The ‘Second U-Turn’: Domestic Politics and Foreign Economic Policy Choice in Ghana

Abstract

Abstract After months of grandstanding amidst an economic crisis that has seen prices of basic goods skyrocketed, growing unsustainable public debt levels and the value of the local currency plummeting, the Government of Ghana made a U-turn on its earlier decision of not seeking an IMF bailout and announced on 1st July 2022, the intention to seek an IMF bailout. This paper tries to understand the initial government resistance to an IMF bailout. Using the qualitative research approach and analyzing speeches of political actors, the study makes the case that domestic politics was the main reason for the governments initial resistance to engaging the IMF . An IMF programme would be politically self-defeating for the government and provide a political tool for the opposition in the 2024 election since a similar deal in 2015 was portrayed as evidence of government failure. On the evidence of the current IMF bailout decision, the paper concludes that governments have political interest in making foreign economic policy choices in Ghana. Choices that may not enhance electoral chances are likely to be avoided in favour of those that enhance it. To derive the best outcome from foreign economic policy choices requires building national consensus, which would help to avoid adverse outcomes that may be occasioned by policy choices that enhance a political actor’s electoral chances at the expense of the long-term interest of the state.

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