a big role. By operating an inflation-targeting monetary policy, the Bank
of Ghana has had to regularly increase its monetary policy rate to reduce the money supply and
suppress demand. However, high policy rates are factored into commercial bank lending rates.
High commercial bank lending rates in turn discourage businesses from borrowing. Secondly,
focusing only on monetary stability, the Bank of Ghana is failing to perform its role of directing
credit to productive use, and instead hoping that the operation of market forces (interest rates)
would shift financial resources to their most productive use. That liberal financial ideology is
problematic because sectors like agriculture and manufacturing are risky and banks will rarely
increase lending to these sectors if they are not mandated to do so by central bank policy. To
buttress this point, I show that prior to the implementation of financial reforms, which the 1980s
structural adjustment program required, central bank credit control policies ensured that
Ghanaian banks lent more to agricultural and manufacturing activities.
The negative impact of financial liberalization shown in this third paper draws parallels
with the arguments raised in the first and second. Across all three papers, my key concern has
been that since the World Bank and IMF interventionism in Ghana started in the 1980s, the
diagnosis and solution to the development problem has been misleading. The diagnosis has
been the same all these decades – namely government failure and an inability to participate in
markets, domestic and global. It is often assumed, erroneously, that if citizens or government
can freely participate in markets, they will have access to resources and private sector ingenuity
will naturally drive growth, which will trickle down to all Ghanaians. This logic underpinned
the regular recourse to borrowing in international capital markets, liberalization and
privatization of the domestic financial sector and the withdrawal of government support to
agricultural and manufacturing. This roll back of the state and faith in private market forces as
shown in the three papers, has failed to produce a transformative and inclusive growth that will
improve the lives of all Ghanaians. Instead, the results have been persistent and growing

15

sovereign and private indebtedness, macroeconomic fragility, and a systemic economic and
financial dependence on the global north.
What are the implications for government policy in Ghana?
The findings in this dissertation offer important insights for policymakers in Ghana. I will
highlight three key areas for government intervention. First, given the empirical evidence and
government’s own admission that the external liquidity constraints that precipitated external
debt default were the result of a large import bill (including imports of basic food items, luxury
cars, among others), government needs to return to the basics – namely import substitution
where possible, and foreign currency regulation. Supporting agriculture and the manufacture of
basic commodities is not only necessary to halt the drain of government’s reserves, but could
potentially create jobs. Generally, there must be a reorientation of government policy towards
the fundamental issues of the productive structure of the Ghanaian economy. As basic as it may
sound, deliberate policies should be instituted to shift the current focus on raw commodity
exports to their refinement into finished goods that can offer fairer prices and at the same time
create jobs.
Second, regulation of the pricing regimes of financial technology services and withdrawal
of regressive taxes on electronic transactions. In its current state, the fintech industry operates
with multiple transaction costs on users. It is necessary to streamline, especially for mobile
money services, the fee-charging system for all operators and to enforce reasonable and
justifiable costs impositions on subscribers. Regarding the electronic transactions levy, I think
it is unproductive to regressively tax low-income earners who use mobile money services.
Instead, government should focus on taxing the abnormal profits that fintechs accumulate.
Third, a reform of financial policy. In particular, there is the need to institute policies that
will encourage indigenous ownership of banks. Minimum capital requirement for instance can
be lowered for infant indigenous banks that are incapable of competing with leading, mostly
foreign banks. More importantly, central banking has to be reformed, away from inflation
targeting to align with the current developmental needs. For instance, the Bank of Ghana could
focus on credit targeting, ensuring that sectors like agriculture and manufacturing receive
sufficient financial support from the banking system. Ultimately, it is important for government
policy to place the developmental needs of the country ahead of a technocratic allegiance to
liberal economic ideologies of international development institutions.

16

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20

List of the cumulative dissertation articles

Article 1
Akolgo, I.A. (2023) Ghana’s Debt Crisis and the Political Economy of Financial Dependence
in Africa: History Repeating Itself? Development and Change 54(5): 1264-1295.
https://doi.org/10.1111/dech.12791

Article 2
Akolgo, I.A. (2023). On the Contradictions of Africa’s Fintech Boom: Evidence from Ghana.

Review of International Political Economy, 30(5): 1639-1659.
https://doi.org/10.1080/09692290.2023.2225142

Article 3
Akolgo, I.A. (2025) Banking and Monetary Policy in Ghana: Has Financed Served the Real

Economy? Forum for Social Economics, 1-25
https://doi.org/10.1080/07360932.2025.2552681

Debate
Ghana’s Debt Crisis and the Political Economy
of Financial Dependence in Africa:
History Repeating Itself?
Isaac Abotebuno Akolgo
ABSTRACT
Recent accounts of the re-emergence of debt distress in Africa, while
offering signiﬁcant insights, fail to provide the historical political-economic
context within which African indebtedness is set. On the surface, spending
induced by the COVID-19 pandemic, economic fallout from the Russia–
Ukraine war, and repeated examples of ﬁscal indiscipline by African gov-
ernments appear to be the causes of the current wave of debt crises. Beyond
these factors, however, this article argues that the present indebtedness, like
previous episodes, is rooted in the economic and ﬁnancial subordination of
African economies. Speciﬁcally, the article places Ghana’s extensive debt
within the country’s post-independence political-economic context, and thus
traces the structural factors and external constraints that underlie its eco-
nomic vulnerability and ﬁnancial dependence. These include the collapse of
developmentalism in the 1970s, the Structural Adjustment Programmes of
the 1980s, and an exploitative transnational lending system dominated by
Western commercial creditors. Internally, recent ﬁscal mistakes by the gov-
ernment, within its limited policy space, have exacerbated Ghana’s indebted-
ness. The Ghanaian experience shows that unconditional debt cancellation,
widely called for, is a necessary but insufﬁcient measure to address the recur-
ring cycles of indebtedness. Debt cancellation should be followed by broader
economic and ﬁnancial reforms, globally and domestically.
INTRODUCTION
The causes of Africa’s debt are neither single nor simple
(Danso, 1990: 6)
On 1 July 2022, Ghana’s president, Nana Akufo-Addo, directed his Fin-
ance Minister to engage the International Monetary Fund (IMF) for a
I thank Professors Franklin Obeng-Odoom, Kai Koddenbrock and Stefan Ouma for their com-
ments on the initial draft of this article. I would also like to thank the editorial board, especially
Andrew Fischer and Servaas Storm and the reviewers for their helpful comments.
Development and Change 54(5): 1264–1295. DOI: 10.1111/dech.12791
© 2023 The Authors. Development and Change published by John Wiley & Sons Ltd on behalf
of Institute of Social Studies.
This is an open access article under the terms of the Creative Commons Attribution-NonCom-
mercial License, which permits use, distribution and reproduction in any medium, provided the
original work is properly cited and is not used for commercial purposes.

