Aurelia Butler

In the centre of Accra lies a deserted construction site that is a symbol both of Ghana’s ambitions and its afflictions.Here is where the National Cathedral of Ghana is set to be built — the passion project of the country’s president, envisioned as a national landmark and a centre of religion to rival Westminster Abbey and Abu Dhabi’s Grand Mosque.Sitting on a tree-lined street just off the major thoroughfare of Independence Avenue, the multimillion-dollar development was proposed in 2017, the year Ghana celebrated 60 years free from British rule. Once completed, it will be a 5,000-seat place of worship to accommodate formal events such as presidential inaugurations and state funerals.But six years on, President Nana Akufo-Addo’s legacy-defining grand vision has stalled — while the economy he presides over is in tatters and citizens struggle under the weight of crushing inflation.The building project is a cautionary tale not only for Ghana but for many countries in Africa that overspent on infrastructure and now face the bill. Ghana has long been considered a success story and a model for African development. It is a major producer of gold and cocoa and has one of the region’s highest gross domestic product per head. A robust democracy since the early 1990s, it has a relatively well-run government that provides decent levels of public service, including free education. The global African diaspora seeking a connection with their ancestral land regard it as a must-visit destination and each winter it attracts young people from the UK, Europe and the US seeking out its rich culture and pulsating nightlife.The current government, in particular, burnished an image of fiscal responsibility and technocratic nous, something that enabled it to tap commercial debt markets at decent rates of interest.That reputation now lies in ruins. Ghana had just agreed a $3bn bailout from the IMF when it defaulted on its debts last December, a fate that could soon befall 19 other countries on the continent, according to the fund. Like Ghana, many have borrowed heavily to fund projects — whether railways, roads, ports or airports — that have failed to generate enough income to pay back debts, particularly in an environment of high interest rates and a strong dollar.To further complicate matters, the threat of insecurity is now on Ghana’s doorstep due to unrest in Burkina Faso, its neighbour to the north, the new epicentre of the jihadist upheaval in the Sahel, the semi-arid strip south of the Sahara.Yet despite this uncertain outlook, the president remains committed to building a cathedral to serve the country’s 33mn population, 71 per cent of whom are Christians. “The National Cathedral is an act of thanksgiving to the Almighty for his blessings, favour, grace and mercies on our nation,” Akufo-Addo said in January after visiting the site and pledging 100,000 cedis ($8,500) of his own money towards the build. The Ghanaian-British architect Sir David Adjaye was appointed to the National Cathedral project. The government says it is wooing donors to help fund the project and ensure construction continues © Adjaye AssociatesMany in Ghana are questioning his priorities. About 87 per cent of Ghanaians think their country is heading in the wrong direction, according to data from the Accra-based polling company Afrobarometer. They blame the government and protests have broken out in the past year over the high cost of living.Just as the citizens of Ghana are asking how badly Akufo-Addo, whose two terms in office end next year, has mismanaged the economy, there are similar accusations around the unfinished cathedral.The building’s price tag has surged to $400mn, four times the original budget. The government says that donors are being wooed to help pick up the tab — and allow construction to continue — but it has contributed most of the $58mn that has already been spent. Paul Opoku-Mensah, the project’s executive director, says the edifice, which is being designed by the prominent Ghanaian-British architect Sir David Adjaye, will serve as a national monument, tourist magnet and economic masterstroke that will eventually pay for itself upon completion. “In a country where politics is so divisive, you need a structure to help build cohesion outside of the political parties,” says Opoku-Mensah. “And the church becomes such an institution.”But instead of being an emblem of unity, for some in Ghana it has become representative of all that has gone wrong here in the past few years — a mothballed site nicknamed, derisively, the “world’s most expensive crater”. Pain of inflation In Accra’s sprawling Makola market, shopper Tracy Aloko has more immediate concerns than national monuments as she looks wistfully at the bag of tomatoes she has just bought. The same quantity cost about 20 cedis in January, she says. Now, shaking her head, she complains that the same bag costs 50 cedis. And this is a good deal — another vendor just tried to sell her the same amount for 60 cedis.