Economy: Tears for Ghana, kudos to Indonesia – OZY

One of West Africa’s largest economies, Ghana is grappling with a deepening economic crisis, with its annual inflation rate rising to 27.6% in May, from 7.5% a year ago. Last Friday, after days of nationwide protests, the Ghanaian government announcement he would approach the International Monetary Fund for financial support. The Ghanaian government has blamed the Russian invasion of Ukraine for disrupting global supply chains and driving up the prices of fuel and food, two commodities that Ghana imports in large quantities. And the conflict certainly contributes to the economic challenges faced by ordinary Ghanaians, says a consumer rights campaigner Kofi Kapito, in a conversation with OZY. But others believe the war has deepened a deeper malaise plaguing the nation’s finances.

The Russian-Ukrainian conflict has caused energy and food prices to soar around the world. But Zimbabwe’s weak currency has made its situation particularly problematic. Earlier this month, the falling Zimbabwean dollar (ZWL) sent its annualized inflation rate jumping nearly 60 percentage points to 191.6% – the third worldwide rates.

“Businesses operate on borrowed funds, so with 200% interest rates it will be difficult to finance their business,” said Kurai Matsheza, chairman of the Confederation of Zimbabwe Industries, the largest business organization manufacturers in the country. in an interview with OZY.

Matsheza noted that if companies borrow at 200% interest, they will ultimately pass on the higher costs to the end consumer. “So really, it’s the consumer who’s going to suffer. Some businesses won’t work, and those that do… will see prices go up.

Zimbabwe’s economy depends on agriculture and mining, as well as manufacturing companies that produce essential supplies for these sectors.

As with economically struggling Sri Lanka, Ghana’s struggles are rooted in deeper structural issues, some analysts say. “The deliberate collapse of the banking system and financial institutions has led to massive job cuts, loss of capital in industry and the collapse of businesses,” Ghanaian activist Bernard Mornah told OZY. He was referring to The Ghanaian banking crisis of 2017-2020, when several banks struggled to meet the central bank’s minimum capital requirements. Some banks went bankrupt and five were consolidated into a single institution. Many businesses failed to secure the capital they needed, triggering job cuts – all before COVID-19 hit, further decimating the economy. And in 2022, the government has tax increase, adding to the pain of ordinary Ghanaians. Ghana’s Information Minister Kojo Oppong Nkrumah did not respond to OZY’s requests for comment.

The Economic Community of West African States (ECOWAS) has lifted financial and economic sanctions against Mali after the country’s military leaders agreed to a two-year transition of power to democratic rule. “However, the heads of state have decided to maintain the individual sanctions, and the suspension of Mali from ECOWAS, until the return to constitutional order,” the president of the ECOWAS Commission told reporters on Sunday. , Jean-Claude Brou. Mali’s May 2021 coup led to the removal of the country’s president, Bah N’daw. ECOWAS imposed an economic embargo on Mali, resulting in a default of more than $300 million. (Source: Reuters)

French health giant Sanofi will provide up to 40 low-income countries with 30 treatments, on not-for-profit terms. The support includes a $25 million fund to startups and innovators capable of providing solutions for sustainable healthcare in underserved regions, according to the firm. “With essential medicines, relentless momentum and impactful partnerships, we can take our innovation beyond the lab and use it to strengthen health systems and access to medicines for the most vulnerable patient communities,” Sanofi CEO Paul Hudson said Monday. (Source: Reuters).

It’s a case of risk versus reward. Doctors in Australia, Italy and Japan prescribe Merck’s COVID-19 pill Molnupiravir more than other antivirals, although it is less effective than, for example, that of Pfizer Paxlovid. The reason? It’s less risky in terms of contraindications, according to Australian Medical Association vice-president Dr. Chris Moy. (Source: The Wall Street Journal).

Not everyone agrees with Moy’s prescription. Germany will encourage the use of Pfizer’s Paxlovid to reduce the burden of serious COVID-19 infections. “A system involving family physicians will be ready to administer this far too rarely used COVID lifesaver more regularly,” the federal health minister said. Karl Lauterbach said on Twitter. The announcement comes amid an increase in intensive care admissions and deaths since late June, driven by the increase in omicron COVID-19 variants that are more contagious. Currently, Pfizer’s antiviral is only available for emergency use in the United States (Source: Reuters)

U.S. investment banks could lose billions of dollars on loans they promised when demand was higher, as the credit market cools amid interest rate hikes by the Federal Reserve to fight against inflation. Since investment banks sell debt securities to institutional investors to raise funds on behalf of companies or individuals at an agreed rate of interest, higher rates could bleed these financial institutions. Bank of America, Credit Suisse and Goldman Sachs are already exposed to such losses, which has increased the risk of recession in 2023. (Sources: The Economist, The Wall Street Journal, Bloomberg).

Argentine President Alberto Fernández chose Silvina Batakis, a government official and economist, like his next Minister of the Economy. It comes after his predecessor, Martín Guzmán, resigned on Saturday over disagreements within the ruling party over how to handle high inflation, energy costs and potential defaults. Guzmán, the architect of a complex deal with the International Monetary Fund to replace an earlier failed program with the global body, was an advocate for a balance between social spending and debt management. Batakis is closer to the left wing of the Peronist party. How she handles the economy won’t just affect Argentina – a major exporter of wheat, corn and soy in a world facing a food security crisis. (Source: Reuters).

Inflation is low. There is no indication that interest rates will be raised. And the country’s rupee is among the best performing Asian currencies. Indonesia outperforms most emerging economies – and smart policies could be responsible for that. The country avoids overreliance on the US dollar, uses additional currencies for trade, sells more debt securities to domestic investors, and creates a local money market. “Indonesia benefits as a net exporter of commodities…it is in a very good position to control some of the supply-side inflationary pressures that some of the other economies are dealing with,” said Ivan Tan, analyst at S&P. (Source: Reuters)

On Monday, Singapore Finance Minister Lawrence Wong told parliament he did not expect a recession next year, despite a volatile global market and worsening inflation. He also ruled out a “stagflation scenario” – where spiraling inflation combines with high unemployment and weak demand to hit the economy. The Singapore government was forced to increase social spending to fight inflation. (Source: Bloomberg).

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