Debate: Ghana and The Political Economy of Africa’s Debt
1265
debt-restructuring programme. Negotiations with the IMF concluded on 17
May 2023 with the approval of a US$ 3 billion, three-year Extended Credit
Facility (IMF, 2023a). This loan agreement marks the 17th time since in-
dependence that Ghana has gone to the IMF for a debt-induced economic
recovery programme. Far from being an exception, Ghana is one of several
African countries in debt distress. The African Development Bank (AfDB)
reported that as of February 2022, seven African countries were in debt dis-
tress, with a further 16 at high risk of joining them (AfDB, 2022).
The empirical literature on this current wave of indebtedness in Africa
(see, for instance, Azolibe, 2022; Ndulu and O’Connell, 2021; Olaoye and
Olomola, 2022) has provided important macro-ﬁnancial insights on the
continent’s economic situation. However, the historical political-economic
origins of the ﬁnancial distress remain largely unaddressed. For instance,
Olaoye and Olomola’s (2022) econometric study of 44 countries found,
rightly, that Africa’s debt-induced growth is not socially inclusive; nor
is it sustainable, since the growth is directed at servicing external debt.
Azolibe (2022) has analysed the link between external debt accumulation
and foreign direct investment between 1990 and 2017, and concludes
that external debt accumulation in Africa arises from the use of loans for
‘unproductive projects’. The solution to the continent’s ‘debt overhang’
(Krugman, 1988), Azolibe suggests, is that African economies should
invest external debt into ‘productive capital projects and infrastructures’
(Azolibe, 2022: 346). By doing that, he adds, the critical infrastructure
will generate enough revenue to service the debt, thereby avoiding the
nuisance taxes that governments introduce in their attempt to repay debts.
Outside of academic circles, broader discussions of the current wave of debt
distress (such as IMF, 2022; UNDP, 2022; World Bank, 2022) highlight
COVID-induced spending and the disruptions to global trade from the
Russia–Ukraine war. Recounting its role in addressing rising debt burdens,
the World Bank (2022: 50) emphasizes the need for countries to work
towards debt sustainability — namely, by improved transparency and debt
management, policy reforms, increased domestic tax compliance, prudent
public expenditures and increased domestic resource mobilization.
The ﬁxation on COVID-19 and the Russia–Ukraine war, as well as the
economistic prognosis and treatment of indebtedness offered by Azolibe and
others, while macro-ﬁnancially prudent, do not provide a holistic explan-
ation of the current debt storm. In fact, they obscure the post-independence
structural economic constraints that African economies have faced, and the
political-economic context of transnational lending within which Africa’s
indebtedness is set. This article aims to mitigate this failing by historicizing
and repoliticizing the African debt crisis, demonstrating that it must not
be seen as isolated but rather as a consequence of Africa’s long-standing
economic subordination and dependence on external development ﬁn-
ance. Ghana, much like other African countries, emerged from the eras of
enslavement and colonialism with a dysfunctional economic structure,
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Isaac Abotebuno Akolgo
shaped into dependence on a narrow set of commodity exports to ﬁnance its
development. The failed attempts to break out of such structural dependence
in the context of global economic and ﬁnancial constraints has occasioned
the frequent recourse to borrowing and, consequently, indebtedness.
Accordingly, this article situates Ghana’s 2022–23 debt crisis in the
context of its post-independence political economy and makes three ar-
guments. First, the rise and fall of the developmental Ghanaian state in
the 1960s and 1970s ushered in the Structural Adjustment Programmes
(SAPs) which in turn disrupted early independence attempts at structural
economic transformation. The disruptive role of the SAPs not only returned
Ghana to reliance on raw commodity exports based on the notion of com-
parative advantage; it also promoted liberalization, de-industrialization and
Ghana’s continued reliance on external development ﬁnance. Second, in the
post-structural adjustment ﬁnancialized order, Ghana remained reliant on a
narrow set of primary commodity exports, and resorted to market-based de-
velopment ﬁnance. The recourse to ﬁnancialized strategies for development
exposed Ghana to an exploitative transnational lending system dominated
by Western private commercial lenders (mostly banks and pension funds).
A third contingent argument regarding Ghana’s indebtedness is that the
underlying structural and external factors that cause vulnerability and ﬁn-
ancial dependence leave government with a small margin for policy error.
As such, every ﬁscal slippage or idiosyncratic policy decision exacerbates
government’s ﬁnancial distress. This constraint to domestic policy and
ﬁscal space has not always been taken seriously by politicians and policy
makers in the period since the Heavily Indebted Poor Countries (HIPC)
debt relief, with various governments borrowing heavily, particularly in the
last seven years (2017–23). The loans may have been justiﬁably spent on
infrastructure projects and social programmes, but huge borrowing, mostly
under the expectation of commodity price booms or low interest rates,
has turned out to be risky and unwise, and has quickened Ghana’s descent
into crisis. Together, these three points shed light on how Ghana’s (and,
more broadly, Africa’s) post-independence attempts to develop recreate the
conditions for dependence on external ﬁnance.
The arguments raised in this article are not intended to dismiss the role
of COVID-19 and the Russia–Ukraine war in the current wave of indebted-
ness in Africa and beyond. On the surface, it is tempting, considering the
timing of the debt distress of several African countries, to blame the con-
tinent’s troubles on those two factors. Between May 2020 and December
2021, for instance, 32 African countries signed onto the G20’s Debt Ser-
vice Suspension Initiative (DSSI). Recognizing the DSSI’s failure to halt
the debt vulnerabilities of distressed countries after its expiration in Decem-
ber 2021, the G20 instituted a Common Framework for debt treatment. So
far, three countries, Chad, Ethiopia and Zambia (which defaulted on its US$
42 million Eurobond debt payment; see Gort and Brooks, 2023), have been
admitted for the debt treatment. These widespread cases of ﬁnancial crisis
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Debate: Ghana and The Political Economy of Africa’s Debt
1267
unfolded in a period which saw a devastating pandemic and an attritional war
in Ukraine. However, it was clear before COVID that many African coun-
tries were headed for a new debt crisis. Between 2010 and 2018, Africa’s
debt-to-GDP ratio increased from about 35 per cent to over 60 per cent.
Within the same period, external debt servicing rose by over 250 per cent
from about US$ 18.7 billion in 2010 to US$ 66.7 billion in 2018.1
Therefore, this article’s point of departure is that, to fully understand the
current debt crisis in Africa, it is important that we do not focus entirely on
the immediate global shocks. Rather, we should emphasize the structural
economic and ﬁnancial constraints that post-colonial African economies
have faced within the context of a hierarchical and exploitative global capit-
alist order. Unlike successful late industrializers in East Asia, such as South
Korea or Taiwan, post-independence African developmentalist attempts
have not only faltered under peculiar conditions (which are discussed in
a later section), but have persistently created a pattern of dysfunctional
economic growth that cripples the long-term potential for economic trans-
formation. This ‘perverse growth’, as Arrighi and Saul (1968) and later
Arrighi (2002) called it, is characterized by a combination of underdevel-
opment of the capital goods sector, and a dysfunctional pattern of domestic
surplus capital absorption — for example, large income outﬂows on for-
eign direct investment. The shortage of development ﬁnance (particularly
foreign exchange) that has accompanied this economic subordination has
historically exposed African economies to a punitive global lending system
under which a combination of loan conditionalities and high borrowing
costs drive them into indebtedness. The internal and external factors that
underlie the persistence of African indebtedness are explored further in the
subsequent sections.
This article’s emphasis on the historical structural constraints that occa-
sion Africa’s reliance on external ﬁnance and indebtedness is consistent with
a variety of heterodox economics perspectives, especially those of early de-
pendency theorists (notably Amin, 1974; Dos Santos, 1970; Furtado, 1956;
Rodney, 1972; Sunkel, 1973) and recent accounts of the subordination of de-
veloping and emerging economies (Alami et al., 2023). An extensive review
of dependency theory is not the focus of this article (see Kvangraven, 2020).
However, the crux of dependency theory, which should guide our analysis
of Africa’s present crisis, is that underdevelopment in peripheral economies
such as those of Africa and Latin America is explained by the mechan-
ism of their integration into the world economic and political system. As
such, Africa’s persistent dependence on external ﬁnance and its ongoing
debt crises are better understood by studying closely how the continent’s
economic and ﬁnancial subordination limit its ability to sufﬁciently ﬁnance
its development.
1. From the World Bank’s International Debt Statistics Database (www.worldbank.org/en/
programs/debt-statistics/ids).
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1268
Isaac Abotebuno Akolgo
Ghana, the focus of this article, serves as a good case study, having gone
through 16 debt restructurings since independence. During the crises of the
1980s, Ghana was the ﬁrst African economy to be admitted to the structural
adjustment programme; it signed onto the HIPC debt relief programme
in the early 2000s; and since 2007, it has borrowed signiﬁcantly from the
Eurobond market. The commencement of commercial crude oil exploration
in 2011 was expected to transform the Ghanaian economy, and yet by 2015
the country was going back to the IMF for its 16th bailout. And now, just
a few years after completing the IMF programme in 2019, a new debt crisis
has emerged. By unpacking Ghana’s present crisis along with previous
instances that necessitated an IMF restructuring, this article aims to extend
the literature and policy discourse on the systemic, structural and historical
factors that explain African economies’ ﬁnancial dependency.
The rest of the article proceeds as follows. The next section dis-
cusses the ﬁnancial crisis in Ghana, the country’s recourse to the IMF
for a bailout and the fallout from that decision. The section concludes
by restating a national and global concern: how did Ghana get into
this ﬁnancial chaos? A technical analysis of the (un)sustainability of
Ghana’s sovereign debt is then carried out in the subsequent section.
This is followed by two sections that examine the rise and fall of de-
velopmentalism in the 1960s and 1970s, and discuss how structural ad-
justment, the solution to the 1980s crisis, compounded the problem
by weakening the domestic capacity to diversify the Ghanaian econ-
omy, plunging it into another crisis in the late 1990s. The last substantive
section concentrates on the post-HIPC period, demonstrating how commer-
cial debt (Eurobonds) drove Ghana into its 2015 and current (2022–23) debt
restructurings. The last section concludes with a discussion of the implica-
tions for debt management. In the analysis that follows, debt statistics are
drawn from multiple sources: the World Bank’s International Debt Statistics
database, the Annual Public Debt Report 2021 of the Ministry of Finance
(Ghana), and Eurobond data from Reﬁnitiv Eikon Datastream.
GHANA’S DEBT CRISIS: MAKING SENSE OF THE UNFOLDING CHAOS
The formal declaration of a debt crisis in July 2022 was preceded by months
of consistent downgrades of Ghana’s long-term local and foreign currency
issuer default rates by several agencies, notably Moody’s Rating, Fitch Rat-
ings and S&P Global Ratings. The systematic downgrades came on the back
of rises in Ghana’s debt stock and debt service levels, as well as heightened
liquidity constraints. The volume of external debt in particular rose rap-
idly in the decade up to 2022. Between 2015 and 2021 alone, external debt
increased by about 80 per cent, from US$ 20.1 billion to US$ 36.2 bil-
lion (Figure 1). In the same period, external debt service costs more than
tripled from US$ 1.05 billion to US$ 3.23 billion (Figure 2). Excluding
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Debate: Ghana and The Political Economy of Africa’s Debt
1269
Figure 1. External Debt Stock, Ghana 1970–2022
Source: World Bank International Debt Statistics (www.worldbank.org/en/programs/debt-statistics/ids)
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1270
Isaac Abotebuno Akolgo
Figure 2. Debt Service on External Debt, Ghana 1970–2022
Source: World Bank International Debt Statistics (www.worldbank.org/en/programs/debt-statistics/ids)
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Debate: Ghana and The Political Economy of Africa’s Debt
1271
amortization costs, these amounts imply that, on average, interest rates paid
on external debt rose from about 5.9 per cent in 2015 to 8.9 per cent in 2021.
It was therefore not surprising that rating agencies decided to downgrade
Ghana’s economy. However, these ratings were often contested by the gov-
ernment, which questioned the methodology and conduct of rating agencies
especially in the context of a devastating pandemic. For instance, a deputy
minister of ﬁnance described Moody’s February 2022 downgrade of Ghana
as a grand scheme aimed at forcing the country to go to the IMF (Peace
FM, 2022). And indeed, Ghana did apply for a US$ 3 billion facility from
the IMF. The period between July 2022, when the debt crisis announcement
was made, and May 2023, when the IMF approved the loan facility, has —
to put it mildly — been a period of ﬁnancial and economic troubles for both
the Ghanaian government and the people. Three sets of fallouts from the
July 2022 announcement are worth noting.
The ﬁrst was the sharp depreciation of the Ghanaian cedi (GHC) against
major trading currencies, along with general high inﬂation and rising
interest rates. The cedi, which had already lost 19.2 per cent of its value
against the US dollar in the ﬁrst half of 2022, further depreciated by 54.2
per cent in November 2022 (Bank of Ghana, 2022a). Accompanying the
cedi’s depreciation was rising inﬂation. Standing at about 29 per cent in
June, inﬂation rose to over 37 per cent in September 2022 (Bank of Ghana,
2023), marking the highest rate since 2001. This 20-year record did not
last for long: inﬂation increased to around 54.1 per cent at the end of
December 2022 (Ghana Statistical Service, 2023). Disaggregated data from
the Ghana Statistical Service show higher rates for food inﬂation nationally,
approximately 59.7 per cent, and food inﬂation in the Greater Accra region,
approximately 66.7 per cent (ibid.). In an attempt to respond to inﬂation, the
Bank of Ghana raised the policy rate by 250 basis points, driving interest
rates from 24.5 per cent in October to 27 per cent in November 2022
(Bank of Ghana, 2022b). Consequently, as the cedi depreciated, inﬂation
rose and interest rates spiked. The resulting increases in the costs of living
and doing business provoked widespread frustrations and demonstrations
(Myjoyonline, 2022a) and calls for the dismissal of the ﬁnance minister and
resignation of the president. An equally frustrated President Akufo-Addo
insisted that ‘malevolent forces’ — COVID and Russia–Ukraine — had
plunged Ghana into the crisis (Ghana News Agency, 2022).
The second major fallout was the struggle for a domestic debt exchange
programme. On 12 December 2022, Ghana reached a staff-level agreement
with the IMF, subject to IMF Management and Executive Board approval,
for a US$ 3 billion extended credit facility. The Board’s approval was con-
ditional, among others factors, on Ghana achieving a comprehensive debt
restructuring with its creditors. Accordingly, the government offered a do-
mestic debt exchange programe, delaying payment of institutional bond-
holders’ investments and interest payments until 2024 (Ministry of Finance,
2022a). However, pension funds, trade unions, insurance ﬁrms and some
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1272
Isaac Abotebuno Akolgo
ﬁnancial institutions rejected the debt exchange as it would deprive them
of returns on their investments (Myjoyonline, 2022b). The debt exchange
was amended on 31 December 2022, excluding pension funds but bring-
ing in individual bondholders including pensioners who invested privately
in government bonds. Extending the debt exchange to individual bondhold-
ers gave rise to its own tensions and protests. Sophia Akuffo, a former Chief
Justice of Ghana and one of several pensioners protesting their inclusion into
the debt exchange programme, described the debt restructuring as ‘wicked,
disrespectful, unlawful and totally wrong’ (Welsing, 2023). As the restruc-
turing efforts with domestic creditors stalled, Ghana missed a 17 February
2023 deadline for a US$ 40.625 million coupon payment on its US$ 1 bil-
lion 2026 Eurobond. This effective default on the 2026 bond was preceded
by a government announcement suspending all external debt payments with
the exception of multilateral debt acquired after 19 December 2022.
The third major fallout from the decision to seek an IMF bailout has been
intensiﬁed domestic debate on the cause of the debt crisis. On the one hand,
the government has maintained that the pandemic and the war in Ukraine
have derailed the Ghanaian economy. COVID-induced spending between
March 2020 and June 2022, for instance, amounted to around GHC 21.8 bil-
lion (about US$ 2 billion) (Ministry of Finance, 2023). Pandemic spending
is particularly evident in the signiﬁcant increase in the government budget
deﬁcit from 8 per cent in 2018 to nearly 15 per cent in 2020 (Ministry of
Finance, 2022b). The government has also contended — justiﬁably — that
distortions in global supply chains and the rise in energy prices arising from
the Russia–Ukraine war have driven spikes in fuel, transport and food prices
in 2022 and 2023. Civil society organizations, opposition political parties,
and a mass of Ghanaians, by contrast, blame the government’s ﬁscal policy
failures for the crisis. What are those ﬁscal policy decisions and to what
extent do they amount to failure? A few examples from the last six years
(2017–22) of Akufo-Addo’s government are illuminating.
In its ﬁrst budget statement on 2 March 2017, The Akufo-Addo gov-
ernment laid out an ambitious development agenda, including free senior
high school education and large industrialization projects, such as the ‘one
district, one factory’ programme and the ‘infrastructure for poverty erad-
ication’ programme. Whether these policies were developmental remains
questionable, given the ideology that guided their formulation, the structure
of the policies, and the government’s autonomy in their implementation, as
pointed out by Mkandawire (2001). Certainly the results of the policies do
not appear developmentalist, as they have hardly translated into export di-
versiﬁcation or lower structural dependence on foreign ﬁnance. They were
in fact more populist policies, or were at least implemented in a ‘populist’
manner, to placate the mass of the electorate whose votes the president cour-
ted in 2016 and 2020.
These questions notwithstanding, the social and economic investments
were necessary and were rightly celebrated nationwide. However, the
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Debate: Ghana and The Political Economy of Africa’s Debt
1273
government set itself up to face revenue constraints when it abolished 18
taxes in the same 2017 budget. The reason, the ﬁnance minister maintained,
was to ‘eliminate nuisance taxes and provide tax incentives for the private
sector to spur growth’ (Ministry of Finance, 2017: 34). Among others, the
17.5 per cent ﬁnancial service tax, the 17.5 per cent tax on domestic airline
tickets, the 5 per cent tax on real estate sales, the 1 per cent Special Import
Levy, and import duties on spare parts/petroleum were all abolished. Other
taxes were signiﬁcantly reduced: special petroleum tax went from 17.5 per
cent to 15 per cent, the national electriﬁcation scheme levy from 5 per cent
to 3 per cent, and the public lighting levy from 5 per cent to 2 per cent. To
make up for the lost revenues, the government issued multiple domestic
and external debt instruments in 2017 and 2018. In 2017, 10 new loan
agreements, totalling about US$ 506.8 million, were signed (Ministry of
Finance, 2018), with a further 23 new loan agreements worth US$ 971.6
million signed in 2018 (Ministry of Finance, 2019a). By abolishing most
of the energy sector recovery levies mentioned, the government was also
compelled to issue energy sector bonds to reﬁnance debts owed to utility
companies and petroleum service providers. For instance, 7-year and 10-
year energy sector bonds worth GHC 4.7 billion (about US$ 1.04 billion) at
an average coupon rate of 19 per cent were issued in 2017. Similarly, three
energy sector bonds worth GHC 880.7 million (about US$ 181.4 million)
were issued in 2018 (Ministry of Finance, 2019a).
Besides the increased borrowing that accompanied the sweeping tax cuts
of 2017, two new oil discoveries announced by Aker Energy and Springﬁeld
E & P had an impact on government borrowing. In January 2019, Aker
Energy, a Norwegian oil and gas ﬁrm, announced it had discovered a new oil
reservoir at the Pecan Field in the Western Region, which it estimated held
about 450–500 million barrels of oil (Graphic Online, 2019). In December
2019, Springﬁeld E & P, a Ghanaian oil and gas ﬁrm, announced it too
had made a signiﬁcant discovery, that more than doubled the volume of
its total discovered oil to 1.5 billion barrels (Springﬁeld Group, 2019).
These discoveries triggered the government’s expectation of increased
oil production and revenues (Ministry of Finance, 2019b), an expecta-
tion which motivated the issuance of additional Eurobonds and domestic
bonds.
Overall, then, an ambitious development agenda that included free edu-
cation, industrialization, government sector recruitment and banking sector
reforms, all within the context of sweeping tax cuts, translated into increased
borrowing. Initially, the government’s huge external borrowing was enabled
by globally low interest rates. The ﬂow of cheap credit to emerging markets
meant American and European investors were eager to invest in Ghana’s
bonds and the Ghanaian government borrowed enthusiastically, in the belief
that interest rates would remain low. Policy decisions and heightened bor-
rowing thus contributed to a rapid increase in public debt from about 54 per
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1274
Isaac Abotebuno Akolgo
cent of GDP in 2017 to 98.7 per cent in 2023,2 thereby increasing Ghana’s
vulnerability to interest rates rises and commodity price shocks, as well as
the fallouts from COVID-19 and the Russia–Ukraine war.
The internal debate about the ﬁnancial crisis, partly driven by compet-
ing political interests, has not always been clear-cut, with blame attributed
to government policy failures, as well as the immediate global shocks of
COVID and the war in Ukraine. While it is fair to point to policy mistakes, it
is more important to highlight the structural factors that cause vulnerability
and ﬁnancial dependence, such as the persistent lack of export and industrial
diversiﬁcation, and large income outﬂows3 from foreign direct investments.
These issues, discussed in later sections of this article, have largely been
ignored in the discourse on Ghana’s crisis. More regrettably, the economic
hardships that have accompanied the ﬁnancial crisis and the partisan debates
about its causes have fuelled a general sense of despair. The situation is best
captured in the nationwide sentiment: how did we get here?
There are two ways to address the question of how Ghana descended into
its current ﬁnancial chaos. The ﬁrst is to take a technical approach by con-
centrating on the issue of the (un)sustainability of Ghana’s sovereign debt
accumulation. The second, a nuanced approach, demands us to confront
the political economy of Ghana’s post-independence development, thereby
tracing the structural economic and ﬁnancial constraints that underlie the
frequent descent to ﬁnancial distress. This latter approach requires certain
steps, as set out earlier in the introduction: (1) a deconstruction of the
post-independence struggle to reverse the structural economic dependence
inherited from colonialism, particularly the rise and fall of development-
alism in the 1960s and 1970s; (2) a critical assessment of structural
adjustment’s role in constraining the diversiﬁcation of Ghana’s economic
structure, effectively consolidating its subordination and dependence; and
(3) an analysis of the post-HIPC factors that contributed to the present wave
of indebtedness. Before proceeding with these three steps, the technical
issue of debt (un)sustainability is addressed in the next section.
THE (UN)SUSTAINABILITY OF GHANA’S SOVEREIGN DEBT
At the core of the current discourse on Ghana’s debt is its (un)sustainability.
This is peculiar neither to Ghana nor to the current wave of indebtedness
across many developing and emerging economies. The theoretical bench-
marks and policy debate on what levels of debt are sustainable or desirable
2. Debt to GDP at the beginning of 2023 stood at about 89 per cent. The IMF’s historical debt
statistics indicate the debt to GDP ratio will be about 98.7 per cent at the close of 2023. See:
www.imf.org/external/datamapper/proﬁle/GHA
3. That is, income outﬂows in the form of proﬁts, interests and dividends accruing from for-
eign direct investment.
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Debate: Ghana and The Political Economy of Africa’s Debt
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Table 1. External Debt Sustainability Analysis and Baseline Scenario
Indicators
Threshold
2022
2023
2024
2025
PV of external debt to GDP
40.0
42.1
45.9
47.2
47.1
PV of external debt to exports
180.0
132.4
142.0
151.6
153.2
PV of external debt service to exports
15.0
18.2
18.8
18.0
19.7
PV of external debt service to revenue
18.0
28.9
30.7
27.4
29.8
Note: PV = present value
Source: Ministry of Finance (2021)
Table 2. World Bank–IMF Debt Sustainability Framework for Low-income
Countries*
PV of external debt in % of
External debt service in % of
GDP
Exports
Export
Revenue
PV of total
public debt in
% of GDP
Weak
30
140
10
14
35
Medium
40
180
15
18
55
Strong
50
240
21
23
70
Source: IMF (2018b)
* Debt burden thresholds and benchmarks under the DSF
for an economy remain unsettled (see Lima, 2022). Notwithstanding the dif-
fering views, many economists concede that sovereign debt is sustainable if
it can be ‘repaid without interruption and without requiring a restructuring
of the contractual terms by lenders’ (Ndulu and O’Connell, 2021: i38). Debt
sustainability is contingent on two things: (in)solvency and (il)liquidity,
where insolvency is a borrowing country’s ‘inability or unwillingness to
meet the present value of its contractual obligations’ and illiquidity is its
‘inability or unwillingness to service obligations that are coming due in the
current period’ (ibid.). The distinction between solvency and liquidity is not
clear-cut, but illiquidity ultimately, through rising interest rates, disrupts a
country’s solvency (IMF, 2002).
In assessing Ghana’s debt sustainability, the crucial considerations are
those of external liquidity constraints, that is, its ability or inability to con-
tinue servicing external debt given the availability of foreign exchange. Fo-
cusing attention on the external constraint is necessary because the shortage
of foreign exchange for servicing external debts might force a country to
enter into default even if its domestic debt level is below a conventional
threshold. As such, this section focuses on indicators such as debt to GDP
ratio (Figure 3), external debt service as a percentage of government revenue
(Figure 4) and external debt stock as a percentage of exports (Figure 5). The
external debt sustainability analysis by the Ministry of Finance is shown in
Table 1, and the joint IMF/World Bank thresholds for Debt Sustainability
Analysis (DSA) are indicated in Table 2. The IMF assesses Ghana to have
a medium debt capacity holding, corresponding to a debt to GDP threshold
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Figure 3. Debt to GDP Ratio, Ghana 1970–2022
Source: World Bank International Debt Statistics (www.worldbank.org/en/programs/debt-statistics/ids)
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Debate: Ghana and The Political Economy of Africa’s Debt
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Figure 4. External Debt Service to Government Revenue Ratio, Ghana 1970–2022
Source: World Bank International Debt Statistics (www.worldbank.org/en/programs/debt-statistics/ids)
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Figure 5. External Debt to Exports Ratio, Ghana 1970–2022
Source: World Bank International Debt Statistics (www.worldbank.org/en/programs/debt-statistics/ids)
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Debate: Ghana and The Political Economy of Africa’s Debt
1279
of 55 per cent. Other indicators discussed here are the composition of debt
holders, and the currency in which debt is denominated.
It is clear from Figures 3–5 and Tables 1 and 2 that several debt thresholds
have been breached. The debt to GDP ratio which stood at about 88 per
cent at the end of 2022 was a breach of both the IMF/World Bank and the
African Union Commission’s benchmarks of 55 per cent and 70 per cent
respectively. External debt service (as a percentage of government revenue)
at the close of 2021 was about 44.1 per cent, over 26 percentage points
above the threshold of 18 per cent for a medium capacity debt holding
country. The Ministry of Finance’s DSA projections of debt service to
government revenue (Table 1) for 2022–25 also exceed the benchmark of
18 per cent. Projections for external debt to GDP and external debt service
to exports similarly go beyond their respective thresholds of 40 per cent
and 15 per cent. External debt stock to exports (Figure 5 and Table 1) is
the only indicator that does not exceed the sustainable level of 180 per cent.
The IMF and World Bank Debt Sustainability Framework (DSF) judges
that if a country’s debt rises beyond any of the thresholds for any of the
indicators requiring restructuring, it is in debt crisis. It is clear that, under
this framework, Ghana is debt distressed.
Beyond the sustainability ratios is the question of the currency in which
the debt is accumulated and serviced. Unable to secure signiﬁcant external
loans in their own currencies, African economies are forced to accumulate
debt in foreign currencies. Early structuralist analyses in development eco-
nomics, and more recent work by Eichengreen et al. (2005, 2023), have em-
phasized the links between foreign currency debt accumulation and balance
of payments disequilibrium. Ghana largely issues external debt in foreign
currencies such as the US dollar, euro, pound sterling and Japanese yen.
Accumulating external debt in US dollars implies increased debt burdens
with US interest rate hikes. As shown in Figure 6, the majority of Ghana’s
external debt is denominated in US dollars. In 1970, about 20 per cent of
government debt was dollar denominated. By the close of 2004, that share
had more than quadrupled to about 82 per cent; it subsequently dropped to
about 48 per cent in 2008 due to HIPC debt relief. Ghana’s entry into the
Eurobond market since 2007 has, however, resulted in the re-accumulation
of debt in US dollars, which now stands at about 83 per cent of total external
debt (Figure 6).
Besides the matter of foreign currency domination, it is also relevant to
note that foreigners held a signiﬁcant share of government debt at the end
of 2021. At ﬁrst sight, the Ministry of Finance’s data on Ghana’s public debt
between 2017 and 2021 (see Table 3) imply that on average, sovereign debt
is equally split between locals and foreigners. For instance, at the end of
2021, 48.3 per cent of debt was externally held and 51.7 per cent was do-
mestically held. However, disaggregation of the data shows that of the 51 per
cent of total debt which is listed as domestic, about 18.5 per cent and 16 per
cent was held by foreigners in 2020 and 2021, respectively. Non-residents
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Figure 6. Currency Composition of Ghana’s External Debt, 1970–2020
Source: World Bank International Debt Statistics (www.worldbank.org/en/programs/debt-statistics/ids)
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Debate: Ghana and The Political Economy of Africa’s Debt
1281
Table 3. Composition of Public Debt, Ghana 2017–21
% of Total Debt
2017
2018
2019
2020
2021
External Debt
53.2
49.8
51.7
48.6
48.3
Domestic Debt
46.8
50.2
48.3
51.4
51.7
100.0
100.0
100
100.0
100.0
Holders of Domestic Debt 2020 and 2021
2020
2021
Millions of
Ghanaian
Cedis
(GHC m)
% of
Total
Millions of
Ghanaian
Cedis
(GHC m)
% of
Total
Domestic Sector
121,925.1
81.5
152,401.9
84.0
Banking sector
76,716.7
51.3
91,032.2
50.2
Bank of Ghana
33,621.9
22.5
35,861.7
19.8
Banks
43,094.8
28.8
55,170.5
30.4
Non-Bank Sector
45,208.3
30.2
61,369.7
33.8
Individual Investors
12,136.2
8.1
16,717.6
9.2
Firms& Institutions
29,863.6
20.0
41,013.8
22.6
Rural Banks
1,689.0
1.1
2,006.7
1.1
Insurance Companies
858.2
0.6
1094.6
0.6
SSNIT
661.4
0.4
537.1
0.3
Foreign Sector
27,687.2
18.5
28,995.3
16.0
Foreign Investors
27,687.2
18.5
28,995.3
16.0
Total
149,612.2
100
181,397.2
100.0
Source: Ministry of Finance (2021)
thus held a large share of total government debt. While domestic creditors
are often more lenient with government indebtedness, foreign creditors with
less information on domestic economic and political conditions and little
interest in the debtor country’s development, pose difﬁculties for any poten-
tial debt restructuring. It has to be noted that the foreign share of domestic
debt emerges as the result of non-resident bondholders’ participation in the
Local Currency Bond Markets (LCBM) in Ghana. LCBMs have opened
up new ﬁnancing opportunities in Africa, allowing countries to effectively
borrow externally in their own currencies. However, as capital markets re-
main relatively less developed in most African countries, including Ghana,
LCBMs have not played a signiﬁcant role in the long-term private ﬁnancing
of African economies (Berensmann et al., 2015). Even as foreign investors’
participation grows in African LCBMs, presenting new opportunities for
development ﬁnancing, Berensmann et al. caution against sweeping capital
market liberalization to avoid volatile capital ﬂows.
There has not always been agreement on what indicators matter in de-
veloping country debt sustainability. Analyses of debt sustainability have
focused on two concerns: whether a country faces short-term liquidity
constraints, or whether it is in severe crisis (effectively bankrupt). The
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Isaac Abotebuno Akolgo
predominant, often simplistic assessment of African indebtedness reduces
the problem to illiquidity, leading to the proposition that a positive bal-
ance in current accounts of debtor nations is the optimum solution. As
Ghosh (1986) observed, this view is the justiﬁcation for frequent recourse
to debt rescheduling, with the expectation that delaying debt repayments
will not only postpone the liquidity problem but also resolve it. In the short
run, debt rescheduling typically allows indebted countries to ‘mobilize the
bare minimum of new resources to enable orderly debt servicing’ (Shadlen,
2003: 10). However, such a short-term measure simply postpones the need
for signiﬁcant restructuring by focusing on short-term liquidity constraints.
With the exception of the 2004–2007 HIPC programme, Ghana’s debt-
restructuring programmes have mirrored this pattern.
POST-INDEPENDENCE GHANA: THE RISE AND FALL OF
DEVELOPMENTALISM
Having addressed the issue of debt sustainability, we now turn our atten-
tion to the political-economic response to the question of why Ghana is
in its current crisis. At the centre of this article’s argument is the conten-
tion that Ghana’s indebtedness arises from a historical pattern of struc-
tural economic subordination and ﬁnancial dependence. This history of
subordination dates back to the periods of enslavement and colonial plun-
der, under which African economies where shaped to be suppliers of la-
bour and raw materials, and dependent on European ﬁnished commodities
(Amin, 1974, 1976; Rodney, 1972). Speciﬁcally, this article’s focus is on
the post-independence era, explaining the external and internal factors that
have limited Ghana’s attempts to transform its economy and reduce its de-
pendence on foreign ﬁnance. This demands due attention to Ghana’s post-
independence developmental struggles.
After achieving independence in 1957, President Kwame Nkrumah’s
seven-year development plan (1963–70) aimed to industrialize Ghana and
break what Nkrumah referred to as a vicious cycle of poverty left behind by
colonialism (Nkrumah, 1963). The big push agenda covered expansion of
public services, the construction of the Volta River Project (a hydro-electric
dam) and Import Substitution Industrialization (ISI) strategies that ranged
from cocoa, timber and aluminium processing factories, to textiles/garment
manufacturing and mechanized state farms. The outcome of this develop-
mentalist agenda, which outlived Nkrumah’s rule, continuing into the late
1970s, has been extensively documented (see Ewusi, 1981; Killick, 2010;
Steel, 1972). Huge government investments drove a brief period of struc-
tural change, before the stagnation and sharp declines in the mid to late
1970s which culminated in the crisis of the early 1980s. In reﬂecting on the
fall of developmentalism, two interlinked questions emerge: what factors
accounted for the failure of ISI; and why, despite the surge in growth and
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Debate: Ghana and The Political Economy of Africa’s Debt
1283
structural change in the 1960 and 1970s, did Ghana (and Africa more gen-
erally) fail to break out of its inherited dependency?
The main problem with ISI was foreign exchange constraints. This was
not peculiar to Ghana or Africa; early dependency and structuralist analyses
of ISI, as Fischer (2018) observes, suggested that the liquidity constraints
generated by late industrialization had the tendency to not only recreate,
but even compound the initial dependence on primary commodities. The
solution to such liquidity constraints — a favourable supply of external
ﬁnance (debt) over an extended time — Fischer argues, was the point of
difference between successful East Asian countries like South Korea or
Taiwan and the less successful countries of Latin America and Africa.
For instance, Ghana’s deteriorating terms of trade from the intermittent
collapses in commodity prices between 1964 and 1983 (Kraus, 1991)
drove large balance of payments deﬁcits. To address the foreign exchange
crisis, Ghana resorted to measures such as suppliers’ credits, raising tariffs
on imports and imposing import licences, which aggravated rather than
alleviated the crisis. For example, while suppliers’ credits enabled Ghana to
sustain its industrialization, their repayments were not spread out over long
enough time periods to allow the investments to pay for themselves (Steel,
1972). Shorter repayment periods, mostly less than seven years, strained
Ghana’s ﬁnances and contributed to the balance of payments deﬁcits.
The answer to the broader question of why developmentalism failed lies,
among other factors, in a dysfunctional pattern of surplus absorption that
accompanied Africa’s developmentalist agenda (Arrighi, 2002; Arrighi and
Saul, 1968). Arrighi and Saul argued that within the framework of their ad-
verse integration into the world economy, the productive potential and struc-
tural transformation of independent African economies were constrained be-
cause the available surplus in such economies was ill-utilized. Speciﬁcally,
they identiﬁed three problems: (1) a lack of development of the capital-
goods sector; (2) conspicuous consumption by a domestic labour aristocracy
comprised of urban workers and elites in bureaucratic employment; and (3)
large income transfers abroad by multinational corporations.
On the ﬁrst point, Arrighi and Saul argued that the international
corporations that still dominated post-independence African econom-
ies tended to adopt capital-intensive production techniques. Capital-
intensiveness promoted the use of imported specialized machinery
which restrained the growth of demand for locally produced capital
goods and thus translated to under-investment in the capital-goods
sector. Consequently, the productive capacity of local economies and
the expansion of the internal market were constrained, reasserting the
dependence on the growth of world demand for domestic primary
products. Secondly, the few, mostly urban workers in the capital-
intensive corporations received relatively high wages: foreign oligop-
olies were willing to concede to wage increases since labour accounted
for a low proportion of production costs and they could simply pass cost
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1284
Isaac Abotebuno Akolgo
increases on to consumers. Together with elites who inherited a colonial
wage structure, this domestic labour aristocracy absorbed a signiﬁcant share
of the surplus into unproductive, discretionary consumption. At the same
time, the export of corporate incomes (proﬁts, dividends, fees) to their
home countries drained the available surplus.
Arrighi and Saul’s Marxist dependency analysis of the failure of devel-
opmentalism is particularly relevant for situating domestic structural dys-
function within historical and external constraints. While drawing signiﬁ-
cantly on their Tanzanian experiences, their work is nevertheless relevant
for and applicable to several African countries. Of course, writing in the
1960s meant they could not address the developmentalist crises of the
1970s. Arrighi (2002), however, rectiﬁed this, reafﬁrming and extending
their earlier analysis. The dysfunctional pattern of surplus absorption,
Arrighi (2002) restated, meant the structural changes in the 1960s and
1970s only produced a perverse growth,4 deﬁned as ‘economic growth
that undermines, rather than enhances the potentialities of the economy
for long-term growth’ (Arrighi and Saul, 1968: 150). Post-colonial Ghana,
like many other African economies, faced this perverse growth, alongside
intermittent global monetary and commodity price shocks.
Beyond the perversity of growth and global shocks, others have high-
lighted the domestic constraints to Ghana’s developmentalist agenda, point-
ing at internal struggles for political settlement (Whitﬁeld et al., 2015). Col-
lectively, this conﬂuence of external constraints and domestic factors limited
Ghana’s ability to break out of its structural subordination and dependence.
By the late 1970s to early 1980s, the developmentalist dream, largely cur-
tailed by foreign exchange shortages arising from declines in non-oil com-
modity terms of trade in the 1970s, descended into a crisis — inﬂation (of
over 100 per cent in 1981), declining wages, collapsing public services and
general shortage of consumer items (Graham, 1988). Therefore, when Jerry
John Rawlings’s military coup seized power in 1981, accepting the IMF and
World Bank structural adjustment was really the only option.
STRUCTURAL ADJUSTMENT AND THE HIPC PROGRAMME
The popular explanation offered by the World Bank’s Berg Report (World
Bank, 1981), while acknowledging the stagﬂation and oil shocks of the
1970s, blamed the 1980s’ crises on African governments’ policy failures,
excessive government expenditure and regulation. The IMF and World
Bank solution was the SAPs, with the objectives of correcting balance of
payments deﬁcits, promoting economic growth and reducing poverty. How-
ever, the overwhelming verdict is that the SAPs were a failure, representing
4. The term ‘perverse growth’ was coined by Ignacy Sachs (1966).
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Debate: Ghana and The Political Economy of Africa’s Debt
1285
ﬂawed solutions to a misdiagnosed economic crisis (Konadu-Agyemang,
2000; Loxley, 1990; Mkandawire and Soludo, 1998). Ghana, initially held
up as an example of adjustment success, is a good case to understand how
the SAPs not only failed to deliver what they promised, but exacerbated de-
pendency and led to subsequent debt crises including the present situation.
This section focuses on two problems: the SAPs’ failure to diversify the
economy, to the detriment of economic growth; and the deregulation and
liberalization that eroded ﬁnancial control and Ghanaian policy space.
The ﬁrst problem with Ghana’s SAP was its failure to address structural
economic problems. Mkandawire and Soludo (1998) pointed out (as did
others, such as Elbadawi and Ndulu, 1996) that Africa’s structural depend-
ence on imports and uncertain revenues from exports meant its economic
growth and domestic policy were more vulnerable to external shocks such
as those of the oil prices in the 1970s and the 1980s drought. If the crises
had been correctly diagnosed this way, any structural adjustment would
have focused on diversiﬁcation, to avert the consequences of the Prebisch-
Singer hypothesis.5 As it was, as Mkandawire and Soludo observed, the
Prebisch-Singer thesis was disregarded, and the SAP focused on increasing
traditional raw commodity exports to earn foreign exchange and correct
balance of payments problems. Since the SAP emphasized the restoration
of equilibrium in the balance of trade and current accounts, the Ghanaian
government had to create economic incentives for producers by undertaking
sharp devaluations of its currency, the cedi (Kraus, 1991). For example, the
devaluation of the cedi by 990 per cent in 1983 was necessary to halt the
destruction of export capacity. In effect, Ghanaian exporters/producers were
paid more cedis for exports. Gold production, as Kraus recounts, doubled
between 1983 and 1990; timber production increased by 170 per cent within
the same period. In contrast to these primary exports, the food production
sector (non-cocoa agriculture), was treated by the SAP as a residual (Loxley,
1990). The government’s inability to immediately diversify the export base
recreated the structurally dysfunctional pre-independence economy.
The second problem with the SAP was its deregulation and ﬁnancial lib-
eralization policies. Far from focusing on long-term domestic-oriented eco-
nomic growth, ﬁnancial policies concentrated on stabilization and debt re-
payment. As Mkandawire (1999: 321) notes, since structural adjustment,
economic policy ‘has given overwhelming priority to ﬁnancial policy in-
struments and objectives (exchange rates, interest rates) relative to the real
side variables’. To be speciﬁc, ﬁnancial liberalization in Ghana included a
shift from ﬁxed to free ﬂoating exchange rates of the cedi, restructuring of
5. The Prebisch-Singer hypothesis (Prebisch, 1950; Singer, 1950) is that the relative prices of
primary commodities tend to follow a declining secular trend. This implies that the terms
of trade of primary commodity exporting economies will deteriorate because the prices of
primary products, relative to manufactured goods, tend to follow a declining trend in the
long run.
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1286
Isaac Abotebuno Akolgo
banks (privatization and sale/liquidation of some banks), the establishment
of foreign exchange bureaus and removal of capital controls. These ﬁnancial
reforms had multiple effects. Mkandawire (1999) notes two broad areas that
were negatively affected by the SAPs’ ﬁnancial reforms.
The ﬁrst was the effect on the level of savings and investment. The success
or failure of an economy’s ﬁnancial policy can be assessed ﬁrst and fore-
most by its ability to mobilize resources through savings and efﬁciently al-
locate those resources for investment. Financial liberalization, Mkandawire
contends, failed by not raising the levels of savings and investments in the
adjusted countries. In Ghana, Mkandawire (ibid.) demonstrated that Gross
Domestic Savings and Investment were lower in the adjustment years (1982–
99) than in the 1960s and early 1970s. The second major consequence
was the dysfunctional patterns of investment. While ﬁnancial liberalization
failed to stimulate domestic investment, it attracted speculative portfolio in-
vestment and foreign direct investments into mining, instead of manufactur-
ing. At the same time, agricultural credit as a share of total bank lending in
Ghana declined from 23.8 per cent in 1987 to an average of 10 per cent in
1992/93 (Hutchful, 1996).
The overall effect of the reforms in Ghana was that they failed to address
the structural weakness in the economy while at the same time intensifying
its adverse integration into globalized capitalism. Beyond external factors,
the neoliberal elites that emerged in the course of the 1980s’ crises captured
key economic positions in Ghanaian government (particularly the Ministry
of Finance and the Bank of Ghana). These neoliberal technocratic elites
have pursued an anti-developmentalist agenda — namely, the destruction of
domestic state capabilities and a focus on market-based development ﬁnan-
cing. It was no surprise that the debt began to build and soon transformed
into another crisis in the 1990s. Having lost its reputation as a structural
adjustment success, Ghana signed up for the HIPC debt cancellation from
2004 to 2007. While the HIPC programme resulted in the reduction of
external debt by more than 50 per cent (Akolgo, 2022), it came with con-
ditionalities similar to the SAPs: freezes in government recruitment, cuts
in social spending, and increased recourse to market-based development
ﬁnance. HIPC was a just a piece in the ‘lending game’ as Soederberg (2005)
calls it. By failing to address the systemic issues, it was just a matter of time
before other debt cycles emerged in the post-HIPC era.
POST-HIPC: THE DOMINANCE OF COMMERCIAL DEBT (EUROBONDS)
Can we therefore say, based on the analysis so far, that the present crisis
is history repeating itself? While the pattern of structural weakness and
reliance on foreign development ﬁnance persists, the post-HIPC period
points to a signiﬁcant shift in the global lending game to reinforce Ghana’s
dependency. The composition of public debt has changed, new actors
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Debate: Ghana and The Political Economy of Africa’s Debt
1287
Table 4. Ghana’s Eurobond Issuances
Instruments
Issuance Date
Maturity
Coupon
rate (%)
Amount
Issued
(US$ m)
Outstanding
Amount (US$
m)
4-year
April 2021
2025
0.000
525
525
7-year
April 2021
2029
7.750
1,000
1,000
12-year
April 2021
2034
8.625
1,000
1,000
20-year
April 2021
2042
8.875
500
500
6-year
February 2020
2026
6.375
1,250
1,250
14-year
February 2020
2034
7.785
1,000
1,000
41-year
February 2020
2060
8.750
750
750
7-year
March 2019
2027
7.875
750
750
12-year
March 2019
2032
8.125
1,250
1,250
31-year
March 2019
2051
8.950
1,000
1,000
10-year
May 2018
2029
7.625
1,000
1,000
30-year
May 2018
2049
8.627
1,000
1,000
6-year
September 2016
2022
9.250
750
16
15-year
August 2015
2030
10.750
1,000
1,000
10-year
July 2014
2026
8.125
1,000
1,000
10-year
August 2013
2023
7.875
1,000
1,000
10-year
September 2007
2017
8.500
750
−
Total
−
−
−
15,525
13,119.9
Sources: Ministry of Finance (2021); Reﬁnitiv Eikon Datastream
and instruments have emerged, but the export structure of the Ghanaian
economy is still narrow, mainly gold and cocoa and, since 2011, crude oil.
These three commodities alone account for more than 70 per cent of total
exports. Gold and cocoa beans, the traditional exports dating backing to
the colonial period, constitute nearly 50 per cent.6 Underlying this lack of
export diversiﬁcation has been the burden of commercial debt.
A dominant feature of African debt after the HIPC debt relief has been
the displacement of ofﬁcial bilateral and multilateral creditors. Commer-
cial creditors, from banks to mutual and pension funds, now constitute the
largest holders of government debt. About 57 per cent of Ghanaian sov-
ereign debt is commercial, whereas bilateral and multilateral debt together
make up about 34 per cent. Export credits and other concessional debts con-
stitute less than 10 per cent of total public debt (see Figure 7). Commer-
cial debt, owed mostly to Western banks and other investors, increased the
cost of borrowing, particularly since Ghana entered the Eurobond market
in 2007. In all, it has issued 17 Eurobonds worth US$ 15.5 billion. At the
end of 2021, about US$ 13 billion of the US$ 15.5 billion was outstanding
(Table 4).
Ghana’s bonds have been lucrative for investors, and are often oversub-
scribed when issued. On average, bonds carry a ﬁxed coupon of about 8 per
cent, with some 2015 and 2016 bonds going as high as 10.75 per cent and
6. Data from the Observatory of Economic Complexity’s trade database. See: https://oec.
world/en/visualize/stacked/hs92/export/gha/all/show/2013.2021/
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1288
Isaac Abotebuno Akolgo
Figure 7. Composition of Ghana’s Debt, 2021
Source: Ministry of Finance (2021)
9.25 per cent respectively (Table 4). Two questions emerge from this. Firstly,
why do African countries like Ghana pay more to borrow from the capital
markets? After controlling for factors such as the period of issue, credit rat-
ings of issuing countries and their macroeconomic fundamentals, Olabisi
and Stein (2015) found investors charged higher interest rates (on average
by 2.9 percentage points) for African bonds. They conclude: ‘higher coupon
payments not explained by observable risk measures may only be described
as a penalty on African governments due to investor bias. This penalty or
premium represents a crude net present value estimate of $2.2billion’ (ibid.:
99).
The second question is: why do African governments, despite the signi-
ﬁcant borrowing cost, have such a taste for Eurobonds? Unlike multilateral
credit, Mutize (2021) explains, loans from Eurobonds do not come with con-
ditionalities and governments are not required to give detailed explanations
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Debate: Ghana and The Political Economy of Africa’s Debt
1289
Table 5. Decomposition of Ghana’s Public Debt, End 2022
Debt Stock (end of period) 2022
(US$ m)
(%
total
debt)
(% GDP)
Total
63,332
100.0
88.1
External
28,869
45.6
40.2
Multilateral creditors
8,055
12.7
11.2
IMF
1,710
2.7
2.4
World Bank
4,750
7.5
6.6
African Development Bank
1,193
1.9
1.7
Other Multilaterals
401
0.6
0.6
Bilateral Creditors
5,438
8.6
7.6
Paris Club
2,867
4.5
4.0
o/w: Belgium
437
0.7
0.6
o/w: United Kingdom
430
0.7
0.6
Non-Paris Club
2,572
4.1
3.6
o/w: China
1,900
3.0
2.6
o/w: India
475
0.7
0.7
Bonds
13,104
20.7
18.2
Commercial creditors
2,272
3.6
3.2
Domestic
34,463
54.4
47.9
Held by residents, total
32,849
51.9
45.7
Held by non-residents, total
1,614
2.5
2.2
Short-term bills
5,009
7.9
7.0
Medium-to-long term bonds
19,934
31.5
27.7
Loans
76
0.1
0.1
Arrears
3,186
5.0
4.4
Other (Overdraft and SDRs on-lent)
6,258
9.9
8.7
Memorandum Items:
Collateralized debt
619
1.0
0.9
Contingent liabilities
308
0.5
0.4
o/w: Public guarantees
284
0.4
0.4
o/w: Other explicit contingent liabilities
24
0.0
0.0
Source: IMF (2023b)
for the speciﬁc use of funds. The underlying focus of institutional investors
is the bond issuer’s willingness and/or ability to service the debt even if
that means — as is mostly the case — engaging in debt reﬁnancing. This
has been the case in Ghana, with different governments ignoring the puni-
tive premium on Eurobonds to quickly re-accumulate huge debts after the
HIPC relief. It is those debts from Eurobond markets, rather than a Chinese
debt trap as suggested by media accounts, that have driven Ghana’s post-
HIPC indebtedness. Based on the decomposition of Ghana’s public debt in
the IMF Staff report on the approval of the US$ 3 billion Extended Credit
Facility (IMF, 2023b), China holds just 3 per cent of Ghana’s debt (Table 5).
In contrast, 20.7 per cent and 12.7 per cent of public debt is owed to Euro-
bond holders and multilateral institutions, respectively. Therefore, in terms
of external holders of Ghana’s debts, China’s inﬂuence is minimal.
14677660, 2023, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/dech.12791 by Cochrane Germany, Wiley Online Library on [19/12/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License