“It’s like hell,” Aloko says, rattling off household items whose prices had skyrocketed in recent months. Not only are tomatoes, the building blocks of Ghanaian soups and stews, more expensive, but so is garri, the granulated cassava flour that is a food staple across west Africa. She used to buy food in bulk, she says, but has had to cut back due to the “increase in everything”. Ama Mary, the market woman who sold the tomatoes to Aloko, says the cost of the produce has partly shot up due to the Islamist crisis in Burkina, from where Ghana imports a sizeable amount of its tomatoes annually. Ordinary people such as Aloko and Mary are on the frontline of Ghana’s economic crisis, and struggling to adapt to record levels of inflation. Although it has dipped from the two-decade high of 54 per cent in December, inflation remains at 41.2 per cent.Women cross the dry bed of the White Volta river to their farms in Burkina Faso from Bawku, northern Ghana. Unrest in Burkina Faso has brought the threat of insecurity to Ghana’s doorstep © Nipah Dennis/AFP/Getty Images“Life is hard for everybody in Ghana. Everybody is feeling the pinch,” says John Asafu-Adjaye, a senior fellow at the Accra-based African Center for Economic Transformation (ACET) think-tank. “But the ones feeling it the most are those in the low socio-economic groups.” The daily minimum wage was increased by almost 10 per cent to 14.88 cedis at the beginning of the year but it is only a tiny reprieve in the face of astronomical price rises. The government says Ghana’s economic misfortune has been caused by the dual external shocks of Covid-19, which ground the economy to a halt, and Russia’s invasion of Ukraine, which sent global food and energy prices soaring. These were the “malevolent forces” that Akufo-Addo said were hurting his country. Ernest Addison, governor of the Bank of Ghana, the country’s central bank, says the decision of the three big rating agencies to downgrade Ghana to junk status made the economic situation “more complicated” in 2022 as prices climbed steadily. “All the external forces were against us, with Russia-Ukraine, the cost of imported food going up and on the exchange rate we had no access to foreign capital,” Addison says. But analysts say this account only tells half the story. James Dzansi, chief Ghana economist at the International Growth Centre, an Oxford university and London School of Economics-backed global think-tank, argues Ghana was “walking on thin ice but not sinking” before the pandemic hit. The government borrowed heavily to insulate the economy from the effects of the pandemic and may have avoided a recession as a result. But the country’s debt as a percentage of GDP went from 62.7 per cent in 2020 to more than 100 per cent last year, according to finance minister Ken Ofori-Atta. Debt servicing now takes up about 70 per cent of government revenue. Despite this growing debt load, the ruling New Patriotic Party resorted to a habit in 2020 that Dzansi says bedevils politics in Ghana: overspending in an election year.The administration stopped charging for mains water and brought in cheaper tariffs on electricity. Analysts say the policy could have been most effective if it targeted those most in need of assistance in a difficult year; instead, it was widely available to everyone, including city-dwelling urbanites who did not require support.“The government saw an opportunity in leveraging the Covid pandemic to engage in reckless expenditure in view of the 2020 election,” Dzansi says. “You warm the temperature and the thin ice broke.” Perils of cheap money Much of the Ghanaian government’s spending took place in a world of low-interest rates. Ghana gorged on cheap money, raising almost $17bn in eurobonds that the Ministry of Finance frequently said were oversubscribed for nine straight years.But as central banks began raising rates to control inflation — the Bank of Ghana has raised rates by 1,250 basis points since March 2022 — Ghana found itself shut out of international debt markets as concerns grew over its ability to repay what it owed.The government has since been forced to rely heavily on a domestic capital market, where interest rates are as high as 40 per cent, and central bank financing of 37.9bn cedis ($3.2bn) in 2022. Some