By Stephen Buckley
Washington Post Foreign Service
Sunday, April 16, 1995; A01
ACCRA, Ghana -- After rebuilding a decimated economy and becoming an international donors' role model for struggling African countries, Ghana finds its comeback endangered by an unlikely new foe: democracy.
Two years after a young flight lieutenant named Jerry Rawlings grabbed power in a 1981 coup d'etat, Ghana launched wholesale economic reforms, funded by hundreds of millions of dollars from the International Monetary Fund and enforced by Rawlings's authoritarian military regime.
Unencumbered by political niceties and following foreign aid donors' prescriptions for painful readjustment, Rawlings presided over 5 percent annual growth in the late 1980s, an exceptional performance in Africa. Exports reached nearly $ 1 billion.
But now all that has changed. After toiling to open markets, draw investors and subdue inflation, this West African nation has seen its economy struggle since the shift to a multi-party political system in 1992. Inflation hovers near 30 percent. Government spending has ballooned. The cedi, Ghana's currency, is in a free fall. Interest rates top 35 percent. Unemployment is pushing 30 percent.
Both supporters and critics of Rawlings -- now the country's elected president -- blame the slump on his desire to be reelected next year, a worry he did not face during 11 years as a repressive military ruler. Rawlings's reelection hopes have compelled him to increase government spending and slow economic liberalization to secure the support of crucial constituencies before presidential elections in November 1996, critics say.
"The government is no longer solely focused on the economy," said Joseph Abbey, a key architect of the government's economic program during the 1980s and now head of a think tank in Accra, the capital. "I think the requirements of politics are a distraction."
Rawlings receives high praise from foreign donors and diplomats. They credit him with establishing Ghana's stability in a region blotted with countries -- Nigeria, Sierra Leone, Togo, Liberia -- engulfed by political and economic crises. Indeed, donors, diplomats and executives worry about Ghana's economic condition in part because the nation of 16 million people appeared poised in recent years to become a full-fledged African success story.
"The economy is like Pegasus getting ready to fly, but he can't because these guys are worried about holding on to power," said Ken Ofori-Atta, executive chairman of Databank Brokerage Ltd. in Accra.
Since opening Databank in November 1990, Ofori-Atta, 35, has made the firm one of the country's strongest brokerages. Its shareholders carry more than $ 8 billion in assets. Databank trades $ 300,000 worth of shares per week on the Ghana Stock Exchange, up from $ 80,000 a year ago. The firm has grown from 10 brokers to 25.
Yet Ofori-Atta feels conflicted. He says his company's success would not have come without open markets, and he is confident that the country will avoid an economic disaster. But he worries that executives and investors continue to feel the heavy hand of government, which controls more than two dozen enterprises.
"The government deserves credit for liberalizing the economy," said the Ivy League-trained Ofori-Atta. "The problem is that they have the power to undo what they have done, which is a little bit dangerous."
When Databank came into being, Ghana had emerged from 25 years in the economic doldrums. After its cocoa-based economy imploded following its independence in 1957, Ghana became one of the world's poorest countries. Production plummeted. The government's tax base withered. Inflation exploded to 122 percent.
Under Rawlings, the economy improved dramatically. The government gave up more than 50 of its businesses. Inflation shrank to 10 percent in 1992. Democracy came to Ghana that year as the nation drew up a new constitution, and Rawlings won the presidency with 58 percent of the vote. He stopped shutting down newspapers, allowed long-banned political parties to criticize him and released opponents he had imprisoned.
Among them was Kwame Pianim, jailed as a political prisoner for a decade and released in November 1992. Now an investment consultant and official with the opposition New Patriotic Party, Pianim, 56, argues that Rawlings's regime has become obsessed with keeping power.
He denounces the government for increasing Ghana's money supply by 59 percent, 27.4 percent and 40 percent the past three years to pay for raises for public employees and to bolster social services and infrastructure.
He also criticizes the president for intermittent attacks on the business class. After becoming president, for example, Rawlings called for a boycott of products made by businesses that support opposition parties. Last year, Rawlings tried to push an ethics measure through the legislature that critics say would have hobbled corporations. A watered-down version was eventually passed.
"For the first time in this country's history, everyone agrees that the private sector is the key to sustained economic success," Pianim said. "But the macroeconomic policies the government set in place seem to be unraveling."
Pianim says Rawlings "is still learning to operate under a constitution. When someone comes to power through the gun and then has to operate as a democratic, that's a very dramatic shift."
Ghana's army, one of Africa's strongest, has remained loyal to Rawlings, who retired from the military upon his election but is still commander in chief of the armed forces. But Ghanaian officials and Western diplomats do not expect the army to be a factor in next year's elections.
It is not clear whether Rawlings would resume a role in the military if he lost the 1996 vote.
Many Ghanaians believe that the country's current slide should not cause panic. At the Ghana Stock Exchange, managing director Yeboa Amoa contends that the government has taken most steps necessary to build a foundation for a thriving economy.
Yeboa notes that, along with other business-friendly measures, the government has slashed corporate taxes from 60 percent to 35 percent. Ghana's investment code has been streamlined. The top rate for individual income taxes, once 75 percent, has dipped to 35 percent.
The five-year-old stock exchange, widely hailed as one of the best among the world's emerging markets, has enjoyed the fruits of Ghana's economic reforms. Its investors saw an average return of 241 percent on their stocks last year.
Amoa disagrees with critics who argue that the government should rein in spending on infrastructure and education.
"The greatest assets of any nation are its people," Amoa said. "You have to make sure they're educated. Ten years ago, you could barely drive on most roads in Accra. Now people can transport their goods, which is absolutely essential for a good economy."
One high-level U.S. official in Accra is optimistic about the Rawlings regime, pointing out that Ghana's emergence as one of Africa's most stable democracies bodes well for its economic recovery.
"Political stability is crucial," the official said. "The only way to make people have confidence in this country is to stick to a constitutional democracy. People said Rawlings couldn't live by a constitution, but so far he has."