The Political Economy of Financial Policy Space in the Global South: Senegal and Ghana compared

• Applicant: Professor Dr. Kai Koddenbrock
• Subject Area: Political Science
• Term: since 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 519767445

Averting the next debt crisis and making much-needed investments have been a delicate balancing act for most governments in West Africa in recent years. Higher government spending in the face of Covid-19 and rising debt ratios have brought a new financing architecture, including a reassessment of the IMF's Special Drawing Rights, to the table of multilateral negotiations. The financing of government activity has been in question in West Africa since independence. With the aim of enriching these recurrent challenges through historical and comparative analysis, this project develops the concept of “financial policy space” in a quantitative and a qualitative dimension. Quantitatively, it encompasses government revenues resulting from taxes, borrowing, and aid payments. Qualitatively, it describes the government's attempts to improve its own financing conditions via central banks and the promotion of the national financial system. In sum, the project asks to what extent financial policy space has increased in Ghana and Senegal since independence. The proposed project uses "incorporated comparison" to analyze the ways in which monetary and financial relationships have hindered and enabled West African governments to pursue their policy priorities in the post-independence period. The project contributes to the emerging debate on "international financial subordination" and "policy space" in International Political Economy. The two countries were chosen because they are relatively similar economically but differ in terms of monetary systems and political stability. Ghana faced a 40% devaluation of its currency in 2016 and recently rejected debt relief under Covid to prove to global markets that it can stand on its own two feet financially. Senegal, for its part, remains part of the controversial Franc CFA currency union and recently complained strongly that African countries pay a premium of several percent for their Eurobonds, compared with Belarus, for example. Senegal is thus making a comeback on the international stage in the fight for fairer global finance. Both countries are becoming increasingly self-confident, will have to repay billions of euros of Eurobond debt in the coming years, and offer not only historical but also contemporary avenues for fruitful comparison.

• DFG Programme: Research Grants