1290
Isaac Abotebuno Akolgo
By 2015, amidst an economically devastating electricity crisis in Ghana,
it became clear that a decade of Ghana’s borrowing from Eurobond mar-
kets had translated into another cycle of debt distress which required a
three-year, US$ 1 billion IMF bailout (IMF, 2015). The 2015 IMF
programme came with its own conditionalities, notably cuts in govern-
ment spending, increased taxation, freezes in government recruitment, and
ﬁnancial reforms (ibid.). Simultaneously, several Eurobonds and domestic
bonds were issued between 2017 and March 2019, to reﬁnance previous
debts. By 2018, it was evident that Ghana was at high risk of debt distress,
based on the debt sustainability analysis of the IMF (see IMF, 2018a). It
was simply a matter of time before the risk of debt distress, occasioned
by the pattern of economic and ﬁnancial subordination discussed so far,
turned into a full debt crisis. The outbreak of the COVID-19 pandemic and
then the Russia–Ukraine war aggravated Ghana’s existing debt and general
economic vulnerability.
CONCLUSION
The current wave of indebtedness that has followed a globally devastat-
ing pandemic has sparked debates about not only the present situation but
also about the cycles of debt crises that have plagued post-independence
Africa. Most empirical analyses of the current crisis point to a lack of macro-
ﬁnancial prudence on the part of African governments. Others have blamed
the crises on the COVID-19 pandemic and the fallout from the Russia–
Ukraine war. Focusing on Ghana, this article has argued that we need to
extend our analysis of the debt storm beyond a narrow focus on the tech-
nical concerns of macro-ﬁnancial imprudence and recent global disruptions.
Instead, a nuanced account of the debt storm demands an emphasis on how
Africa’s history of structural economic subordination: (a) constrained do-
mestic attempts to develop out of its dependence; and (b) sustained and in-
tensiﬁed its dependence on external ﬁnance within the context of an unjust
transnational lending system.
Accordingly, the article ﬁrst engaged the ongoing debate in Ghana on
the immediate causes and consequences of the ﬁnancial crisis. Within the
limits of its structural and external constraints, Ghana’s huge borrowing
between 2017 and 2023 turned out to be risky, particularly when combined
with the massive tax cuts implemented in 2017. Beyond an account of the
chaos unfolding in Ghana, a technical analysis of its sovereign debt sustain-
ability was conducted. On several parameters, it is clear that even before
COVID, Ghana’s debts were unsustainable. To offer a holistic account of
how Ghana got to this present crisis, its historical pattern of structural subor-
dination and dependence was traced. After independence, developmentalist
attempts to break out of Ghana’s entrenched dependence failed due to a con-
ﬂuence of global constraints and domestic factors. Structural adjustment,
14677660, 2023, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/dech.12791 by Cochrane Germany, Wiley Online Library on [19/12/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License

Debate: Ghana and The Political Economy of Africa’s Debt
1291
which was advertised as the solution to the 1980s’ crisis, returned Ghana
to its pre-independence reliance on primary commodity exports. Addition-
ally, the SAPs, with the support of domestic neoliberal technocratic elites,
liberalized the economy, emphasizing the government’s reliance on
market-based ﬁnance for development. The recourse to ﬁnancialized
strategies exposed Ghana to an exploitative translational lending system
dominated by Western investors. The resultant debt built-up, aggravated by
domestic policy errors and COVID-induced spending, drove Ghana into its
2022–23 debt crisis.
Besides Ghana, several African countries (such as Chad, Ethiopia and
Zambia) are facing debt distress, provoking widespread calls for debt
forgiveness. The Ghanaian experience shows that debt cancellation, while
necessary, is insufﬁcient to address the cycles of indebtedness and restruc-
turings. Debt cancellation can be the starting point for the transnational
lending system to enforce responsibility by both lenders and borrowers.
However, African governments have to go back to basics, which many are
already doing. They need, ﬁrst, to increase domestic production in place of
imports for those basic commodities that can be produced locally. More im-
portantly, they need to build the regional and continental alliances that can
support diversiﬁcation not in terms of the basket of raw materials exported,
but in terms of building manufacturing capacities that support the export of
reﬁned commodities. In the context of halting the needless importation of
basic items with high capacity for domestic production, the Ghanaian gov-
ernment has already taken steps by withdrawing foreign exchange support
for the importation of rice, poultry and other commodities. This is com-
mendable but not enough; such policy responses have been instituted before
and abandoned once the short-term liquidity constraints receded. Broader
structural reforms will be needed to follow the short-term measures.
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Isaac Abotebuno Akolgo (Isaac.Akolgo@uni-bayreuth.de) is a Research
Associate at the Africa Multiple Cluster of Excellence, University of
Bayreuth, Germany. His current research draws from a variety of hetero-
dox economics perspectives to explain ﬁnance capitalism in Ghana. His re-
cent publications on Africa’s ﬁntech boom and Ghana’s banking sector crisis
have appeared in the Review of International Political Economy and Review
of Africa Political Economy, respectively.
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On the contradictions of Africa’s fintech boom:
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Isaac Abotebuno Akolgo
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REVIEW OF INTERNATIONAL POLITICAL ECONOMY
2023, VOL. 30, NO. 5, 1639–1659
On the contradictions of Africa’s fintech boom:
evidence from Ghana
Isaac Abotebuno Akolgo
Africa Multiple Cluster of Excellence, University of Bayreuth, Bayreuth, Germany
ABSTRACT
Since the pioneering role of Kenya’s mobile money service – M-PESA, a consortium
of international development agencies, philanthropists, academics, tech corporations
and governments – have led an optimistic account of a poverty-eradicating,
prosperity-spreading power of financial technology (fintech) in the global South. In
contrast, a growing critical IPE literature has demonstrated that the optimistic
accounts are broad-brush and misleading. Drawing from recent theorization on digi-
tal financialisation and Marxian conceptualization of capital accumulation, this article
shifts the focus of the Kenya-centered critical response to Ghana, the second largest
mobile money market in Africa. Relying on quantitative data from the Bank of Ghana,
and qualitative data from 42 semi-structured interviews, the article provides evidence
to show that the mobile money boom in Ghana is underpinned by (1) customer
indebtedness from digital microloans, (2) high transaction costs, (3) excessive taxa-
tion, and (4) a prevalence of dormant accounts. Collectively, the findings confirm the
wider critical literature suggesting that, far from ending poverty and inspiring pros-
perity, the fintech-financial-inclusion agenda in Africa is opening new frontiers for a
sustained and intensified capitalist exploitation of working-class labor in the
continent.
KEYWORDS
Fintech; Ghana; financial inclusion; mobile money; capitalism; financialization; Africa
Introduction
A new optimism about African economies has emerged following the retreat of the
‘Africa rising’ narrative founded on Gross Domestic Product (GDP) figures. Unlike
before, the good news about Africa is not based on the trickle-down power of
GDP—it is premised on a postulated poverty-eradicating, prosperity-spreading
power of financial technology (fintech). Mobile money (MoMo),1 a notable fintech,
has gained popularity in the continent. From M-PESA in Kenya to MTN MoMo
in Ghana, telecommunication companies have expanded their primary focus on
communication technologies to include banking services, marking a peculiar phase
© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
CONTACT Isaac Abotebuno Akolgo
Isaac.akolgo@uni-bayreuth.de
Africa Multiple Cluster of Excellence,
University of Bayreuth, Bayreuth, Germany.
Supplemental data for this article can be accessed online at https://doi.org/10.1080/09692290.2023.2225142.
https://doi.org/10.1080/09692290.2023.2225142
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives
License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and repro-
duction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any
way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by
the author(s) or with their consent.
SPECIAL FEATURE: 30TH ANNIVERSARY

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I. A. AKOLGO
of finance capitalism described as digital financialisation (Jain & Gabor, 2020). To
have access to a transaction account, subscribers need a mobile phone and a phone
number from the operator. With an account, they can make payments, send money,
receive payments, and for some, access microcredit. This service has become com-
monplace in the continent. Currently, half of the world’s registered MoMo users are
in sub-Saharan Africa, with transaction values totaling over $700 billion at the end
of 2021 (GSMA, 2022).
Two sets of opposing narratives have accompanied this explosive growth of MoMo
in Africa and across the global South. On the one hand is an optimistic account
given by a consortium of international development agencies, philanthropies and gov-
ernments2 who have for years promoted a financial inclusion agenda in the global
South. Their case is that the MoMo boom in Africa has enabled the financial inclu-
sion (FI) of large sections of the previously unbanked3 population, which has led to
poverty reduction. This view has received validation within mainstream Economics
circles (Suri & Jack, 2016). On the other hand, there is a critical perspective held by
scholars in International Political Economy (IPE). Put in context, these IPE scholars
argue that optimistic claims of a fintech-FI-development nexus in the continent and
elsewhere in the global South are broad-brush and misleading. They cite the prob-
lematic of financial inclusion as a measure (Aitken, 2017; Dafe, 2020; Mader, 2015,
2018; Soederberg, 2013); gender and spatial inequalities in the digital finance boom
(Bernards, 2022; Natile, 2020;); increasing fintech-engineered surveillance, commodi-
fication, monetization and exploitation of customer data (Bernards, 2019a; Jain &
Gabor, 2020); customer indebtedness (Donovan & Park, 2019, 2022a, 2022b; Kusimba,
2021); and continued neoliberal capitalist exploitation through fintech (Boamah &
Murshid, 2019; Bernards, 2019b). More troubling accounts of fintech point to its
view of poverty as an opportunity for profit making and accumulation (Gabor &
Brooks, 2017).
This paper follows in line with the critical IPE perspective and at the same time
seeks to address two shortfalls in its critique of the fintech-led development narrative in
Africa. One, the IPE literature has overly focused on Kenya’s M-PESA, the premier
MoMo service, to the neglect of fintechs in other African countries. Two, where attempts
have been made to address this (such as Boamah & Murshid, 2019), the work has been
largely conceptual and less empirical. Accordingly, this paper addresses these two issues
by unpacking the political economy of digital financial inclusion in Ghana. Relying on
payment systems data from the Bank of Ghana and 42 semi-structured interviews across
seven regions in Ghana, the paper provides evidence in support of four criticisms of
fintech-led development in Africa. In the case of Ghana, the contradictions to the fin-
tech hype include: (1) customer indebtedness from digital microloans, (2) high transac-
tion costs, and (3) excessive taxation of digital finance, resulting in (4) a prevalence of
dormant MoMo accounts. The choice of Ghana is based on its significantly large MoMo
market. Ghana has the third highest mobile money usage globally after Kenya and
China (Creemers et al., 2020), and is the fastest-growing MoMo market in Africa
(Geiger et al., 2019). It therefore provides a good case study, outside the Kenya-focused
narrative, in explaining the contradictions associated with Africa’s fintech boom.
Theoretically, I engage two perspectives on finance capitalism. One, I employ Jain
and Gabor’s recent theorization of digital financialisation (Jain & Gabor, 2020) to distin-
guish fintech from traditional forms of finance or banking in Africa. Two, I situate
fintech’s FI agenda in Africa within a Marxian theorization of capital accumulation.