of the money being injected into the economy by the central bank may have helped to fuel inflation, says Henry Telli, an economist at the International Growth Centre.Telli says Ghana’s government should have “consolidated” in 2021 by applying “very strong brakes on government spending” the year after the election and should have asked the IMF for help sooner than it did. “Politically, the IMF may not be popular but it is an economic tool,” Telli adds. “It’s available to use when you need a different strategy.” A family prays at St Mary’s Sanctuary in Kumasi. The new cathedral is intended to serve as a national landmark for the country, almost three-quarters of whom are Christians © Francis Kokoroko/ReutersGhana did eventually seek relief from the IMF in 2022 as it became apparent that its economy needed outside assistance. Months before, finance minister Ofori-Atta had insisted that no such help was required. By July, after criticism from the opposition and protests in the capital, Ofori-Atta’s position had softened and Ghana began talks with the Washington-based lender for its 17th programme since independence. “We have our own issues with the IMF but we saw that the country needed external help,” says Mensah Thompson of Asepa, an anti-corruption group that helped organise protests calling on the Ghanaian government to seek aid. “It felt like the people in charge could no longer manage things.” Ghana speedily reached a staff-level agreement with the IMF for a $3bn loan in December, pending approval from the fund’s board if Ghana meets some conditions it has set out. First, Ghana has had to restructure its domestic debt, the first time such a request has been made. Police patrol Makola market to during a protest by the Ghana Union of Traders Association. The trade body has criticised new taxes, which it says will further increase the cost of doing business © Getty ImagesNow, it has to restructure its external debt of about $34bn, most of which it stopped paying in December. Ghana’s bilateral creditors have now formed a committee led by France and China to begin debt restructuring talks, the Paris Club of bilateral creditors has said, clearing the way for the IMF’s board to approve the country’s rescue package.Additionally, Ghana has to stop central bank financing to plug the government’s revenue shortfalls. Addison, the central bank governor, told the Financial Times this month a “zero financing” agreement had been signed with the finance ministry. The government must also increase revenue generation. To achieve this, it introduced new company and income taxes, higher excise duties on goods including tobacco products and alcoholic drinks, and raised VAT by 2.5 points to 15 per cent. Cleaning house The new taxes are already proving controversial. Joseph Obeng, president of the Ghana Union of Traders Association, a trade body, calls them “obnoxious”, adding that they will further increase the cost of doing business. He asks why the government is targeting the few who pay formal taxes and not widening the tax net to bring in more people in the informal sector, which is estimated to make up at least 80 per cent of the economy. At around 13.4 per cent, Ghana’s tax-to-GDP ratio is below the African average of 16 per cent and the government’s own target of 20 per cent by this year.The IMF deal, when approved, could help restore investor confidence in Ghana and slow currency fluctuations that have raised the cost of imports, says Asafu-Adjaye, of the ACET think-tank. But he cautions that it could take time before ordinary citizens feel its impact on the cost of living.Analysts say they hope this economic crisis and the impending IMF programme will spur radical reforms in Ghana. There is a need to plug leakages that deny the government crucial revenues. A report by the auditor-general Johnson Akuamoah Asiedu says Ghana missed out on almost $3bn in revenues in 2021 due to what he described as “irregularities [representing] trade debtors, staff debtors and outstanding loans and cash locked up in non-performing investments”.But most importantly, there is a consensus among experts that the size of Ghana’s government must shrink. At the outset of Akufo-Addo’s presidency in 2017, he defended his decision to appoint 110 ministers as a “necessary investment to make for the rapid transformation of this country”. At present, there are about 90 ministers, some of whom have two or three deputies. “It’s jobs for the boys,” says Asafu-Adjaye, pointing out that there are many ministries with significant crossover. Ghana has separate ministries for transport, railways development, roads and highways, and