REVIEW OF INTERNATIONAL POLITICAL ECONOMY
1641
Traditional notions of finance capitalism require updating to take account of the ‘reor-
ganisation of finance around digital infrastructures’ (Jain & Gabor, 2020, p. 813). Jain
and Gabor’s conceptualization should be situated in longstanding Marxist theorization of
the capitalist mode of accumulation. Reflecting on Marx allows us to sift through the
complexity of how digital financial markets ‘obscure yet remain reliant on particular
configurations of productive activity’ (Bernards, 2019b, p. 1444). I explore this concep-
tual framework further in section three.
The rest of the paper proceeds as follows. Section 2 explains the fintech-led develop-
ment agenda, provides the facts on MoMo, and reviews the criticisms raised in the IPE
literature. Section 3 analyses digital financialisation and Marx’s circuits of capitals, which
serve as the theoretical basis for this study. Section 4, the empirical part, outlines the
methodology and discursively presents the findings of the study. Section 5 concludes
with implications for IPE research on fintech and development.
Fintech-led development in Africa: the facts and criticisms
The crux of the good news of fintech-led development in Africa can be summa-
rized in three claims that actors4 in the global FI agenda make. One, a conceptual
claim that access to financial services (that is FI) offers poor people a way out of
poverty. Two, a policy claim that where traditional banks and microfinance institu-
tions have failed, fintech (notably MoMo) offers a rapid path to FI. Three, an
evidential claim that after more than a decade of fintech boom, more people now
have access to transaction accounts and financial services; and that this has reduced
poverty levels. Impact analysis within mainstream Economics, such as those by
Beck et al. (2015), and Suri and Jack (2016) have provided evidence to support
these claims. For instance, in their study of Kenya’s M-PESA, Suri and Jack find
that ‘access to mobile money has lifted as many as 194,000 households out of pov-
erty’ (Suri & Jack, 2016, p. 1292). What has been the IPE response to these claims?
But first of all, what are the facts regarding Africa’s MoMo boom?
The facts
One undisputed part of the claims stated earlier is the significant growth of the
number of transaction accounts and the value of overall transactions. Globally, the
MoMo industry has grown more than ten times its value in the last decade. Valued
at $68 billion in 2012, the annual transaction value reached $1.2 trillion at the end
of 2021 (Figure 1). More than half the decade-long MoMo boom is attributable to
Africa (Table 1). The evolution of MoMo in Africa is traced to Vodafone Group
and Safaricom’s introduction of M-PESA in Kenya on March 6, 2007. Conceived as
a development intervention for the huge unbanked, mostly poor population,
M-PESA’s subscriber base expanded quickly—a million subscribers in a year, 8.5
million two and half years later, and by 2018, 90% of Kenyans had used the service
(Kusimba, 2021). Vodafone has since extended its MoMo services to other coun-
tries such as Ghana, the DRC, Egypt, Lesotho, Mozambique and Tanzania. At the
same time, other telecom companies such as MTN, Airtel and Orange have intro-
duced MoMo to their customers. Together, these services have led the digital
finance revolution in the continent. There are now more MoMo services in West

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I. A. AKOLGO
Africa (70 services) than in East Africa (57 services) where M-PESA’s pioneering
role began (Table 1). Notwithstanding that, 55% of the value of transactions in the
entire continent comes from East Africa.
In Ghana, the story has been that of the Kenyan experience. Ghana’s emergence
as a MoMo hub is due largely to MTN who introduced the first MoMo service to
Ghanaians in 2009. In the last ten years, MoMo has grown faster in Ghana than
the global growth rate in transaction values from less than $1 billion in 2012 to
about $158 billion at the end of 2021 (Figure 2). Between 2012 and 2014, transac-
tion values grew more than 200% yearly. By mid-2019, the decade-long exponential
growth slowed to about 23% and picked up again with the onset of the COVID-19
pandemic that provoked more remote financial transactions. This expansion of the
market value of MoMo corresponds with the equally rising numbers of registered
users from about 3.7 million registered accounts in 2012 to over 48 million in 2022
(Table 2). There is, however, a huge variance between registered accounts and
active accounts, an issue which is discussed in Section 4.
The criticisms
Two main concerns dominate the critical response to the optimistic narratives
about fintech-FI-development links in the global South, particularly Africa: One, a
contestation of the developmental value and methods of FI, and two, a contestation
of the reported empirical outcomes of the fintech revolution.
Contesting the value and methods of FI
The works of Dafe (2020) and Soederberg (2013) discounts the conception of FI
as a way out of poverty. For Dafe, FI is ambiguous ‘regarding its targets, its rela-
tionships to other economic goals, and the role of market’ (Dafe, 2020, p. 506).
Figure 1. Growth in global value of mobile money transactions. Source: Author drawings from GSMA data
(GSMA, 2021, 2022).

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Table 1. Distribution of mobile money Statistics in Africa for 2020.
Area
Services
Registered accounts
(millions)
Active accounts (millions)
Transaction volume (billions)
Transaction value ($) (billions)
Africa
171
562 m
161
27.5 bn
495
West Africa
70
198
47
6.4
178
Southern Africa
14
11
3
0.28
3.0
North Africa
14
14
1
0.07
5.4
Central Africa
16
46
16
2.2
35.7
East Africa
57
293
94
18.6
273
Source: GSMA (2021).

1644
I. A. AKOLGO
There is also no clarity about the relationship between FI and other economic
goals. The FI agenda is nothing more than an extension of neoliberalism. If there
is anything unambiguous, it is that FI ‘serves to legitimate, normalize and consol-
idate the claims of powerful, transnational capital interests that benefit from
finance-led capitalism’ (Soederberg, 2013, p. 593). Others (such as Aitken, 2017;
Bernards, 2019a; Gabor & Brooks, 2017; Kaminska, 2015) go beyond the concep-
tual value of FI to analyze the methods by which the unbanked are included. One
of the postulated benefits of FI is that the poor get access to financial credit since
FI mediates the information asymmetry inhibiting lenders’ assessment of the cred-
itworthiness of potential borrowers (see Demirgüç-Kunt et al., 2018; World Bank,
2022). However, critics such as Aitkens argue against fintech’s reliance on custom-
ers’ personal data and psychometric tests for establishing creditworthiness. By ana-
lyzing the methods of FI, these critics show that FI through fintech ultimately
aims to render the unbanked as visible, legible and calculable subjects of the
financial realm and, thus, re-engineer the markets for capitalist profiteering.
Consequently, what is promised as FI does not only become financial intrusion
Figure 2. Growth in the value of mobile money transactions in Ghana (2012–2021). Source: Bank of Ghana
(2020, 2021).
Table 2. Mobile money Statistics in Ghana (2012–2022).
Year
Registered accounts
Active accounts
Transaction volume
Transaction value ($)*
2012
3,778,374
345,434
18,042,241
330,000,000
2013
4,393,721
991,780
40,853,559
1,300,000,000
2014
7,167,542
2,526,588
113,179,738
4,181,000,000
2015
13,120,367
4,868,569
266,246,537
9,580,000,000
2016
19,735,098
8,313,283
550,218,427
20,130,000,000
2017
23,947,437
11,119,376
981,564,563
35,420,000,000
2018
32,554,346
13,056,978
1,454,470,801
48,520,000,000
2019
32,470,793
14,459,352
2,009,989,300
59,490,000,000
2020
38,473,734
17,142,677
2,859,624,191
100,742,000,000
2021
48,300,000
17,900,000
3,578,000,000
157,999,363,200
*Transaction values are the dollar equivalent of their Ghana cedi figures reported by the Bank of Ghana. They
are converter at the end of year exchange rates corresponding to each year.
Source: Bank of Ghana (2020, 2021).

REVIEW OF INTERNATIONAL POLITICAL ECONOMY
1645
(Kaminska, 2015), it leads to exploitation by transforming the previously unbanked’s
‘precarious or informal incomes into calculable risks’ (Bernards, 2019a, p. 819).
Contesting the outcomes of the fintech revolution
Growing evidence within IPE equally cast doubts on the outcomes reported by the
World Bank and its partners in the FI agenda. In this regard, evidence increasingly
points to customer/household indebtedness from digital microloans (Donovan &
Park, 2022a, 2022b; Kusimba, 2021), and inequalities in the digital finance boom
(Bernards, 2022; Natile, 2020). In their extensive studies of Kenya’s M-PESA story,
Kusimba (as well as Donovan and Park) document how subscribers are trapped in
debt as they rely on digital microcredit. These studies show that small digital micro-
loans have failed to be the solution to poverty. Borrowers use them for daily survival
or just to mitigate their temporal lack of money. A far-reaching concern raised by
Donovan and Park is that digitally mediated debt, apart from extracting from people’s
limited incomes, effectively makes a claim on their future work. It implies a burden
of mortgaging one’s future in order to navigate present financial turbulence.
In light of these criticisms by IPE scholars, this study sought to answer the
following questions: (1) Is there any evidence of customer exploitation in the con-
text of Ghana’s fintech boom? (2) If yes, to what extent does such exploitation
contradict the good news of fintech-led development? Before considering the evi-
dence, the next section explores the theoretical framework that helps to explain
finance-based capitalist exploitation through fintech.
Conceptualizing digital finance as capitalist accumulation in Africa
A key concern in the critical response to the digital FI in the global South has
been the attempt to identify the theoretical framework within which to situate the
‘fintech for FI agenda.’ Earlier critiques (Aitken, 2017; Gabor & Brooks, 2017) ana-
lyzed FI as part of wider processes of financialisation. Others drew from science
and technology studies, neoliberal logics of marketization (such as Bernards, 2019a,
2019b), or more strictly inserted fintech into Marxist logics of rentier capitalism
(Boamah & Murshid, 2019; Donovan & Park, 2022b). There is as well a growing
body of literature that views fintech as neo-colonial finance (Langley & Leyshon,
2022; Timcke, 2021). To mediate the theoretical challenge of explaining fintech
within conventional notions of finance capitalism as organized around traditional
banking systems, Jain and Gabor (2020) proposed a new theoretical framework—
digital financialisation. A common theme around these writings is the view of FI
as a new frontier for finance capitalist accumulation. Accordingly, I argue for a
reconciliation of these conceptualisations. In so doing, we understand two things
regarding the fintech for FI agenda. One, fintech is distinct from longstanding
forms of finance capitalism in Africa. Two, while distinct from analogue forms of
financialisation, fintech feeds into longer-running processes of capitalist exploitation.
How different is digital financialisation from analogue financialisation? For Jain
and Gabor (2020), analogue financialisation ‘focuses on the expansion of the finan-
cial realm and its increasing dominance over other realms’ (p. 816). It is driven by
financial deregulation, innovation and globalization; the main actors often include
transnational and domestic financial institutions such as central banks, the

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I. A. AKOLGO
International Monetary Fund (IMF) and the World Bank. The state plays a dual
role in analogue financialisation: First as a promoter, helping to expand the finan-
cial sector through monetary and fiscal policies while simultaneously allowing
global private players (e.g. fintechs, IFIs, development agencies) significant control
of the sector. Secondly, the state acts as a stabilizer, using its central bank monetary
tools to manage any bottlenecks in the financial system. Digital financialisation on
the other hand, Jain and Gabor continue, is driven by technological innovation
built around digital infrastructures. The main actors here are both new and old
fintech companies. In this hybrid realm of digital finance, the state employs coer-
cive measures, including demonetization and the integration of citizens’ digital
identities to expand the digital-financial sphere. It permits and facilitates fintechs’
collection and monetization of customers’ data through services such as MoMo.
The coercive role of the state is motivated by its mutually beneficial bargain with
techno-capitalists. While the fintechs want more profits, the state aims to make its
citizens more legible and governable through digital surveillance. As digital finance
expands, tensions grow between traditional banks and fintechs. This requires the
state to act additionally as a mediator in the struggle for control of the financial
realm. Effectively, the hybrid process results in the expansion of financial subjects
whose lives and data can be commodified in the name of FI, justified by ‘argu-
ments of economies of scale’ (Jain & Gabor, 2020, p. 817).
Jain and Gabor’s conception of digital financialisation is clearly manifested in the
context of Ghana. Over the last decade and half, global tech firms such as MTN and
Vodafone, with varied institutional investors including corporations like BlackRock, J.P
Morgan, Norges Bank, Emirati investors and Chinese banks (see online Appendices 2
and 3 for a description of the shareholding of MTN and Vodafone), sought new markets
to make profit. Their interests aligned with IFIs and Development Finance Institutions’
(DFIs) shift to private sector-led development financing and that of the Ghanaian gov-
ernment’s goal of expanding telecommunication and financial services to citizens.
Consequently, a hybridized financial realm has emerged. MTN and Vodafone have con-
sequently expanded their telecommunication services to include digital finance (MoMo
to be precise). The government’s coercive role, as Jain and Gabor posited, is evidenced
in Ghana’s aggressive digitization agenda, which requires citizens to integrate all digital
identities through mobile sim re-registration. Simultaneously, the MoMo operators have
built significant databases of customers. This data has not only been commodified by
the fintechs, government is also increasing viewing citizens data both as a means of
surveillance and revenue generation. The response of the communications minister
(Ursula Owusu-Ekuful) to recent complaints against the government’s coercive digitiza-
tion captures this reality:
‘If you look at the revenues that these tech giants are generating from managing, analysing
and utilizing the data that we freely give them; the Facebook, Google, WhatsApp and all
those mega-platforms, then it gives effect to the saying that data is the new oil because if
we effectively analyse and utilize it properly, it can generate a lot of revenue for the state
for our own development’ (reported in Ghanaweb, 2022).
Jain and Gabor’s sketch of this process of subjectification, commodification and
monetization disguised as FI, once situated within Marxist conceptions of finance
capital, provides a holistic understanding of fintech’s trajectory in Africa. While the
concept of digital financialisation offers a concrete manifestation of technology
being harnessed for both profit-making and political control, reflections on Marx’s

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1647
circuits of capital (Marx, 1990, 1991) clarifies the capitalist logic underpinning
MoMo operators’ transaction fees and micro lending. Of particular relevance to
this paper is the tendency of interest-bearing capital, in this case fintechs’ micro-
loans, to obscure the labor that enables the repayment of exploitative interests on
such loans. Capitalist accumulation, which is rooted in the transformation of con-
crete labor to abstract labor within Marxian thinking, concludes in the circulation
of money capital that demands an interest from borrowers.
Once capitalist accumulation reaches this point of interest-bearing capital as the
means of profiteering, ‘all that we see is the giving out and repayment. Everything
that happens in between is obliterated’ (Marx, 1991, p. 471). In the case of custom-
ers accessing microloans through fintechs, everything that happens in between as
interest-bearing capital circulates, referring to the ‘concrete productive activities that
enable the repayment of debts and interests’ (Bernards, 2019b, p. 1448). By failing
to account for this exploitative nature of digital micro lending, the FI agenda
obfuscates the links between the real economy and the financial sector by present-
ing FI as sufficient in itself. While being silent about the real jobs that provide the
money for transactions on digital platforms, the focus of FI has been on low-income
earners’ ability to send and receive payments or access financial resources from
social networks and micro lending platforms.
In short, my case for reconciling the different conceptualisations of digital
finance in Africa is that we capture the novelty of digital financialisation within the
context of persisting finance capitalist exploitation in the continent. Consequently,
fintech in Africa should be seen from these perspectives—as marking a shift toward
digital infrastructures to organize citizens’ engagement with finance (as Jain and
Gabor posit) and yet a part and parcel of finance capital accumulation (as in
Marx’s conceptualization). In the next section, I focus on providing evidence of
what digital financial inclusion has meant for Ghanaians.
The evidence from Ghana
Data and methods
A methodological concern for researchers attempting to explain finance capitalism
in the global South is access to financial data. Stefan Ouma noted this when he
called for unpacking the grounded operations of finance which is often shrouded
in complex and technical jargons (Ouma, 2020). But as he wondered, ‘how can we
practically produce knowledge about the grounded operations of finance when
many of its key players…that ought to be the objects of public scrutiny keep their
profiles low and doors closed?’ (Ouma, 2020, pp. 16–17). Particularly for fintech is
‘the lack of comprehensive quantitative data on the balance sheets of fintech firms’
(Loannou & Wojcik, 2022, p. 59). To provide a comprehensive view of the political
economy of fintech in Ghana, in the context of these data constraints, I adopted a
mixed methods approach (Jick, 1979, cited in Loannou & Wojcik, 2022), relying on
both quantitative and qualitative data for the analysis.
The data sources relied on include: one, payment systems’ data for the past ten
years (2012—2021) gleaned from the Bank of Ghana’s Payments Systems Report for
2020 and its Summary of Economic and Financial Data for 2021; and, two,
responses from 42 semi-structured interviews (for reviews on semi-structured

1648
I. A. AKOLGO
interviews, see Dunn, 2005; Longhurst, 2010). Interviewees comprised 32 MoMo
customers and10 MoMo agents– carried out in Greater Accra, Ashanti, Central,
Eastern, Northern, Volta, and Upper East regions.
Face-to-face interviews were conducted in Greater Accra, Ashanti, Central,
Eastern and Volta Regions during field trips in February and March 2022. Interviews
in Northern and Upper East regions were conducted online in April 2022. The
interview questions were framed on five issues: (i) ownership of a MoMo account,
(ii) usage—type of transaction and frequency of usage, (iii) customers’ assessment
of MoMo transaction fees (charges), (iv) access to microloans, purpose for borrow-
ing, and repayment of loans, and (v) customers’ views on the 1.5% electronic trans-
actions’ levy. For in-person interviews, respondents (owning a MoMo account or
being an agent) were randomly selected. In the case of online interviews, I relied
on my networks in Northern Ghana to suggest potential interviewees who matched
the criteria above. Those suggested by my networks in turn suggested others.
Interviews were conducted in two languages: English and Twi. Where consent was
given, the interviews (mostly lasting 5–10 min) were recorded and transcribed.
MoMo operations have recently become deeply politicized in the wake of the 1.5%
tax that has met widespread resistance. As such, many declined to be recorded; in
those instances, I took notes during our interactions. To protect the identity of
interviewees, I used codes for each person interviewed, ranging from N1, N2, up
to N42 (see online Appendix 1).
The regions were chosen to reflect the socio-economic dynamics of Southern and
Northern Ghana. A notable political-economic concern in Ghana is the North-South
development gap. To provide a complete analysis of any socio-economic issue, it is
crucial to account for the mostly urbanized, relatively richer South (particularly
Greater Accra, Ashanti and Eastern regions) and the mostly rural, relatively poorer
Northern Ghana (Northern, Savannah, North-East, Upper East and Upper West
regions). The Volta region lies between the rich-South-poor-North dichotomies.
Collectively, this sample provides a broader view of MoMo operations across Ghana.
While this geographical spread of interviewees is important, it must be noted, as
Longhurst (2010) echoing Valentine (2005) observed, that the purpose of interviews
is not to be representative as they are usually mistakenly criticized for. Rather, the
aim of interviews is to ‘understand how individual people experience and make
sense of their own lives’ (Valentine, 2005, p. 111). Ultimately, a crucial concern in
my interaction with interviewees is a question of reflexivity and positionality
(Roulston, 2010). As a Ghanaian who has used MoMo for nearly ten years, I rec-
ognize that such a financial technology is far more than an inclusion into a formal
financial system and that subscribers’ experiences of it can be diverse depending on
not just their location but also their socio-economic conditions. Semi-structured
interviews allowed for the expression of those varied experiences with MoMo.
Findings
Like most Kenyans who had access to M-PESA, the ease of financial transactions
was what attracted many Ghanaians to MoMo services, beginning with MTN in
2009. The number of MoMo accounts expanded rapidly, and so did the services.
Over the last ten years, MoMo has gone beyond sending and receiving money to
several other services including accessing microcredit. Simultaneously, the

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1649
hybridization Jain and Gabor posited is actively in place in Ghana—the initial con-
flict between banks and tech firms has been resolved, ensuring that MoMo accounts
are now seamlessly linked to bank accounts. Banks (such as Ecobank, AfB, CBG)
even offer the microloans on MoMo platforms such as MTN’s Qwik Loan and
Vodafone’s Ready Loan. However, as the euphoria recedes, MoMo subscribers in
Ghana are realizing, like their counterparts in Kenya, perhaps too late, that FI
comes at a huge cost. Collectively, the findings show, in answer to research ques-
tions 1 and 2 in Section 2, that there is significant evidence of customer exploita-
tion accompanying Ghana’s fintech boom, and that this negates the good news of
fintech-led development. As Jain and Gabor’s digital financialisation suggests, the
confluence of private (global) fintechs’ and Ghanaian government’s interests account
for the exploitation of MoMo customers. On the one hand, the fintechs continue
to accumulate profits through (1) predatory micro lending which creates customer
indebtedness and (2) high transaction fees. On the other hand, government, instead
of taxing the profits of the fintechs, shifts its financing needs to citizens through
(3) excessive taxation of MoMo. As the state supported fintech exploitation grows
and the low-income MoMo users cannot afford transaction fees, loan interests, and
digital finance taxes, (4) MoMo transaction accounts increasingly lie dormant.
These results are discussed below.
Customer indebtedness from digital microloans
One of the popular financial products offered by MoMo operators is micro lending.
To access a loan, subscribers have to be 18 years or older and hold an active MoMo
account. MTN Ghana, the largest MoMo operator, runs the Qwik Loan, Ahomka
Loan and Xpress Loan. Vodafone Ghana runs its own version called Ready Loan.
Applicants can access between ¢50 (about $6) and ¢1000 (about $125) repayable in
30 days, at an average interest of 6.9%. In case of default, loan recipients face three
penalties: (1) an instant additional charge of 12.5% on the total outstanding loan
amount; (2) a downgrade of their credit score; and (3) disqualification from the loan
service for a minimum of three months (see Loanspot, 2022; Vodafone Ghana, 2022).
The ease and speed of access to such loans without collateral has resulted in a rapid
growth in the numbers of borrowers. MTN alone disbursed over one million loans
in less than a year after the launch of its Qwik Loan in November 2017 (Letshego,
2018). However, widespread accounts of loan defaults (see ModernGhana, 2019) raise
concern over customer indebtedness from microloans. Several MoMo users inter-
viewed admitted to having defaulted at some time (N9, N11, N15, N16, and N34) or
were currently in default (N1, N23, N27, N17, N38).
To understand their indebtedness, it is important to consider two things: one,
the principal, repayment period and interest rate; and two, what borrowers use the
funds to do. It can take several months of regular, faithful borrowing and repay-
ment to reach a credit score that allows borrowers to access any amount close to
¢1000 ($125). Nevertheless, even if we assume that subscribers can borrow ¢1000
from the start, is that significant to start a small-scale business in Ghana (as advo-
cates of FI suggest credit from MoMo are used for)? Retail shops, which are fast
becoming rare in crowded urban areas, cost between ¢1000 and ¢20,000 to rent.
That is just one part of the cost of doing business. One subscriber observed, ‘they
don’t give large amounts when we request for MoMo loan, we only get some small

1650
I. A. AKOLGO
amount which can’t even solve the problem we need the loan for or do business’
(N9). For others, there is no intention from the outset to use the credit for busi-
ness; it is simply an attempt to manage a precarious economic life marked by low,
and/or irregular income streams: ‘the salary cannot even take me to the middle of
the month. So I take Qwik Loan to survive until salaries are paid’ (N38).
It is at this point that digital microcredit becomes a temporary measure to ‘buy
time’ as Donovan and Park (2022b) found in Kenya. At worse, some borrowers in
Ghana hardly ever buy enough time: ‘The time frame at which MoMo loan is to be
paid is very limited. The deadline comes and I struggle to get money to pay back
the loan’ (N1). Even if N1 took that loan for entrepreneurial reasons, what business
in Accra could yield enough profit in 30 days to pay back the loan with 6.9% inter-
est? Even for borrowers (like N20) who choose debt juggling—borrowing from one
lender to pay another, it is only a question of when, not if, such debt crisis manage-
ment reaches its limits. And when it does, the default will cost more than the 12.5%
penalty. They will be inundated with calls and texts reminding, perhaps threatening,
them to repay. From this point, any cash flows into their MoMo account are instantly
deducted by the MoMo operator to offset the loan. Their misery gets complicated:
They not only owe, they also need money to survive but no one can send financial
assistance through their MoMo account, unless the remittance is enough to mitigate
both crises. That is why it has become a norm in Ghana that, ‘…before I (you) send
money to anyone through MoMo, I (you) ask them if they owe QwikLoan. Otherwise,
I (you) send it and MTN will just take the money’ (N40).
Ultimately, a lot of productive labor, future labor as Donovan and Park suggest
in Kenya, is geared toward the repayment of debts. At least, that is for borrowers
who have jobs—formal or informal. For the majority of jobless youth, including
those of the Unemployed Graduates Association,5 it could turn into unproductive
activities, notably online sports betting. One Qwik Loan defaulter put it as follows:
‘I owe them for so many months. My brother (referring to the interviewer), I am a grad-
uate but as you know there are no opportunities. The only thing is for me to bet, maybe
I will win big so I can pay them and stop taking it’ (N17).
Maybe he will never win that bet, sometimes statistically unpredictable outcomes
occur in sports. Either way, he is headed for a new kind of financial exclusion. He will
mostly likely be ‘blacklisted’ even upon repayment—borrowers like him are ‘risky’ (see
Aitken, 2017), and the algorithms underpinning digital financial inclusion were built to
exclude them (see Gabor & Brooks, 2017; Kaminska, 2015), in service of larger
techno-capitalist profit-making. Besides predatory loans, fintechs also exploit subscribers
through multiple transaction fees for MoMo services as shown below.
High transaction costs
The optimism about MoMo as part of the FI agenda has been built on an inaccurate
notion that it lowers the cost of financial transactions. It has become increasingly evi-
dent, contrary to this claim, that MoMo transactions are costly, especially for the poor
(Anyanzwa, 2019). This is largely because MoMo is based on profit motives, requiring
that ‘most transactions incur a fee that many poor (people) find difficult to pay, even if
they are willing to do so because of the convenience and speed of transfer’ (Donovan
2012, p. 70). Because MoMo platforms allow subscribers to send smaller amounts of

REVIEW OF INTERNATIONAL POLITICAL ECONOMY
1651
money than they could or would have done in a traditional bank, it may appear at first
that using MoMo is cheap. However, put together, and in the long run, those seemingly
‘small’ fees become unbearable. Ghanaians know this (see Dowuona, 2021) and try to
avoid the charges in multiple ways. One way is to ask the sender to include withdrawal
fees; another trend is to revert to the old ways—send the money through a bank trans-
fer since most banks do not charge customers for transfers and withdrawals. It is not
only MoMo users who recognize the exorbitant MoMo fees, some operators do and
attempt to take competitive advantage in the market by lowering or waving certain tar-
iffs. Vodafone is a notable example (Table 3). That presents subscribers a third option
to avoid the fees—they can simply switch to cheaper platforms. However, it does not
come that easy with issues of poor network connectivity:
‘My problem with mobile money is the network connections and the charges. I was using
MTN but due to the connection and charges, that is why I switched to Vodafone and still
I am facing the same problem. They should learn to build a strong connection and reduce
their charges…’ (N24).
As customers attempt to navigate poor connectivity and cost by holding multiple
accounts with different operators, it presents another cost constraint. MoMo
interoperability (that is transfers across different MoMo operators) leads to higher
tariffs. For instance, while the charge for an MTN MoMo user sending between
¢50 and ¢1000 is 1%, that increases by 50% (1% to 1.50%) if she transfers the same
amount to a Vodafone or AirtelTigo account (Table 3). For unregistered customers
who receive payments from MTN accounts, the cost triples (1% to 3%) or even
more (1% to 5%) (Table 3). It should be noted that not everyone is concerned
about the transactional cost of MoMo:
‘Mobile money is good; it has come to help a lot. Many Ghanaians complain about the
charges and other issues. But for me it has been really helpful. I do a lot of transactions,
sometimes in a day I can send 1000, 2000, or even 5000 cedis. Can you imagine walking
to the bank to do all that, when I have a lot of business going on? I can quickly do it on
my phone. So I mostly transfer money from my bank accounts to the MoMo wallet and
then use it to do the payments. Besides, dealing with some of these people in the bank
can be annoying; with MoMo, I avoid all that’ (N22).
Of course, N22 is right about the satisfaction of not dealing with banks who are
noted to have a longstanding bad customer service record (B&FT, 2020).
Nevertheless, as N22 also notes, people like him in Kumasi or anywhere in Ghana,
are the minority. Average monthly incomes are low and stagnant. Most informal
workers in urban areas earn as low as ¢150 ($19) monthly (Kwakofi, 2018). Besides,
the FI agenda is built around banking the large population of unbanked, mostly
poor people, not middle-class Ghanaians like N22 who have multiple bank accounts
and enough money to meet most of their financial needs. While micro lending and
transaction fees serve profiteering by private global actors (MTN Group & Vodafone
Group), government is also treating the new subjects of the hybrid financial realms
as sources of revenue.
Increased taxation
As the government-private actors’ alliance in digital financialisation unfolds, sub-
scribers’ burden of paying excessive microloan interests and transaction fees is

1652
I. A. AKOLGO
Table 3. Comparison of mobile money fees and tariffs by operators.
Mobile money
operator
Transaction amount
(¢)
Mobile money fees and tariffs
Send from a registered to
registered customer
Send from a registered
customer to unregistered
customer
Send from unregistered customer
to unregistered customer
Withdrawal by
registered customer
ATM
cash-out Interoperability
MTN
1.00–50.00
0.50
1.50
2.50
0.50
0.50
0.75
50.01–1000.00
1%
3%
5%
1%
1%
1.50%
Above 1000.00
10.00
n/a
n/a
10.00
n/a
15.00
Vodafone
1.00–50.00
Free
1.50
n/a
0.50
0.50
n/a
50.01–75.00
Free
2.50
n/a
1%
1.50
n/a
75.01–100.00
Free
2.50
n/a
1%
1.50
n/a
100.01–250.00
Free
4.50
n/a
1%
2.50
n/a
250.01–500.00
Free
6.00
n/a
1%
4.00
n/a
500.01–1000.00
Free
n/a
n/a
1%
n/a
n/a
1000.01–2000.00
Free
n/a
n/a
10.00
n/a
n/a
2000.01–3000.00
Free
n/a
n/a
10.00
n/a
n/a
AirtelTigo
1.00–50.00
0
0.75
0.5
0.50
0.50
0.75
50.01–1000.00
0.50%
1.50%
1%
1%
1%
1.50%
Above 1000.00
10.00
1.50%
n/a
10.00
10.00
15.00
Figures not quoted in percentages represent flat rates charged in Ghana cedi (¢).
n/a (not applicable) means the service is either not rendered or not rendered at the corresponding amount.
Source: Bank of Ghana (2020).

REVIEW OF INTERNATIONAL POLITICAL ECONOMY
1653
compounded by the recent introduction of a 1.5% electronic transactions levy
(e-levy) (see Citi Newsroom, 2022). Constrained by its current sovereign debt crisis
(see Akolgo, 2022), the Ghanaian government sees the e-levy as an easy way to
shift its financing needs onto citizens. However, the levy has been widely con-
demned as a ‘lazy’ and punitive tax (Karombo, 2022), particularly within the cur-
rent context of economic hardships occasioned by COVID-19 and the Russia-Ukraine
war. Prior to the parliamentary approval of the e-levy in March 2022, surveys indi-
cated that a majority of Ghanaians, about 81% (Myjoyonline, 2022) disapproved of
the levy. With a majority of MPs in parliament, government nonetheless passed the
e-levy bill into law.
What is the effect of the tax on the cost of MoMo transactions? Take for example
an MTN MoMo user sending amounts in the range of ¢200 and ¢2,000. The 1.5%
tax is charged on any additional amount after the first ¢100. To understand the
effect of the tax on the transaction cost, we calculate the total fees the customer will
pay with and without the tax component. The calculations are done using two sets
of tariffs: One, the prevailing MTN MoMo tariffs given by the Bank of Ghana (Table
3), and two, MTN’s planned tariff reduction (see NewsGhana, 2022). With the addi-
tion of the 1.5% tax, the customer pays about twice or more, as transfer fees (Table
4). The cost quadruples if she transfers more than ¢2000. Even if we consider MTN’s
plan to reduce its own tariffs to 0.75% (instead of 1%) for transfers below ¢1000 and
a fixed tariff of ¢7.5 (instead of ¢10) for transfers above ¢1000, the negative effect
of the tax is still significant. Instead of paying a ¢7.5 fee for sending ¢1000, a cus-
tomer now pays ¢22.5 due to the tax (Table 4). But the problem with e-levy goes
beyond one-off deductions:
‘…how can you tax the same money several times? I work, and at the end of the month
receive salary, which I have already paid tax and when I send part of it to my mother in
the village, you will tax it again. Imagine she wants to send part of it to another relative,
and you tax it again…’ (N6).
Effectively, if N6’s chain of transfers continues electronically, the money could
be exhausted in the multiple taxation and operator fees. The tax does not apply
once they money falls below ¢100 but the operator fees do, until the last cedi.
Table 4. Impact of e-levy on transaction cost.
Transfer amount (¢)
Fees without e-levy (¢) (¢50–
¢1000 = 1% above ¢1000 = ¢10)
E-levy charge (¢) (1.5%
on additional amount
after ¢100)
Total fees (¢) (fees plus
e-levy)
200
2
1.5
3.5
300
3
3
6
500
5
6
11
1,100
10
15
25
2,100
10
30
40
*(50–1000 = 0.75%
Above 1000 = ¢7.5)
200
1.5
1.5
3
300
2.25
3
5.25
500
3.75
6
9.75
1,100
7.5
15
22.5
2,100
7.5
30
37.5
*MTN’s planned tariff reduction.
Source: Author’s calculation based on tariff data from Bank of Ghana (2020).

1654
I. A. AKOLGO
MoMo agents and subscribers (N33 and N12 respectively) are adamant that gov-
ernment tax fintechs and enforce fiscal discipline:
‘If government thinks telcos are making huge money from MoMo, then it should tax their
profit not adding to our woes. What have they done with all the money we borrowed from
outside Ghana? Because of the tax, we are not getting customers like before; people are
withdrawing their monies from MoMo…’ (N33).
‘Look at the huge number of ministers and other government appointees. The huge gov-
ernment expenditure is part of the reason we are in this financial crisis. The ministries and
presidency should cut down the unnecessary expenditure before asking us to pay more
taxes through MoMo’ (N12).
The prevalence of dormant accounts
The consequence of the ‘new possibilities for profit generation and governance’ (Jain &
Gabor, 2020, p. 814) created by digital financialisation in Ghana is the prevalence of
dormant transaction accounts. The good news about MoMo in the Global Findex
Report is premised on the number of mobile money accounts which are taken to be
indicative of FI of the ‘unbanked.’ Such logic presumes that once people create accounts,
they automatically use them. However, the data informing such claims show large num-
bers of inactive accounts. Data from the Bank of Ghana for the last 10 years (Figure 3)
show significant variances between registered and active accounts. On average, more
than half of registered accounts remain inactive. For instance, only 5 million of the 13
million registered accounts in 2015 were used by account holders. By the end of 2021,
registered accounts stood at 48 million but subscribers actively used only 38% (about 18
million). What explains the huge number of dormant accounts? I offer two explanations:
one, multiple account registrations. With a population of about 30 million citizens
(Ghana Statistical Service, 2021), 48 million MoMo accounts imply some people are
holding more than one MoMo account. Why do subscribers acquire several accounts?
As indicated on the issues of debt and transaction costs, subscribers keep multiple
Figure 3. Registered vs active MM accounts in Ghana (2012–2022). Source: Bank of Ghana (2020, 2021, 2022).

REVIEW OF INTERNATIONAL POLITICAL ECONOMY
1655
accounts to navigate various challenges: some want to avoid interoperability fees; others
want to forestall the potential of network breakdowns with one operator. Moreover,
there are those whose aim is to juggle debt across MoMo operators or completely run
away from a debt. The second plausible explanation for the dormant accounts is that
subscribers have no money or do not regularly earn money:
‘I will say I haven’t used my account in the last three months. I am a mason and we don’t
get contracts that often. Sometimes you can get many jobs to build for people and they
send you money through MoMo. But there are times you stay two, three or more months
and no job comes’ (N36).
The findings contradict fintech-led development
The evidence shown above regarding fintech players, financial institutions, and the
Ghanaian government’s ongoing coercive and exploitative creation of new financial
subjects in the name of FI cast doubts on any optimism of a fintech-engineered
development. The hype about the developmental value of FI obscures the real prob-
lems facing poor or low-income unbanked people. The pressing issue for people in
Ghana or anywhere else is not so much how to send or receive money as it is about
how, when, and where they will get the means (including money) necessary to
afford a decent life. The claim of FI offering the unbanked better livelihoods through
increased access to credit for social entrepreneurship is not consistent with the
Ghanaian evidence. As demonstrated above, microloans are not sufficient to run any
profitable business. Worse than that, the loans are given at exploitative interest rates.
Suri and Jack (2016) also suggest that holding MoMo accounts means the poor can
access financial support from their social networks. In the absence of decent jobs,
those accounts in Ghana are predominantly not used. Besides, financial support is
only possible, as Bateman et al. (2019) explain, if their networks are wealthy enough
to be capable of offering handouts. With poor networks, a MoMo account cannot
magically invite financial support. If even social networks send remittances, it has
been shown that costly transaction fees and regressive taxes are eroding any finances
sent through or received on digital platforms. The grand claims of FI success in the
presence of widespread accounts of fintech exploitation shown in Ghana and earlier
in Kenya should not come as any surprise. Reliance on modest economic gains to
draw sweeping conclusions about development in Africa is not new. Not long ago,
global development agencies and western mainstream media (in particular, The
Economist, 2011) relied on ‘superficial features’ like GDP figures, widespread use of
mobile phones, among others to propagate an optimistic narrative of ‘Africa rising’
(Taylor, 2016). It was later shown to be empty rhetoric (Obeng-Odoom, 2015) and
rightly so because the euphoria was a sharp contrast to the realities on the ground
(Akolgo, 2018). The present stage of optimism built around FI is no different.
Conclusion
In this article, I have analyzed the proliferation of mobile money services in Ghana
within the broader development agenda of fintech-engineered financial inclusion.
Like the wider critical literature on financial inclusion, the point is not to argue
that providing technologies that facilitate convenient and speedy transactions is

1656
I. A. AKOLGO
inherently bad. Far from renouncing technology, the attempt has been to analyze
the political-economic logic underpinning the turn to technology for financial
inclusion. In Ghana, fintech has improved the ease and speed of financial transac-
tions. However, the profit motive informing its creation has exposed subscribers to
debt and exorbitant transaction costs. These are worsened by the Ghanaian govern-
ment’s introduction of a 1.5% electronic levy, a regressive tax as it disproportion-
ately burdens the poor. These outcomes are not accidental—the rollout of mobile
money in Ghana should be viewed as part of global processes of digital finance
capitalism intended to sustain, open new frontiers for, and intensify capitalist accu-
mulation in the global South. Capitalism’s long history has been characterized by
its ‘unlimited flexibility’ and ‘capacity for change and adaptation’ (Braudel, 1982,
cited in Arrighi, 2010, p. 4). The turn to technology, pacified with claims of inclu-
sion, is just one way capitalism is adapting to make ‘informal labor visible, decode
wealth, and accumulate for the sake of accumulation’ (Boamah & Murshid, 2019,
p. 254). Looking forward in Ghana and beyond, it is crucial for IPE scholarship on
fintech to consider the macro-level implications of digital financial inclusion for the
longstanding financial subordination of African economies. As foreign fintechs with
shareholders located in the global North expand, the foreign control of the African
financial system (as earlier posited by (Nkrumah, 1965) and recently affirmed in
(Alami et al., 2022) gets entrenched. Therefore, macro-level analyses of how fintech
contributes to foreign control of the domestic financial sector will provide a broader
understanding of the financial inclusion agenda. In this regard, Jain and Gabor’s
conceptualization of digital financialisation lends itself as an important theoretical
framework. It offers a comprehensive approach to explaining finance capitalism in
the global South, accounting for the roles of digital technologies, global actors and
domestic governments.
Notes
1. In Ghana, MoMo is a term used by MTN Ghana but which is now used loosely to refer to
all mobile money services.
2. The World Bank, Bill and Melinda Gates Foundation, Alliance for Financial Inclusion, the
G20.
3. Adults who have no access to formal banking services.
4. See footnote 1.
5. The Unemployed Graduates Association of Ghana was formed in 2011 as a response to the
growing numbers of jobless university graduates.
Acknowledgements
I would like to thank Professors Franklin Obeng-Odoom, Kai Koddenbrock, and Stefan Ouma for
their comments on the initial draft of this paper, as well the editors at RIPE and the anonymous
reviewers for their helpful comments. I will also like Enock Kesse for his field assistance during
the interviews in Ghana.
Disclosure statement
No potential conflict of interest was reported by the author.