aviation, for example. The ministries of information and communications are separate entities. Idled cranes at the stalled construction site of the National Cathedral of Ghana in Accra. The building’s price tag has surged to $400mn, four times the original budget © Nipah Dennis/BloombergBeyond the size of government, corruption is a growing concern. The country was rocked last month when a 2021 report was leaked to the press alleging that government officials have frustrated the fight against illegal gold mining. The government denies the allegations but opposition MPs are calling for a bipartisan investigation. Kweku Bamford, a young shopkeeper, says he has no faith that the $3bn from the IMF will be judiciously spent given what he says is the rampant corruption in the public sector, pointing to the auditor-general’s report that showed some of the funds mobilised for Covid support were mismanaged. “Ghana’s culture has changed,” he says. “Ghana is a corrupt country right now.” This perception is reflected in how some Ghanaians see the costly, delayed cathedral — although not everyone has lost faith in it. Solomon Ntiamoah, a taxi driver on his way to attend an evening sermon at the capital’s Black Star Square, is “praying for the project to go on”.Opoku-Mensah, the project director, still expects it to be completed by the end of next year. But unless Ghana can turn its economy around, Ntiamoah’s prayers are likely to go unanswered.Data visualisation by Keith Fray More

More than decade after bailouts and austerity measures pulled Greece from the brink of bankruptcy and a eurozone exit, the country has rebounded and is on the cusp of regaining its investment-grade rating.S&P recently changed its outlook for the country from stable to positive. A full upgrade would put Greece at triple B minus, the rating agency’s lowest investment grade rating. Many, including the country’s central bank governor, expect the upgrade to come after the May 21 elections should the new government continue with the reforms and maintain political stability. The ruling conservative New Democracy party has a lead of five to six points in the polls ahead of Syriza, the radical left opposition party. However, it is expected to struggle to form a government after the first round of voting, with Greeks set to return for a runoff in July. Fokion Karavias, chief executive of Greek lender Eurobank, said the return to investment grade — to which not only the government’s borrowing costs but also those of local lenders and corporates are inextricably linked — would signal “the greatest turnround in the European financial system”. “There [had been] many voices asking for Greece to exit the eurozone. They were arguing that the country’s debt would never be sustainable, that it will be impossible to achieve primary surpluses, and that its banking system will not be able to reduce its stockpile of bad loans,” he said. “In the end, nothing is impossible.” After years as Europe’s problem child, growth in Greece is now rocketing. The economy made one of the strongest recoveries from the Covid-19 pandemic, with gross domestic product expanding 8.4 per cent in 2021 and 5.9 per cent last year. A masked pedestrian in Athens in January 2022. The Greek economy posted one of the strongest recoveries from the pandemic © Nick Paleologos/BloombergFigures from Eurostat, the EU’s statistics office, show that Greece recorded a 0.1 per cent primary budget surplus in 2022. The amount of loans that are now non-performing on banks’ balance sheets has fallen from more than 50 per cent in 2016 to close to 7 per cent.Economists at rating agencies and investment banks such as Goldman Sachs expect Greece to continue to outperform the bloc this year and next. It is a far cry from February 2012, when the country’s credit rating came close to the lowest rating — selective default — following a debt crisis that threatened to tear the eurozone apart. The lack of investment-grade status resulted in higher financing costs and meant that, for a time, the European Central Bank was prohibited from buying Greek debt as part of its multitrillion-euro bond-buying programmes to stabilise the bloc’s economy.

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Reaching a point where rejoining the investment-grade club — a status bestowed by S&P on just 70 countries — would become a real possibility has been tough. Painful austerity measures have left their mark on a country that now has one of the highest rates of relative poverty in the EU. Up until a few weeks ago, when it was raised from €832 to €910 per month, the minimum wage was lower than it was 12 years ago.