REVIEW OF INTERNATIONAL POLITICAL ECONOMY
1657
Funding
Funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) under
Germany’s Excellence Strategy – EXC 2052/1 – 390713894.
Notes on contributor
Isaac Abotebuno Akolgo is a Research Associate in the Monetary and Economic Sovereignty
research group at the Africa Multiple Cluster of Excellence, University of Bayreuth. As a hetero-
dox economist, he currently researches the Political Economy of Money and Finance in Ghana,
with a focus on banks, financial technologies, and debt.
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Appendix 1 – Interviews
Code
Interviewee Description
Region
Date
Sex (Male=M,
Female=F)
Category
(Subscriber1/Agent2)
N1
M
Subscriber
Accra
15/02/2022
N2
F
Subscriber
Accra
15/02/2022
N3
F
Agent
Accra
16/02/2022
N4
M
Subscriber
Accra
16/02/2022
N5
M
Agent
Accra
17/02/2022
N6
F
Subscriber
Accra
17/02/2022
N7
M
Subscriber
Accra
18/02/2022
N8
F
Subscriber
Accra
19/02/2022
N9
F
Subscriber
Eastern
21/02/2022
N10
F
Subscriber
Eastern
21/02/2022
N11
M
Subscriber
Eastern
22/02/2022
N12
M
Subscriber
Eastern
22/02/2022
N13
M
Agent
Eastern
22/02/2022
N14
F
Agent
Central
24/02/2022
N15
F
Subscriber
Central
25/02/2022
N16
F
Subscriber
Central
25/02/2022
N17
M
Subscriber
Central
27/02/2022
N18
M
Subscriber
Central
28/02/2022
N19
F
Agent
Ashanti
03/03/2022
N20
M
Subscriber
Ashanti
04/03/2022
N21
M
Agent
Ashanti
04/03/2022
N22
M
Subscriber
Ashanti
07/03/2022
N23
F
Subscriber
Ashanti
07/03/2022
N24
F
Subscriber
Ashanti
10/03/2022
N25
M
Subscriber
Ashanti
10/03/2022
N26
M
Agent
Volta
13/03/2022
N27
M
Subscriber
Volta
13/03/2022
N28
F
Subscriber
Volta
15/03/2022
N29
F
Subscriber
Volta
16/03/2022
N30
M
Subscriber
Volta
16/03/2022
N31
M
Subscriber
Volta
18/03/2022
N32
M
Subscriber
Northern
08/04/2022
N33
M
Agent
Northern
08/04/2022
N34
F
Subscriber
Northern
13/04/2022
N35
F
Subscriber
Northern
14/04/2022
N36
M
Subscriber
Northern
17/04/2022
N37
F
Subscriber
Upper East
18/04/2022

1 Subscribers refer to individual mobile money account holders.
2 Agents are persons or businesses contracted by mobile money operators to facilitate transactions
for mobile money subscribers. Their job often entail cash-in and cash-out transactions and they
receive a commission on each transaction carried out for the mobile money operator.

N38
M
Subscriber
Upper East
20/04/2022
N39
F
Agent
Upper East
23/04/2022
N40
M
Subscriber
Upper East
25/04/2022
N41
M
Agent
Upper East
25/04/2022
N42
M
Subscriber
Upper East
28/04/2022

Appendix 2:
Vodafone Ghana
Vodafone Ghana, a successor to Ghana Telecom, is a telecommunication, media and technologies
company. In 2008, global tech giant, Vodafone Group, acquired 70% stake in Ghana Telecom
leaving the government of Ghana with a a minority stake of 30%. At the end of June 2022,
Vodafone had about 7.3million mobile subcribers, representing about 18% of total subscriptions.
In June 2011, Vodafone Ghana received $115million financing from the World Bank Group’s
International Finance Corporation (IFC). The purpose of financing, as the IFC stated, was to help
Vodafone Ghana improve its telecommunication network and spread the benefits of mobile phone
and broadbank services in Ghana, particularly rural communities. The IFC mobilised the
$115million loan from multiple source: the import-export Bank of China, the China Development
Bank, DEG (from Germany), Barclays Bank, Ecobank, Rand Merchant Bank and Standard Bank.
Earlier in 2010, the IFC lent $100million, from its own account, to Vodafone Ghana. Vodafone
Group, the majority shareholder of Vodafone Ghana, has investors as diverse and global as its
operations. In its 2022 Annual Report, Vodafone Group reported, among others, major
shareholders including: J.P Morgan, BlackRock Inc., Norges Bank, The Emirates Telecommunication
Group Company (Etisalat), Morgan Stanley.
Sources: Vodafone Group (2022); IFC (2011); Marketscreener (2022); NCA (2022)
Appendix 3:
MTN Ghana
MTN Ghana traces its history to 1994 with the establishment of Scancom Limited. It started
operations as Spacefon in 1996, rebranded as Areeba in 2006 and MTN Ghana in 2007 by its
owners – the MTN Group. MTN Ghana holds the largest share of the Ghanaian telecom market
with almost 26million subcribers, about 63% of total market share at the end of June 2022. MTN
Ghana is 85.4% owned by the MTN Group. Others such as Conrad N. Hilton Foundation, Vanderbilt
University Foundation, The Rock Creek Group LP; Russell Investment Management LLC (all from
the US) and Eastspring Investments (Singapore) hold minority shares in MTN Ghana. Who then are
the investors behind MTN Group’s 85.4% shareholding? MTN Group, headquartered in South
Africa, has investors including: US-based Capital Research & Management Co. and Dimensional
Fund Advisors LP; Norges Bank (Norway); M & G Investment Managers Ltd (UK & South Africa) and
Old Mutual Investment Group Ltd. MTN Ghana was the first to introduce mobile money in Ghana
in 2009.
Sources: MTN Ghana (2022); Marketscreener (2022); NCA (2022).

Forum for Social Economics
ISSN: 0736-0932 (Print) 1874-6381 (Online) Journal homepage: www.tandfonline.com/journals/rfse20
Banking and Monetary Policy in Ghana: Has
Finance Served the Real Economy?
Isaac Abotebuno Akolgo
To cite this article: Isaac Abotebuno Akolgo (04 Sep 2025): Banking and Monetary Policy
in Ghana: Has Finance Served the Real Economy?, Forum for Social Economics, DOI:
10.1080/07360932.2025.2552681
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RESEARCH ARTICLE
FORUM FOR SOCIAL ECONOMICS
Banking and Monetary Policy in Ghana: Has
Finance Served the Real Economy?
Isaac Abotebuno Akolgo
Africa Multiple Cluster of Excellence, University of Bayreuth, Bayreuth, Germany
ABSTRACT
The post-COVID debt crisis in Ghana and across several African countries has reig-
nited debates about development financing. The literature on Ghana in particular has
shown that its financial distress is not only rooted in external constraints, but also
the structural dysfunction in its domestic economy. This paper focuses on one area
of the structural dysfunction in Ghana’s economy – namely the financial system.
Relying predominantly on central bank data, the paper contends that operations of
commercial banks and the conduct of monetary policy have failed to support the
real productive sectors of the economy. Specifically, bank credit to the agricultural
and manufacturing sectors has persistently declined in the 25 years from 1999 to
2023. This pattern of credit repression to the domestic productive sector is aggra-
vated by the high interest rates from the central bank’s inflation-targeting regime.
The paper recommends a reform of financial policy – among others, the institution
of credit policies and a reorganisation of development banking.
KEYWORDS: Ghana, central banking, development finance, credit policy, monetary policy
1. Introduction
The litmus test of financial policy for developing countries is its contribution to the mobilisa-
tion of resources and their efficient or optimal allocation…
(Thandika Mkandawire, 1999, p. 327)
The initial chaos and media attention that followed Ghana’s 2022–2023 debt crisis
appears to have receded. The severity of the economic hardships Ghanaians have
faced since the crisis broke out, and the debates about what caused the new cycle
of indebtedness are well documented (Akolgo, 2023). The election of President John
Dramani Mahama in December 2024 and his subsequent assumption of office in
January 2025 has so far restored a certain level of hope among the majority of
Ghanaians who voted overwhelmingly for him to stabilise and transform the econ-
omy. There are already early signs of an economic recovery. For instance, from April
to May 2025, the Ghanaian Cedi appreciated about 16% against United States Dollar
© 2025 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
Supplemental data for this article can be accessed online at https://doi.org/10.1080/07360932.2025.2552681.
https://doi.org/10.1080/07360932.2025.2552681
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives
License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and repro-
duction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any
way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by
the author(s) or with their consent.

2
I. A. AKOLGO
(Bloomberg, 2025) and that translated into cost reductions, notably the nationwide
reduction of transportation fares by 15% (Myjoyonline, 2025). The overall
macro-financial distress itself is far from over as government’s policy space remains
constrained, and citizens struggle to cope with the austerity measures imposed by
the IMF-supported economic recovery programme—at least until 20261. Nevertheless,
the initial sense of national despair that attended Ghana’s 2022–2023 debt crisis has
retreated, and it is now time to refocus research attention on the structural and
systemic constraints to development financing in Ghana. One place to start this kind
of inquiry is the domestic financial system. Assessing the nature and operations of
the Ghanaian financial system is not only crucial to explaining the persistent crisis of
development finance but also necessary to identifying potential pathways to creat-
ing substantial, sustainable, and socially inclusive prosperity for Ghanaians.
There is a long tradition of economic theory and evidence rooted in the founda-
tional Schumpeterian theorisation (Schumpeter, 1939, 1934) that links finance with
economic development. Entrepreneurial innovation, Waters (1988, p. 123) suggests,
“constitutes creative economic activity and brings forth substantial differences in
society.” Waters was quick to add, following Schumpeter, that such economic trans-
formation is only possible with a sufficient supply of finance flowing from a
well-functioning financial system. Since the 1980s financial liberalisation reforms, the
finance-development nexus is, however, no longer straightforward. There is evidence
that financial development may not be necessarily associated with economic growth
(Ibrahim & Alagidede, 2018) or poverty reduction (Bolarinwa, et al., 2022). The key to
reasserting the Schumpeterian thesis is to distinguish between finance that supports
productive economic activity in the real sector from finance that is unproductive and
speculative (Bezemer, 2014; Bezemer et al., 2023).
Therefore, the purpose of this paper is to analyse the extent to which the
Ghanaian financial system has served the real productive economy. I argue that in
Ghana, money and finance have not aligned with the interest of the real productive
sector, evidenced in two ways: first, the operations of commercial banks2 and sec-
ond, the conduct of monetary policy. In the first instance, commercial banks have
not only failed to advance sufficient credit to the domestic private sector in general
as has often been the case,3 but have misallocated the available credit to
‘non-productive’4 sectors of the economy. Specifically, as will be shown in the empir-
ical section of this paper, financial credit to agricultural and manufacturing sectors
has been in decline from 1999 to 2023. On the contrary, a greater share of private
sector credit has gone into commerce and finance—that is, to other financial insti-
tutions, import trade, and mortgage financing. While this private sector credit repres-
sion5 and misallocation persists, banks are increasingly investing in government
1 Ghana’s $3billion dollar extended credit facility from the IMF since May 2023 is for the duration of
36months (3 years). Which means it runs until 2026.
2 Commercial banks here refer to all Deposit Money Banks (DMBs) and does not include non-bank
financial institutions.
3 See, for instance, the accounts of Akolgo (2022) on Ghana and Quist (2022) on Cote d’Ivoire.
4 The theoretical distinction between ‘productive’ and ‘non-productive’ activity or credit is set out in
Section 2.1 below and is also explained in Supplementary Appendix 5 regarding the Bank of Ghana
categorisation of the sectoral distribution of private sector credit.
5 In this context, credit repression, a terminology also recently used by Koddenbrock and Sylla (2019),
denotes the failure of the domestic financial system to allocate significant credit to domestic private
sector businesses. Unlike the financial repression terminology which is used within neoclassical eco-

BANKING AND MONETARY POLICY IN GHANA
3
securities in pursuit of higher returns as shown by the distribution of banks’ invest-
ments in section three of this article. In the second instance, the Bank of Ghana
(BoG), since 2007, continues to pursue an inflation-targeting monetary policy regime.
The aim, as the central bank sets out, is to maintain stable prices, and yet prices
have hardly been stable. Between 2007 and 2023, the average inflation rate was
about 15%, rising from about 12.7% in 2007 to 54.1% at the end of 20226. Based on
its inflation-targeting policy, the BoG’s response to these high inflation levels has
been regular increases in the Monetary Policy Rate (MPR). However, hiking the MPR
has not only failed to control inflation; it has pushed up commercial banks’ lending
rates and thus, imposed higher borrowing costs on the private sector.
By focusing on the extent to which the financial system supports the real sector
in Ghana, this article responds to longstanding and contemporary policy and aca-
demic debates about the financial constraints to economic transformation in Africa.
Critical analysis of finance and development in Africa, while longstanding and exten-
sive, nevertheless leave a gap—that of a seemingly absent comprehensive and
empirical analysis of credit to productive and non-productive sectors of the econ-
omy. For instance, in his seminal work, Mkandawire (1999) offered the most thor-
ough critique of financial liberalisation in Africa, which he blamed for having
frustrated economic transformation in Africa. Mkandawire’s analysis relied on aggre-
gate figures on private sector credit, gross domestic savings, and gross domestic
investment, which he argued, had failed to positively respond to the reliance on
interest rates during the 1990s financial policy reforms. He, however, offered no evi-
dence on the sectoral flow of bank credit. Nissanke (2001) on the other hand anal-
ysed the performance of formal and informal financial systems in sub-Saharan Africa,
demonstrating that the financial sector had failed to support ‘private investment,
enterprise growth and transformation’ (Nissanke, 2001, 343). Like Mkandawire,
Nissanke relied on gross domestic savings, gross domestic investment and private
investment (as shares of Gross Domestic Product). Even recent scholarship that high-
light the value of productive lending (such as Koddenbrock et al., 2022), neverthe-
less fall short of an empirical analysis of the allocation of bank credit to productive
and non-productive sectors in the African context. Similarly, Bolarinwa et al. (2022)
showed empirically, that while overall financial development may not predict lower
levels of poverty, the private credit component of financial development does. They,
however, did not provide a sectoral analysis of this private sector credit. Within the
context of this rich and yet non-exhaustive literature, this paper is a modest contri-
bution that offers evidence on the sectoral misallocation of bank credit in Ghana.
Similar to the broader literature, accounts of the financial sector’s failure to create or
allocate sufficient and affordable credit for the real productive economy are not new
in Ghana.
nomic theorisation to denote government financial policies that are considered as distortive to the
financial system, crowd out private investment, and thus hinder economic growth, credit repression
is used here to suggest that the low availability of credit to the private sector or some sectors could
either be the result of banks’ credit discrimination policies, the organisation of the banking system
(especially if it is foreign-dominated and thus extroverted), and/or the poor conduct of central bank
monetary policies.
6 Headline inflation trend shown by the Bank of Ghana https://www.bog.gov.gh/economic-data/
time-series/.

4
I. A. AKOLGO
There is for instance, an extensive literature on small and medium-scale enter-
prises’ (SMEs’) inability to access credit from the Ghanaian banking system. In their
empirical study of the challenges to financing SMEs in West Africa, Quartey et al.
(2017) blamed Ghanaian SMEs’ difficulties in accessing loans on their small sizes and
the informal nature of their businesses. Consequently, the authors recommend that
SMEs formalise their businesses and or ‘…join Business Associations and seek group
credit schemes’ (p. 26). Similarly, Abor and Biekpe (2007, p. 100) found that SMEs’
ability to access bank credit is dependent on their possession of high value ‘tangible
fixed assets’ collateral, as well as the size and age of the firm. For Abor and Biekpe,
the information asymmetry that constraints banks’ assessment of SMEs collateral can
be mediated by the businesses ‘keeping proper and accurate records of firm opera-
tions’ and the banks developing ‘alternatives to property as collateral to secure loans’
(p. 100). Earlier, Aryeetey (1998) underscored the failure of the formal banking sys-
tem in Ghana and across other parts of Africa to deliver sufficient credit for private
sector development. Drawing largely on the experiences of Ghana, Aryeetey argued
for the integration and deployment of informal and semi-formal financial institutions
and practices to aid the formal banking sector in addressing the funding needs of
the private sector.
A common theme that runs through these separate studies is an emphasis on the
challenges private sector businesses face in securing loans from banks. These studies
appear to make an implicit assumption that credit to the private sector is predomi-
nantly constrained by banks’ inability to effectively assess creditworthiness.
Institutional arrangements such as the ownership of the banks, their loan granting
practices, the regulatory framework of the banking sector and the influence of mon-
etary policy, have received less attention in these studies. Moreover, there is an
apparent absence of a systematic analysis of the sectoral allocation of domestic
credit to the private sector. While it is important to know the level of bank lending
to the private sector, it is even more crucial to identify the sectoral distribution of
such credit. As such, this paper’s contention is that the existing literature on finance
and development in Ghana can be strengthened by highlighting and providing evi-
dence of the financial system’s repression of credit to the productive sector in Ghana.
The rest of this paper is structured as follows. Section 2 is a discussion of the
theoretical and empirical literature on credit, monetary policy and economic devel-
opment. Its purpose is to establish the causal link between finance (also financial
policy) and economic development. It conceptualises credit as central to economic
transformation and distinguishes between credit allocation to productive and
non-productive sectors based on the foundational Schumpeterian theorisation.
Additionally, this section shows the role of central bank monetary policy in the
direction of bank credit and, thereby, highlights the essential mix of financial policies
that can direct credit in support of transformative economic growth. In Section 3, I
analyse the sectoral distribution of credit, monetary policy rates, and inflation,
demonstrating how these influence the credit necessary for the growth of the real
productive economy. I show in particular that the agricultural and manufacturing
sectors have received declining shares of bank credit in the last 25 years. Section 4
is conclusion and policy implications. It summarises and concludes the paper’s argu-
ments and discusses the policy options necessary to redirect and increase credit to
finance real productive private sector investments.

BANKING AND MONETARY POLICY IN GHANA
5
2. Credit, Monetary Policy, and Economic Development
As set out in the introduction, this paper is primarily concerned with the extent to
which Ghana’s financial system and policy has supported a substantial flow of credit
to the real sector. It is therefore important to establish the theoretical case linking
the key concepts employed here—namely credit, monetary policy and economic
development. Two questions are particularly pertinent in this regard: first, what is
the role of financial credit in economic development? Two, should governments in
developing countries (through central bank policies), influence the volume and
direction of credit to certain sectors of the economy?
2.1. Credit and Economic Development
The theoretical case linking credit and development dates back to Joseph
Schumpeter’s foundational works: Theory of Economic Development (Schumpeter,
1934) and Business Cycle (Schumpeter, 1939). Schumpeter posited that credit is
essential to the entrepreneurial innovation that propels economic development in a
capitalist economy. He observed, as Bezemer (2014, p. 937) recounts that: ‘the new
combination of means of production and credit are the fundamental phenomena of
economic development’ and that the credit system ‘is the characteristic method of
the capitalist type of society…for forcing the economic system into new channels,
for putting its means at the service of new ends… it is as clear a priori as it is estab-
lished historically that credit is primarily necessary to new combinations [i.e. innova-
tion]…’ (Schumpeter, 1934, pp. 69–70, 74). King and Levine (1993) affirmed this
conceptualisation of the causal link between credit and development. In a
cross-country study of 80 countries for the period 1960–1989, King and Levine found
that financial development is ‘…strongly associated with real per capita GDP growth,
the rate of physical capital accumulation, and improvements in the efficiency with
which economies employ physical capital’ and reluctantly affirmed that ‘Schumpeter
might have been right about the importance of finance for economic development’
(King & Levine, 1993, p. 717, 735). The explosion of publications that followed King
and Levine’s seminal paper could be summarised into two sets of contributions:
those who have asserted the positive correlation between finance and development
(Levine 1997 for an extensive review), and those, especially since the 2008 financial
crisis, who demonstrate that some levels of credit or financial deepening could have
adverse effects on economic growth (Beck et al., 2012).
At the center of these mixed results is the analytic confusion generated by a fail-
ure to delineate between credit generated by the financial system to finance produc-
tive activity and other forms of credit. The conceptual distinction between ‘productive’
and ‘unproductive’ credit received an earlier intervention from Werner (1997), and was
subsequently, thoroughly discussed by Bezemer (2014) who drew extensively from a
holistic interpretation of the Schumpeterian theorisation. Schumpeter, Bezemer clari-
fies, distinguished between two kinds of credit in the economy: a primary wave of
credit (productive credit) and a secondary wave of credit (unproductive credit).
Productive credit refers to finance ‘…which plays a role in the entrepreneurial inno-
vation process which he [Schumpeter] viewed as the motive force of capitalist devel-
opment…precisely for this reason, distinguishing it from unproductive credit was

6
I. A. AKOLGO
important’ (Bezemer, 2014, p. 937). In contrast, unproductive credit generated in the
secondary wave (usually larger than that generated in the primary wave), finances
speculative activities, household consumption, and mortgages.
Most of the macroeconomic literature, Bezemer observed, has erroneously focused
on the aggregate flow of credit from the financial system, usually measured by
credit-to-GDP ratios, which are taken as indication of financial deepening. Since the
credit/GDP ratio does not disaggregate productive credit from unproductive credit,
it increases the probability of financial deepening exhibiting a negative relationship
with economic growth and thereby suggesting a relationship contrary to the
Schumpeterian theorisation of a positive relationship between credit and economic
development. Once credit is disaggregated, it becomes clear that credit that finances
productive businesses enhances growth while unproductive credit does not. The key
lesson from the literature is to think not so much about the volume of credit but
where the credit goes. In other words, the crucial concern should not be whether
and how much banks lend to the private sector but instead a question of what
purpose and to whom they lend. If bank lending fails to support innovation, product
creation, or value addition (specifically agriculture and manufacturing) as I argue for
the case of Ghana, then the credit generated by the financial system is unproductive
and suggests a dysfunction of finance.
2.2. Financial Policy and Credit Allocation to the Real Sector
The statement that governments in developing countries such as Ghana can, through
central banks, institute policies to direct credit is hardly in dispute. Rather, the debate
is often that of whether they should, and how they should go about it. The vast the-
oretical and empirical literature on this issue can be summarised within two broad
spectrums. On the one hand, there are those within neoclassical circles, specifically
financial liberalisation advocates (notably, Barro & Gordon, 1983; Rogoff, 1985; Kydland
& Prescott, 1977; McKinnon, 1973; Shaw, 1973) who suggests non-interference from
government but rather a reliance on the market force of interest rates to mediate the
allocation of credit to borrowers. However, more than four decades of financial liberal-
isation has not only failed to produce tangible development outcomes but has also
been associated with cycles of financial crises (Botta, 2018). On the other hand are
those (such as Amsden, 2001; Amsden & Euh, 1993; Arestis & Sawyer, 2006; Bezemer
et al., 2023; Dow, 2017; Mkandawire, 2001, 1999; Wade, 1990; Werner, 1997) who sug-
gest the institution of credit policies or a proper conduct of monetary policy by cen-
tral banks, with the aim of directing bank credit into productive economic activity.
The analysis of the sectoral distribution of bank credit in this article follows the
second, nuanced view that policy intervention is essential to organising finance in
support of economic development. Werner (1997) for instance studied the lending
patterns of Japanese banks, showing how speculative practices led to a decline in
banks’ loans for productive investment, and concluded:
The results imply for policy makers that it is imperative to monitor the allocation of credit
and intervene, if credit creation for unproductive, especially speculative purposes takes place
to a significant degree…Our findings suggest that central bank targeting of credit aggregates
is likely to be more successful than traditional monetary or interest rate targeting (Werner,
1997, p. 305).

BANKING AND MONETARY POLICY IN GHANA
7
Similarly, Amsden (2001) as well as Amsden and Euh (1993) who extensively stud-
ied South Korea’s financial system and the country’s industrialisation success observed
that South Korean policymakers (particularly the Ministry of Finance) did not follow
the liberal financial reforms proposed by international finance institutions. The
Korean financial system, Amsden and Euh noted, ‘…operates under the umbrella of
an industrial policy, and economic goals have been attained by means of invest-
ments in institutions rather than by exclusive reliance on the price mechanism’
(Amsden & Euh, 1993, p. 379). Korean authorities understood that the claim by finan-
cial liberalisation advocates that higher real interest rates will attract increased sav-
ings, which consequently drive investment and growth, was a fallacy. Instead, the
Korean Ministry of Finance was guided by the fact that ‘… low interest rates are
necessary to stimulate investment, while high interest rates are not as necessary to
mobilise savings’ (Amsden & Euh, 1993, p. 380). The implication of this realist view
of the financial system is that the Korean government, as Amsden and Euh sum-
marises, actively intervened to direct credit to productive ends:
The same point is illustrated by the method adopted by the Korean government to channel
more credit to small- and medium-size firms. Instead of granting banks and other financial
institutions carte blanche to decide to whom to lend (on the presumption that in the absence
of heavy-handed government, small and medium size enterprises will get their fair share of
credit), the government has taken the opposite tack. It has set minimum quotas on the
amount of credit that financial institutions must allocate to such firms (Amsden & Euh, 1993,
pp. 389–390).
More recently, Bezemer et al. (2023) have offered a comprehensive empirical
account in support of the case for the institution of credit policies. In their study of
17 advanced economies covering the period 1973–2005, Bezemer et al. observed
that prior to the 1980s Washington Consensus and the accompanying financial
deregulation, governments and central bankers instituted both State Investment
Banks and deliberate credit policies to ‘…support industrial policy, while repressing
credit flows into less desirable areas, including household debt’ (Bezemer et al. 2023,
p. 462). However, these interventionist policies were abandoned following the dereg-
ulation, liberalisation and privatisation of the 1980s. As such, Bezemer et al. found
that the rollback of credit controls, financial account controls and the privatisation of
state banks that followed this neoliberal turn, led to a significant decline in the busi-
ness share of total bank credit since the 1990s across the countries.
This developmental imperative of central banking was well understood in the first
decade of Ghana’s political independence. The BoG which was established days
before the declaration of independence, was primarily charged with the issuance
and redemption of notes and coins of the Ghana Pound, the maintenance of the
country’s reserves, maintenance of monetary stability and serving as banker and
financial advisor to the government.7 However, shortly after independence in 1957,
Kwame Nkrumah’s government began to reconstruct the central bank so that its
operations aligned with the national development agenda. Accordingly, the principal
objectives of the BoG were expanded in the Bank of Ghana Act 1963 (Act 182). In
addition to issuing and redeeming notes and coins, Section 3 required the bank to:
7 Bank of Ghana Ordinance No. 34/1957 Section 5.

8
I. A. AKOLGO
…to regulate and direct the credit and banking system in accordance with the economic
policy of the Government…propose to the Government measures which are likely to have a
favourable effect on the balance of payments, movement of prices, the state of public
finances and the general development of the national economy…
This focus on what can be described as a developmentalist central banking was
not sustained following the economic crisis of the 1980s. The financial liberalisation
that began with 1980s/1990s structural adjustment program gradually eroded the
central bank’s responsibility of fostering the development of the national economy.
Financial liberalisation during structural adjustment, Mkandawire (1999) recounted,
excessively limited government involvement in the financial system, treating any inter-
vention by policy makers as financially repressive following the McKinnon-Shaw thesis.
Mkandawire observed that rather than ‘addressing issues central to national develop-
ment and nation-building’ financial policy was directed at ‘stabilisation and debt
repayment’ (Mkandawire, 1999, p. 321). Practically, the consequence of liberalisation is
that ‘economic policy has given overwhelming priority to financial policy instruments
and objectives (exchange rates, interest rates) relative to concerns for the ‘real’ side
variables and goals that directly affect employment and growth’ (Mkandawire, 1999, p.
321). Particularly in Ghana, liberalisation resulted in the adoption of flexible exchange
regimes, privatisation and sale or liquidation of state banks, and the eradication of
capital controls (Akolgo, 2023; Hutchful, 2002, 1996) and the adoption of liberal inter-
national banking standards (Jones, 2020). Subsequently, independent central banking
that prioritised monetary stability was formalised.8 Since 2007, this focus on monetary
stability, achieved through an inflation-targeting monetary policy was entrenched as
the non-negotiable objective of the BoG. What has been the consequence of this lib-
eral approach to financial policy? The next section responds to this question and pro-
vides evidence on the implication for credit allocation and distribution.
3. Evidence of Dysfunction in Ghana’s Financial System
As set out in the introduction, this paper’s main argument has been that the opera-
tions of commercial banks and the conduct of monetary policy have not sufficiently
aided investments in the real economy. This section provides empirical evidence in
support of that claim. Specifically, it analyses the sectoral distribution of bank credit to
the private sector, inflation rates, the BoG’s policy rates, and average commercial bank
lending rates. The analysis focuses mainly on the period 1999–2023, relying on the
consistent data available in a series of reports from the BoG. Unlike indicators like the
historical trends of inflation and BoG policy rates, there is no publicly available data-
base on the sectoral distribution of bank credit. However, the data is reported in mul-
tiple Bank of Ghana reports. Specifically, data is drawn from the BoG annual financial
statements and quarterly bulletins between 1999 and 2023. Detailed descriptions of
the various reports from which data is compiled are indicated in Supplementary
Appendix 1. Percentages of the sectoral distribution of credit to the private sector are
calculated using the absolute figures reported by the BoG. Where available, data on
the years before 1999 are relied on to emphasise the shifts in credit allocations to
8 Both the Bank of Ghana Act 2002 (Act 612) and the Bank of Ghana (Amendment) Act, 2016 (Act
918) set price stabilisation as the bank’s primary objective.

BANKING AND MONETARY POLICY IN GHANA
9
various sectors of the economy. Data on the inflation and monetary policy rates are
accessed from the BoG public database available on its official website.
Supplementary Appendices 2–4 provide an overview of the macroeconomic con-
text in Ghana. It is clear from the data provided by the Ghana Statistical Service that,
Ghana has experienced a largely erratic growth trend since political independence
in 1957. The substantial economic growth in the 60s and early 70s, driven by the
import substitution industrialisation, was interrupted in the mid1970s as growth
declined to its worst of negative 12.4%. A brief recovery in 1978 soon descended
into a crisis in the 1980s. Growth was relatively stable in the early 2000s. With the
commencement of oil production in 2011, Ghana posted a record growth of 14%.
The post-Covid crisis has however driven down growth to about 2.9% in 2023. There
is also the issue of unemployment which rose to about 14.7% in 2023 from about
8.4% in 2017. This was indicative of the deteriorating economic conditions that
accompanied the 2022–2023 debt crisis. Details of these macroeconomic conditions
including inflation, are indicated in the various chats in Supplementary Appendices
2–4. The analysis of credit allocation from the banking sector, which is the main of
focus of this article proceeds in two subsections focusing on commercial banks’
operations and central banking.
3.1. Bank Operations – Domestic Credit to the Private Sector/Sectoral
Distribution of Credit
Before discussing its sectoral distribution, it is important to point out the general
low levels of domestic credit to the private sector as a percentage of Gross Domestic
Product (GDP). This was already highlighted in Akolgo (2022) where I showed the
trend of credit allocation in Ghana relative to that of the sub-Saharan African
Figure 1. Domestic credit to the private sector (1999–2023). Source: Author drawings from World Bank
Development Indicators https://databank.worldbank.org/reports.aspx?source=2&series=FS.AST.PRVT.GD.ZS&
country=GHA

10
I. A. AKOLGO
average which excludes high income countries. In this instance, an additional com-
parative trend for lower middle-income countries is included as shown in Figure 1.
This trend is included to account for the fact that since 2010 Ghana has been clas-
sified as a lower middle-income country. The data from Figure 1 shows that Ghanaian
banks allocated less credit to the domestic private sector as compared to both the
continental average, and that of lower middle-income countries. At least, between
1999 and 2021, the domestic credit to the private sector averaged about 14.6% of
GDP, more than two times less than that of the sub-Saharan African and lower
middle-income averages of about 46 and 38.3% respectively. More than this general
level of credit repression, the sectoral shares of bank credit to the private is a main
concern in this paper. Three trends can be observed from the patterns of banks’
credit to the private sector in Ghana.
3.1.1. Declines in Agriculture and Manufacturing Shares of Credit
Agricultural and manufacturing shares of domestic credit to the private sector have
declined consistently over the period under consideration as shown in the negative
slope of the trend lines of manufacturing (Figure 2) and agriculture (Figure 3) as well
as the data in Table 1. Between 1999 and 2023 the manufacturing share of bank
loans declined by about 54.2% from 24.9% of GDP to 1 l.4% of GDP. The agricultural
sector saw an even sharper fall of about 65.2% in the same period from 11.8% of
GDP to about 4.1% of GDP. What could have accounted for this credit repression to
the manufacturing and agriculture sectors? Several factors played a role, but they all
revolve around the evolution of financial and economic policy since the structural
adjustment programs of the 80s and 90s. A few factors are worth noting.
First, the withdrawal of credit controls. Starting in Kwame Nkrumah’s developmen-
tal agenda in the 1960s until 1982, Ghanaian financial policy mostly emphasised
credit controls by the BoG so as to direct credit to agriculture and manufacturing.
Figure 2. Manufacturing share of domestic credit to the private sector (1999–2023). Source: Author drawing
from Bank of Ghana Data (Supplementary Appendix 1).

BANKING AND MONETARY POLICY IN GHANA
11
Credit controls first instituted by the BoG in 1964, Sowa (1991) recounted, were
enforced through sectoral credit ceilings, interest rates, reserve requirements, and
mandatory lending ratios for various sectors. For instance, banks were not allowed
to lend outside agriculture and industry any amounts exceeding 5,000 Ghanaian
Pounds without the approval of the BoG. By 1982, the BoG required that 20% of
bank credit go to agriculture. As Sowa emphasises: ‘this system which has a devel-
opmental objective, is also intended as a credit rationing scheme to curb excessive
expansion in the money supply’ (Sowa, 1991, p. 29). In the course of the economic
recovery programme under structural adjustment, these policies of directed lending
were gradually reduced and by the 1990s, were completely abolished. This is evident
in the decline of agricultural credit during the adjustment period (Table 2). The 1982
BoG directive on agricultural lending raised credit to the sector from 16.2% in 1981
to about 21.6% in 1982 and further to 31.9% in 1984. However, as financial deregu-
lation and liberalisation took root, the sector’s share of bank credit began to decrease
consistently. By 1993 when Ghana returned to multiparty democracy, agriculture’s
share of bank credit was in single digits.
Second, the structural shift from import substitution back to intensive primary
commodity exports. Import substitution industrialisation in the 60s and 70s empha-
sised an elimination of imports that could be produced locally. The focus was on
expansion of agriculture and manufacturing. Combined with the financial directives
from the BoG, this industrialisation agenda directed finance to the productive sector.
With the collapse of import substitution, and the growth of imports of commodities
previously produced locally, bank lending shifted in favour of commerce and trade
(mainly the wholesale and retail of imported commodities). Third, the deregulation
and privatisation of the banking industry. Private, mostly foreign banks had little
motivation to lend to agriculture and manufacturing. Agriculture in particular requires
long-term loans, and its high risks mean chances of timely repayment are usually
very low. Therefore, banks preferred to lend to retail trade. Besides, the empirical
Figure 3. Agricultural share of domestic credit to the private sector (1999–2023). Source: Author Drawing
from Bank of Ghana Data (Supplementary Appendix 1).

12
I. A. AKOLGO
Table 1. Sectoral distribution of domestic credit to the private sector (1999–2023).
Year
Agriculture,
forestry &
fishing
Export
trade
Manufacturing
Transport,
storage &
communication
Mining &
quarrying
Import
trade
Construction
Commerce &
finance
Electricity,
gas &
water
Services
Cocoa
marketing
Miscellaneous
1999
11.8
3.1
24.9
2.7
5.8
4.5
8.9
15.7
4.2
9.3
1.2
8
2000
9.6
2.3
28.1
3.1
5.5
5.5
6.8
16.8
4.6
9.1
0.8
7.9
2001
9.6
2.4
19.3
3.5
4
3.6
6.8
28.4
4
9.4
0.8
8.2
2002
9.4
2.8
21.1
4
3.7
6.7
7.8
12.8
4.9
11.3
2.3
13.2
2003
9
3
20
5
3
7
5
18
4
11
3
12
2004
9
2.4
24.8
3.5
2.9
9.6
7.9
13.2
0.6
12.2
14
2005
7.7
2.1
21.7
2.6
4
8.6
6.7
14.7
1.7
16.6
13.7
2006
5.9
1.6
21.6
3.1
4.3
8.4
9.2
15.3
2.2
19.3
9.1
2007
4.4
1.7
12.7
3.9
3.2
4.9
7.6
25.2
3.3
22
1.1
10
2008
4.3
1.4
11.9
2.9
2.9
5.2
6.8
26.2
4
23.9
1
9.6
2009
4.7
1.7
11.6
4
2.7
5.3
7.8
24.1
6.3
21
0.7
10
2010
6.1
1.9
13.3
4
2.7
5.8
7.5
23.3
6.5
20.6
0.5
7.7
2011
5.9
1.3
9.6
4.4
4.6
10.1
8.6
15.6
5
26.2
8.8
2012
4.7
1.2
12.4
5.4
2.4
8.8
9.2
15.9
6
25.2
9
2013
3.6
0.9
9.9
4.6
3
10.3
10
16.4
8.1
25.3
7.8
2014
4.2
1.1
9.3
6
3.1
8.7
10.5
14.6
9.7
22.4
10.4
2015
3.9
0.6
9
4.5
2.2
8.2
10.5
16.4
12.6
22.4
9.7
2016
3.8
0.5
8.6
4.2
2.3
6.8
10.5
22.7
11.5
18.6
10.5
2017
4
0.9
8.7
6.5
3.2
5.5
11
21.2
8.6
18.4
12
2018
4.1
0.7
9.8
9.9
3.3
4.7
9.9
17
8.2
20.9
2
9.5
2019
5
0.8
11.1
7.6
3.1
3
10.2
18.9
5
24.5
10.8
2020
3.5
0.4
11.5
7.1
2.7
2.8
10.1
22.7
5.8
26.6
6.8
2021
3.4
0.4
11.8
6.9
1.7
3.6
10.5
15.5
4.1
34.9
7.3
2022
4.2
0.6
11.2
5.6
2.5
3.2
10.1
18.1
5.5
32.7
6.3
2023
4.1
0.4
11.4
5.5
3.7
7.3
9.4
14.8
3.7
33
6.6
Source: Author calculations based on data from Bank of Ghana reports (Supplementary Appendix 1).

BANKING AND MONETARY POLICY IN GHANA
13
evidence on foreign banks in low-income countries is clear that they tend to lend
less to domestic private sector businesses, especially small-scale and medium enter-
prises (SMEs). There are several reasons for this, including the mainstream account of
information asymmetry between banks and predominantly informal SMEs (Quartey
et al., 2017) or the critical accounts which suggest that these banks are more inter-
ested in increasing shareholder value through trading in government securities and
repatriating profits, rather than encouraging local business development (Akolgo, 2022).
3.1.2. Larger share of Credit goes to Services, Commerce and Finance
Unlike agriculture and manufacturing, the service sector’s share of total private sec-
tor credit has increased significantly since 1999 (see Figure 4 and Table 1). Between
Table 2. Agriculture, forestry and fishing share of commercial bank credit (1981–1993).
Year
Agriculture, forestry and fishing share of commercial
bank credit
(%)
1981
16.2
1982
21.6
1983
30.5
1984
31.9
1985
22.9
1986
17.9
1987
22.1
1988
16.6
1989
15.5
1990
15.8
1991
13.6
1992
11.1
1993
9.6
Source: Author calculations from Ghana statistical service’s quarterly digest of statistics – 1989, 1990, 1995.
Figure 4. Services share of domestic credit to the private sector (1999–2023). Source: Author drawing from
Bank of Ghana Data (Supplementary Appendix 1).

14
I. A. AKOLGO
1999 and 2023, its share of bank credit increased by more than 250% from 9.3 to
33% of total credit to the private sector. It is instructive to note that in 1999, agri-
cultural share of credit was 2.5% higher than that of services. However, by the end
of 2023, the service sector’s share of total private sector credit was about eight times
that of agriculture (Table 1). Commerce and finance’s share of total credit (Figure 5)
has not shown any clear trend in the 25 years from 1999 to 2023. It has, however,
received a relatively large share of bank loan advances to private sector, far above
all sectors except the service sector. In the 25-year period, the service sector received
on average 20.7% of bank credit; 17.3%, went to commerce and finance; 14.6% was
allocated to manufacturing; and agriculture received on average 5.8% of bank credit.
The question that emerges from this evidence of sectoral distribution of bank
credit to the private sector is: why does it matter where credit goes? The answer to
such a question ultimately revolves around the developmental imperative to expand
the economy and provide high, inclusive and sustainable living standards for citizens
in a low-income country such as Ghana. In all economies, but especially low-income
countries, agricultural productivity is essential to meet food demand, create jobs,
and produce raw materials that can support any industrialisation agenda. The man-
ufacturing sector is similarly important to diversifying production and exports from
the primary extractive or agricultural commodities, to finished goods that offer
higher value domestically and when exported. Financing is central to productive
agriculture and industrialisation. It is with this understanding that governments in
the developmentalist period focused on channeling finance into these key sectors of
the economy.
However, the effect of repressed credit to agriculture and manufacturing since the
structural adjustment programs in the 1980s can have implications for the nature of
economic growth. While this paper does not test the empirical link between sectoral
distribution of credit and sector contributions to GDP, it is important to note that
consistent with the agricultural sector’s declining share of credit, its contribution to
GDP has similarly been in decline (Figure 6). Other factors may be contributing to
Figure 5. Commerce and finance share of domestic credit to the private sector (1999–2023). Source: Author
drawing from Bank of Ghana Data (Supplementary Appendix 1).

BANKING AND MONETARY POLICY IN GHANA
15
the sector’s diminishing share of GDP. However, financing for agricultural investment
can hardly be dismissed. If one considers the classic view of the path to structural
transformation, namely a transition from agricultural dominance to manufacturing
and services, Figure 6 would, mistakenly, be evidence of significant structural change
in Ghana’s economy. However, the declining agricultural share of GDP as well as the
disproportionately large service sector in most African countries is more of a struc-
tural dysfunction and less an indicator of structural change. For instance, a large part
of the growth of financial, communication, and transportation services are rather the
result of industrial expansion from industrialised, high-income countries rather than
an expansive knowledge economy in Ghana. Good examples include telecom com-
panies like Vodafone, MTN, Airtel; transportation services from Uber and Bolt; and
the numerous foreign financial institutions that dominate the Ghanaian banking sec-
tor. That most African countries have a disproportionate service sector which is not
necessarily a result of a knowledge intensive economy is not a new phenomenon.
In the early 2000s for instance, Ajakaiye et al. (2007) observed this structural weak-
ness occasioned by declines in agriculture and manufacturing while service indus-
tries expanded across the continent. Behuria and Goodfellow (2019) have offered
more comprehensive analysis of services-led development. Drawing on evidence
from Rwanda, Behuria and Goodfellow sought to explain the extent which a reliance
on services to achieve the developmental successes that are credited to the East
Asian developmental states which relied on manufacturing for their socio-economic
transformation. Central to the East Asian experience yet ignored in the literature,
Behuria and Goodfellow noted, is that they successfully integrated labour into their
development strategies. Accordingly, they contend that it is difficult to rely on ser-
vices to attain similar patterns of growth and job creation because of the high levels
of human capital that will be required. Practically, Behuria and Goodfellow acknowl-
edge, affirming Rodrik (2016) that:
Figure 6. Sectoral distribution of GDP (1960–2023). Source: Author drawing World Bank Development
Indicators Data https://databank.worldbank.org/reports.aspx?source=2&series=NV.AGR.TOTL.ZS&country=GHA.