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After shrinking by almost a quarter from peak to nadir, Greece’s output remains substantially below pre-crisis levels. Giorgos Chouliarakis, economic adviser to the Greek central bank governor, believes a return to peak “still needs another decade”, while only “a serious multiyear investment plan in human capital, key infrastructure and health services” will boost wages. “Many households feel the pressure from higher prices in food, energy and other basic goods,” said Nikos Vettas, general director of IOBE, an Athens-based economics think-tank.Reforms have not only stabilised an economy in freefall but also led to some real improvements. Chief among them is trade: between 2010 and 2021, the country’s goods exports soared 90 per cent, compared with 42 per cent in the euro area as a whole. “Greece’s biggest success story over the past decade is exports,” said Dimitris Malliaropulos, chief economist of the Greek central bank. However, a big factor was “outright” cuts in wages, he added. “The price of this improvement was high.” The pain is now beginning to pay off. After surging to 206 per cent during the pandemic, Greek government debt as a proportion of GDP was down to 171 per cent last year, its lowest level since 2012 and one of the most rapid rates of debt reduction in the world. It is expected to keep falling in 2023, aided by high inflation.

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“In principle, the winners from high inflation are those with lots of inflation-linked revenues and not many inflation-linked liabilities,” said Chris Jeffery, head of inflation and rates strategy at Legal & General Investment Management. The country is also relatively less exposed to higher regional borrowing costs, as the average maturity of its debt is 20 years, compared with seven years for the average advanced economy. “Greek nominal GDP is now up over 25 per cent in the last two years. Their nominal debt is up just 4 per cent,” said Jeffrey. “A further big improvement [in the debt-to-GDP ratio] is likely this year, bringing an upgrade back to investment grade before long.” Covid helped raise revenues by forcing people to use easier-to-trace electronic payments as shops shuttered. “Economic activity that was in the dark has now been revealed and taxed,” said Malliaropulos. Greece has also benefited from a surge in foreign direct investment, which rose 50 per cent last year to its highest level since records began in 2002. The EU’s post-pandemic recovery fund is set to provide €30.5bn of grants and loans to Greece by 2026, equal to 18 per cent of current GDP.Tourism — the Greek economy’s largest sector, accounting for about one-fifth of GDP — last year rebounded to reach 97 per cent of pre-pandemic levels. Foreigners not only have their holidays in the country but are also heavily investing in real estate. Property sales to overseas buyers were almost four times higher last year than in 2007, reaching almost €2bn.Construction, the hardest-hit sector during the financial crisis, is also booming. Haris Kokosalakis, whose construction business collapsed in 2012, said demand from overseas buyers had given him a slight “hope” of a sustainable recovery. “If it weren’t for our foreign clients I would be very pessimistic,” he said. “I still fear we are back in 2007, about to face another crash.” More

The ECB has raised rates by a combined 375 basis points since last July and has promised further increases, but at a more measured pace of 25 basis point increments, after oversized moves in the early part of its tightening campaign.”We have now entered the home stretch of our monetary policy tightening path,” Il Sole 24 Ore quoted de Guindos as saying on Sunday. “And that’s why we are returning to normality, to 25 basis-point steps.”These rate hikes improve banks’ lending margins but could also make it more difficult for some borrowers to repay their debts, lifting the portion of non-performing loans or NPLs.”At the moment, the improvement in margins more than compensates for the potential losses from the growth in NPLs,” de Guindos said. “The combination of a slowing economy and the interest rate hikes will bring a rise in the cost of funding for banks and possibly an increase in non-performing loans.”ECB supervisory chief Andrea Enria earlier told Croatian newspaper Vecernji list that the ECB is seeing “some early signs” of loans being paid with a delay, an indicator that NPLs could be rising.”We do not expect a wave of NPLs, but now is not the time for complacency,” de Guindos added. De Guindos also warned about so-called shadow banks – a category including non-bank financial firms such as funds or insurers – that are experiencing “some tension” given that they are highly leveraged and more are exposed to liquidity risk.Providing the ECB’s first estimate on the effects of quantitative tightening, or the reduction of the bank’s massive holdings of government debt, de Guindos said this had increased 10-year government bond yields by between 60 and 70 basis points, with rate hikes having had a far bigger effect. More