16
I. A. AKOLGO
Although services such as IT and finance can in theory play the ‘escalator role that manufac-
turing has traditionally played’, such services sectors are highly skill-intensive and cannot
absorb the type of labour that exists in low- and middle-income countries (Behuria &
Goodfellow, 2019, 586).
In the case of Ghana, it follows that the defunding of agriculture and manufacturing
since 1980s and the consequent fall in their contribution to national output in relation
to services is a worrying trend that has to be addressed. In the period under consider-
ation, it has been shown that commerce and finance and what is grouped as services,
receive a large share of bank credit. What is credit financing in those industries?
According to the Bank of Ghana banking sector reports, the import trade sub-sector
receives the larger share of credit categorised as commerce and finance (Bank of Ghana,
2006). Other categories include mortgage financing, cocoa marketing, and credit to
other financial institutions. For instance, as at end of December 2006, import trade sub-
sector received about 22.3% of credit in the Commerce and Finance sector. This was
followed by the mortgaging financing subsector with 5.5% and the cocoa marketing
subsector with 4.9% (Bank of Ghana, 2006, p. 24). Credit to other financial institutions is
particularly speculative, with financial institutions ultimately reinvesting such credit into
trading government securities. That constrains any serious attempt to break out of the
historical commodity dependence. It also means decent jobs cannot be created in agri-
culture or industry as most Ghanaians are reduced to informal petty trading of foreign
goods. This dysfunction of the financial system has implication for macro-finance. With
declines in agricultural productivity, more foreign exchange is drained to import food
commodities like rice which could have been produced locally. It is not surprising there-
fore that amid the 2022–2023 crisis, the Ghanaian government restricted access to for-
eign exchange for the importation of rice (Myjoyonline, 2022). However, as long as the
financial system fails to provide substantial, affordable and patient financial credit to
farmers, local production cannot suddenly increase to replace the rice imports.
3.1.3. Banks Invest More in Government Securities
Another noticeable trend in the banking sector is the shifting pattern of banks’
investments. While domestic credit to the private sector has remained low, and lend-
ing to agriculture and manufacturing has declined, banks have increased their
investment in government securities. As shown in Figure 7, banks have significantly
acquired government securities since 2010 and particularly in the four years prior to
the 2022–2023 debt crisis. Between July 2010 and June 2021, banks’ investment in
government securities rose by nearly 80% from about 40.2% of their total invest-
ment in 2010 to about 72.6% in 2021. Banks’ equity financing has been negligible
(about 0.3% of total bank investment in 2021) as banks focused mainly on purchas-
ing securities and treasury bills (which both accounted for about 99.7% of their
investments in 2021). Banks and their customers on whose behalf they invest, find
government securities as both safer and lucrative investments with interest on trea-
sury bills in particular averaging above 30% in 2023. In the absence of a
well-developed capital market, government has had to continuously rely on borrow-
ing from the banking sector. Local Currency Bond Markets (LCBMs) could have been
an alternative to borrowing from the banking sector. However, in most developing
countries, domestic financial markets remain underdeveloped as Cingolani and
Toporowski (2024) asserts. In particular, as Berensmann et al. (2015) noted, the

BANKING AND MONETARY POLICY IN GHANA
17
underdeveloped capital markets across the continent mean LCBMs cannot function
as significant source of private funding for governments. Even if LCBMs are to be
relied on, it is important to note that because such bond markets are still dominated
by domestic banks, the issuance of local currency bonds could negatively affect the
volume of domestic private credit (Dafe et al., 2023). Nevertheless, the consequence
of an excessive reliance on borrowing from banks is that banks have shown little
interest in lending to SMEs given the investment profitability and safety that the
Ghanaian government offers for its securities.
This pattern of shifting away from lending to the private sector to a predominant
focus on government securities has not only repressed credit to the productive sec-
tor but has also exposed the banking sector to crisis associated with the govern-
ment’s sovereign distress. The fallout from the 2022–2023 debt crisis is a clear
example. At the end of 2021, just before Ghana fell into its 2022-2023 crisis, more
than 30% of domestic debt was held by banks (Akolgo, 2023). When the govern-
ment entered default and asked for a $3billion extended credit facility from IMF, it
was asked to restructure its debt, starting with the domestic component.
Consequently, as Akolgo (2023) recounted, government instituted a domestic debt
exchange programme, delayed bond repayments, and since government securities
occupied a large component of banks’ balance sheets, they suffered significant
impairment losses which Atuahene and Frimpong (2023) estimated to be about
GHC37.7 billion. Ultimately, the initial dysfunctional system under which bank
resources are diverted from supporting the real economy will be reinforced, as the
government will devote more resources into what it called the Ghana Financial
Stability Fund, which aims at preventing distressed banks from collapsing.
Figure 7. Composition of Banks’ Investments (2010–2021). Source: Author drawing from Bank of Ghana data
from annual banking sector reports.

18
I. A. AKOLGO
3.2. Central Banking
A second aspect of dysfunction in the Ghanaian financial system relates to central
banking, particularly the conduct of monetary policy. Beginning in 2007, the BoG, an
independent central bank, operates an inflation-targeting monetary policy. Its cur-
rent inflation target is 8.0 ± 2 per cent. After each of its bi-monthly meetings, the
Monetary Policy Committee (MPC) of the BoG decides whether to maintain, increase
or decrease the MPR in response to inflation. Because the bank’s inflation targeting
draws on the theoretical assumption that higher inflation is demand driven and thus
a monetary problem, it more often than not raises the policy rate in the hope of
discouraging demand, attracting savings, and ultimately tackling inflation. However,
even on its own terms, this monetary policy stance has failed to yield results, at least
in the last two decades. For instance, the BoG responded to the inflation surge in
2020–2021 with hikes in the policy rate. First, from 13.5% in September 2021 to
14.5% in November 2021 and then a further increase by 250 basis points to 17%.
The hikes continued with subsequent MPC meetings until November 2022 when
there was another 250 basis points increment from 24.5% to 27% (Table 3 and
Figure 8). However, raising interest rates did little to stop the growing inflation. On
the contrary, inflation has been rising with policy rate hikes. For instance, from less
than 13% in December 2021, inflation rose persistently, reaching as high as 54.1% at
the end of 2022 (Figure 9).
It is understandable that monetary policy failed to halt inflation, and policy mak-
ers should have considered the reasons monetary policy failed. As a heavy import
dependent economy, Ghana imports a lot of food. The fallout from the COVID crisis
and later in 2022 when the Russia-Ukraine war disrupted supply chains and trig-
gered higher energy prices, meant most of the inflation was imported. Domestically,
a combination of higher production costs, weak transportation networks, and multi-
ple indirect taxes compounded the high imported prices. Interest rates were
Table 3. Monetary policy decisions (2021–2023).
Meeting No.
MPC meeting dates
Effective date
BoG policy rate
98
January 26 – 29, 2021
01 Feb 2021
14.5
99
March 17 – 19, 2021
22 Mar 2021
14.5
100
May 26 – 28, 2021
31 May 2021
13.5
101
July 21 – 23, 2021
26 Jul 2021
13.5
102
September 22 – 24, 2021
27 Sep 2021
13.5
103
November 16 – 19, 2021
22 Nov 2021
14.5
104
January 25 – 28, 2022
31 Jan 2022
14.5
105
March 16 – 18, 2022
21 Mar 2022
17
106
May 18 – 20, 2022
23 May 2022
19
107
July 20 – 22, 2022
25 Jul 2022
19
107
August 17, 2022 (Emergency)
17 Aug 2022
22
108
September 20 – 23, 2022
06 Oct 2022
24.5
109
November 22 – 25, 2022
28 Nov 2022
27
110
January 22 – 25, 2023
30 Jan 2023
28
111
March 22 – 24, 2023
27 Mar 2023
29.5
112
May 17 – 19, 2023
22 May 2023
29.5
113
July 19 – 21, 2023
24 Jul 2023
30
114
September 19 – 22, 2023
25 Sep 2023
30
115
November 22 – 24, 2023
27 Nov 2023
30
Source: Bank of Ghana https://www.bog.gov.gh/monetary-policy/.

BANKING AND MONETARY POLICY IN GHANA
19
therefore an inappropriate tool for dealing with an inflation rate whose sources were
largely structural and hardly a money supply problem.
Apart from failing to keep inflation within the target (which does not in any way,
even if achieved, means consumers are paying less for products or services), policy
rate increases contribute to the high average commercial bank lending rates as dis-
cussed in section two above. From Figure 10, it is evident that average commercial
bank lending rates mirror those of the monetary policy rates in Figure 8. The decline
in the MPR between 2000 and 2006 was accompanied by consistently decreasing
commercial bank lending rates. Similarly, the policy rate hikes between 2021 and
2023 were followed by a more than 70% jump in lending between the same period
Figure 8. Monetary policy rates in Ghana (2000–2022). *Policy rates are those reported for the end of year
in December.
Source: Author drawing from Bank of Ghana data https://www.bog.gov.gh/economic-data/interest-rates/.
Figure 9. Headline inflation rate in Ghana (1999–2023). Source: Author drawing from Bank of Ghana data
https://www.bog.gov.gh/economic-data/time-series/.

20
I. A. AKOLGO
(Figure 10). The MPR signals the cost of the central bank’s overnight lending to com-
mercial banks. Commercial banks, in turn, factor this cost into the interest rates
charged on loans to businesses and households. Therefore, raising central bank inter-
est rates potentially pushes up borrowing costs (Kwakye, 2010) and would ultimately
impair business productivity and or increase the cost of products.
Even though it is also assumed within the liberal financial policy that higher inter-
est rates will attract more savings and induce investment as banks lend these sav-
ings out, there is little evidence of this interest rates-savings-investment nexus in
Ghana. Credit to Deposit Ratios which show the proportions of banks’ deposits that
Figure 10. Commercial bank lending rates in Ghana (2000–2022). *Lending rates are those reported for the
end of year in December.
Source: Author drawing from Bank of Ghana data https://www.bog.gov.gh/economic-data/interest-rates/.
Figure 11. Credit to deposit ratio (2006–2023). Source: Author drawing from Bank of Ghana data https://
www.bog.gov.gh/economic-data/time-series/.

BANKING AND MONETARY POLICY IN GHANA
21
are lent out, have shown a negative trend since 2008 (Figure 11). From nearly 86%
in 2008, the Credit to Deposit Ratio was less than 40% in April 2023. This implies
banks lent less than half of the deposits they accumulated to private sector busi-
nesses. The fact that a reliance on interest rates to induce savings and raise invest-
ments has failed to produce substantial results is not a new phenomenon. Critics of
financial liberalisation in the 1980s and 1990s in Africa warned that financial policies
under structural adjustment did not support national development (see Mkandawire,
1999; Mkandawire & Soludo, 1998). Mkandawire (1999) in particular showed that
interest rates failed to generate sufficient savings in countries like Ghana and Uganda.
It is not surprising then that higher interest rates in Ghana in recent times have not
correlated to increased savings from the public, especially given that real incomes
continue to be eroded by inflation from structural, not monetary, factors.
4. Conclusion
The post-COVID debt crisis in Ghana and across several African countries has reig-
nited debates about development financing. The literature on Ghana in particular
has shown that its financial distress is not only rooted in external constraints, but
also a structural dysfunction in the domestic economy. This paper has focused on
extending that discourse, analysing the role of the financial system in financing
domestic development. Its main aim has been to explain the extent to which the
banking system has supported productive investments in the private sector.
Relying predominantly on central bank data on the sectoral distribution of bank
credit and the conduct of monetary policy, I have argued that the operation of
finance has not supported the real productive economy in Ghana. First, the data
showed that commercial banks’ lending to sectors such as agricultural and manufac-
turing has been in decline in the last 25 years. On the contrary, banks have shifted
to more speculative and lucrative investments into government securities. Second, it
is also evident that this pattern of dysfunction in bank lending has been aggravated
by central bank monetary policy. In the pursuit of its inflation targeting monetary
policy, the Bank of Ghana has more often than not raised its monetary policy rate
to influence the money supply, suppress demand and as theorised, halt inflation.
This focus on monetary stability has not only yielded few results, but it has also
increased average commercial banks’ lending rates and thus further suppressed
credit to small and medium scale businesses. These findings raise concerns for a
reform of financial policy in the immediate case of Ghana and across Africa where
countries face similar dysfunctions in their financial systems. Three areas of financial
reforms are discussed here.
Credit policy. Financial policy should be more focused on directing credit to pri-
vate business development and especially supporting productive sectors of the
economy. One specific way to do this would be a return to credit policies and the
revitalisation of development banks. This could involve the deployment of policy
instruments that affect both the demand and supply of credit as categorised by
Bezemer et al. (2023). Government credit subsidies for agriculture and manufactur-
ing, and the extension of loan maturities will attract SMEs to borrow from the bank-
ing sector. Similar to the credit policies of the Bank of Ghana in the 1960s to early
1980s, it may be necessary to return to the use of credit quotas. The Bank of Ghana
could mandate commercial banks to lend a certain share of credit to agriculture and

22
I. A. AKOLGO
manufacturing or alternatively limit the share of credit that goes into mortgage
financing and other non-productive activities. Additionally, the reorganisation and
resourcing of development banks such as the Agricultural Development Bank, the
National Investment Bank, and Development Bank Ghana will facilitate long term
financing for agricultural and industrial investments. It must however be cautioned
that directed credit policies and development banks have suffered setbacks in the
past. Particularly in the developmentalist agendas of the 1960s and 1970s, the oper-
ation of credit policy in Africa was criticised for fostering ‘favouritism, cronyism and
rent seeking’ (Mkandawire, 1999, (p. 339). Politicians were often accused of support-
ing cronies to take state-subsidised credit for purposes other than the prioritised
agricultural and industrial projects. In other instances, there was also the issue of
high loan delinquency rates, and as governments allocated more funds into devel-
opment financing, the increased state spending created budget deficits. In addition,
unlike the South Korean and Japanese cases cited earlier in this paper, credit policies
have not always been pursued under a stated development plan or industrial policy.
Therefore, it is important that these lessons of early post-independence develop-
mentalist attempts are taken into account so that directed credit policies are guided
by clearly defined criteria, proper monitoring, and a strong focus on SMEs in agricul-
ture and industry.
Reform of Central Banking. The current practice of independent central banking
and a strict focus on monetary stability has not promoted coordination between gov-
ernment economic policy agenda and the organisation and operation of the financial
system in Ghana. Inflation-targeting in particular has shown itself to be
counter-productive given that inflationary pressure is more often driven by structural
and not monetary issues in Ghana. A review of the Bank of Ghana Act is necessary,
to redirect the central bank to more developmentalist policy pursuits. Inflation-targeting
has often led to raising interest rates and thus the cost of credit. Under a reformed
central bank that focuses more on propelling transformative growth, such frequent
interest rate hikes can be avoided. Additionally, a reformed Bank of Ghana would
effectively monitor the credit granting practices of commercial banks in line with any
directed credit policy that government institutes. Again, it is important that the reg-
ulatory regime clearly defines the limits of coordination between the central bank
and government to avoid abuse of monetary authority by politicians. While it is
important that the central bank should support government’s development agenda,
including where necessary central bank financing of the government, it is crucial that
parliament legislates the conditions, mode and limit to which the Bank of Ghana can
finance government’s budget. If this is not done, excessive central bank financing has
the potential to promote financial indiscipline, hyperinflation, and corruption.
Indigenous bank ownership. Policy reforms should equally encourage indigenous
participation in the banking sector. The new minimum capital requirement of 400mil-
lion Ghana Cedis applied to all banks does not promote local participation in the
banking sector. Lower minimum capital requirements for indigenous and relatively
new banks would support Ghanaian investors who wish to establish banks. Given
that indigenous banks tend to lend more to SMEs, this should, in the long run, con-
tribute to addressing the credit repression that currently persists in the Ghanaian
banking system. Indigenous banks should, however, be subjected to rigorous regu-
latory standards so they can ultimately become competitive and not perpetually rely
on government support to stay viable.

BANKING AND MONETARY POLICY IN GHANA
23
Acknowledgement
I am grateful to the editors, especially Dr. Asimina Christoforou and the reviewers for their
patience and helpful comments. I also thank Professors Franklin Obeng-Odoom, Kai
Koddenbrock and Stefan Ouma for their comments on the initial draft of this article.
Funding
Funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) under
Germany’s Excellence Strategy – EXC 2052/1 – 390713894.
Data Availability Statement
No separate dataset is available. Data sources are as indicated in the graphs, tables, and
appendices.
ORCID
Isaac Abotebuno Akolgo
http://orcid.org/0000-0002-1446-6800
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APPENDIX 1
Description of Data Sources - Sectoral Distribution of Bank Credit to the Private Sector in Ghana

1 The aggregate figure at the end of fourth quarter of each year (December) is used to calculate each sector’s
share of total private sector credit. Where data does not exist, the last quarter for which the data exist is relied
on (in particular, August 2018 and September 2021)
2 Reports from 1999 -2023 are from the Bank of Ghana.
Year
Data Point
relied on for
calculation1
Data Source2
1999
Q4 1999
Quarterly Economic Bulletin October-December 2001
2000
Q4 2000
Quarterly Economic Bulletin October-December 2001
2001
Q4 2001
Quarterly Economic Bulletin October-December 2001
2002
Q4 2002
Quarterly Economic Bulletin October-December 2002
2003
December 2003
Bank of Ghana Annual Report 2005
2004
December 2004
Quarterly Economic Bulletin October-December 2005
2005
December 2005
Quarterly Economic Bulletin October-December 2005
2006
December 2006
Quarterly Economic Bulletin October-December 2006
2007
December 2007
Quarterly Bulletin – October-December 2009
2008
December 2008
Quarterly Bulletin – October-December 2009
2009
December 2009
Quarterly Bulletin – October-December 2009
2010
December 2010
Quarterly Bulletin – October-December 2010
2011
December 2011
Quarterly Bulletin – October-December 2013
2012
December 2012
Quarterly Bulletin – October-December 2013
2013
December 2013
Quarterly Bulletin – October-December 2013
2014
December 2014
Quarterly Bulletin – October-December 2017
2015
December 2015
Quarterly Bulletin – October-December 2017
2016
December 2016
Quarterly Bulletin – October-December 2017
2017
December 2017
Quarterly Bulletin – October-December 2017
2018
August 2018
Quarterly Statistical Bulletin – Quarter four 2018
2019
December 2019
Quarterly Bulletin – January-March 2020
2020
December 2020
Quarterly Economic Bulletin – Fourth Quarter 2021
2021
December 2021
Quarterly Economic Bulletin – Fourth Quarter 2021
2022
December 2022
Quarterly Economic Bulletin – Fourth Quarter 2022
2023
September
2023
Quarterly Economic Bulletin – 3rd Quarter 2023

Appendix 2 Ghana’s GDP Growth 1961-2023

Source: Ghana Statistical Service – Productivity, Employment and Growth: National Report 2024.
https://www.statsghana.gov.gh/headlines.php?slidelocks=NzU0Nzk0NjIyNy42Nzk=/headlines/pqnr3
6216n

Appendix 3 Unemployment and NEET3 Rates in Ghana (2000-2023)

Source: Ghana Statistical Service – Productivity, Employment and Growth: National Report 2024.
https://www.statsghana.gov.gh/headlines.php?slidelocks=NzU0Nzk0NjIyNy42Nzk=/headlines/pqnr3
6216n

3 Not in Employment, Education or Training (NEET)

Appendix 4 Ghana – Inflation, Yearly Change (%) – December 2023)

Source: Ghana Statistical Service December 2023 Statistical Bulletin.
https://statsghana.gov.gh/gssmain/fileUpload/Price%20Indices/Bulletin_%20CPI%20December%202
023.pdf

Appendix 5 Sectoral Categorisation and Explanation of Productive/Unproductive Credit.
Key Bank of Ghana Sector
Categories4
Description/sub-categories
Agriculture, Forestry and Fishing
Crop production, animal rearing, timber, and fish harvesting.
Subsectors may include poultry, logging, and cocoa production
Commerce and Finance
Includes import trade, mortgage financing and cocoa
marketing.
Services
Sub-categories include salary credit, business services,
government services and personal services.
Manufacturing
Metal fabrication, food and beverages, Tobacco, sawmilling,
and wood processing
Productive vs Unproductive Credit:
Perceptions of productive and unproductive credit used in this paper follow the Schumpeterian
theorisation which was most recently expanded by Dirk Bezemer and reviewed in Section two.
Productive credit finances innovation, generation of new products and thus supports structural
economic transformation. Credit to Agriculture and Manufacturing is termed productive in the
sense that it supports the fundamental basis for meaningful structural change - production of
sufficient food, raw material and technological base for industrial activity that can generate larger
and sustainable jobs. Ignoring these primarily productive sectors by redirecting financial credit to
retail services creates petty, unsustainable and sometimes precarious jobs and, therefore, is
considered as unproductive credit allocation. More unproductive credit is that which goes
excessively into real estate and speculative financial activities. As Bezemer, Grydaki and Zhang
(2016)5 explain, mortgage financing “does not finance income formation…It finances the trade in

4 Bank of Ghana (2006) Quarterly economic bulletin: October – December 2006 https://www.bog.gov.gh/wp-
content/uploads/2019/07/q4-2006.pdf
5 Bezemer, D., Grydaki, M. and Zhang, L. (2016) More mortgages, lower growth? Economic Inquiry 54(1), 652-
674

an already existing asset…on the macroeconomic level, such mortgage lending grows the
economy’s debt but not total incomes”. It should be noted, however, that this paper does not
suggest that bank credit is not useful in the services, construction or commerce sectors. The
argument is that in support of transformative economic growth, it is necessary to shift more credit
into sectors that produce rather than commerce which predominantly entails retail of imported
goods and services, in the case of Ghana.

Subjects

Keywords: Ghana; Financial System; Debt; Monetary Policy; Financial Technology; Africa

People & roles

Authors: Akolgo, Isaac Abotebuno
thesis advisor: Koddenbrock, Kai
degree granting institution: Universität Bayreuth, Bayreuth International Graduate School of African Studies - BIGSAS
Place of publication: Bayreuth

Origins & context

Title: Money, Finance, and the Political Economy of Development in Ghana
Publication type: Doctoral thesis
Language: English
Funded by: Deutsche Forschungsgemeinschaft; EXC2052/1 Africa Multiple, DFG Project number 390713894
Year: 2025
Defense date: September 17, 2024
Page count: VI, 20
Number of pages: 20

Identifiers & sources

Source ID (eref-/epub-): eref-95088
Repository URL: https://eref.uni-bayreuth.de/id/eprint/95088/; https://epub.uni-bayreuth.de/id/eprint/8627/; urn:nbn:de:bvb:703-epub-8627-4

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