Ghana: IMF review approval ignites debate

The International Monetary Fund (IMF)’s approval of Ghana’s third review under the Fund’s Extended Credit Facility (ECF) reinforces investors’ confidence in Ghana’s economic outlook, Finance Minister, Seth Terkper has stated.

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Finance Minister Seth Terkper
Seth Terkper

The country for close to three years has been facing a lot of challenges including high debt levels, depreciating currency, high inflation and power challenges among others.

The challenges pushed the country into a three year program with the IMF in 2015.

The program is expected to bring Ghana out of the woods by restoring debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending.

The country is currently in the second year of the program and has so far received three approved reviews from the IMF, with the third approval given this last week.
Seth Terkper, in February this year, announced that Ghana’s economy had made a turnaround, commencing a movement from its challenging times.
But, Dr Joe Abbey, Executive Director of the Centre for Policy Analysis (CEPA), has disclosed that even though the extended credit facility of the International Monetary Fund (IMF) to Ghana was restoring fiscal discipline, poverty will not reduce in the country.

He explained that “there’s a cost in terms of people crying out that they don’t have enough jobs or that their poverty levels may be worsening. Yes, we are being forced to live within our means. But we have not reached the point where we are seeing this in our pockets in terms of jobs and increased wellbeing.”

According to him, Ghanaians would not feel the economic turnaround until they got growth and jobs.

Despite the approval as well as the positive review of Ghana by Ratings Agency Moody’s early this week some economists have warned Ghana’s economy is still not out of the woods.
Seth Terkper however says ‘the approval is a further confirmation of the economic turnaround story. Government would like to express its gratitude to all Ghanaians and especially the Parliament of Ghana for their continued support during this time.
Looking forward, he said, Government will continue its effort at fiscal consolidation and not be complacent with the present good news. In this vein, Government will continue to contain expenditures whilst mobilizing domestic revenue’.

He adds that “the prospect ahead is even brighter with the coming on board of the utilization of the Policy Risk Guarantee to bring investments into the economy especially the oil and gas sectors. The use of the integration of the oil and gas to the other sectors of the economy especially, fertilizer development for the agriculture sector and bitumen production for road infrastructure”.

Prior to the approval of the IMF Government secured an Eurobond ($750M) after which Ghana COCOBOD also raised US$1.8 billion from the international market.

Also early this week Rating Agency, Moody’s affirmed Ghana’s ratings to B3 with a stable outlook.
But Dr Joe Abbey explains that, “This is foreign exchange that is coming to us. It doesn’t go to the budget. That is money that rather goes to the Bank of Ghana (BoG). And its main purpose is to increase the buffer we have within, or cedi exchange rate. It is to support the cedi. It is supposed to be called like the balance of payments.

“Not a penny of that goes to reduce our budget deficit and our debt and so on. So yes we are receiving that and because of that the international market may not be asking for a lot when they lend to Ghana. The deficit is another measure of the borrowing requirement of the government. This is just a means to check you to borrow less.”
Also, reacting to government’s joy at the release of the fourth tranche of $116.2 million, Dr Mark Assibey-Yeboah, Member of Parliament (MP) for New Juaben South, said the IMF should have disbursed the fourth tranche in June after the third review but waited for three months.

“That’s why it has become news now. Now, why did it delay? It delayed because the IMF did not believe in the numbers that government was giving out, i.e. the data on our macro-economy. So the government had to go and present the proper data. It means somebody was lying to the fund initially. Then they were concealing the actual debt owed by the state owned enterprises (SOEs) in the energy sector i.e. VRA, ECG, TOR and the rest. So the IMF asked them to come clean on those so that the fund will know the total debt.”

This is no news because the IMF would disburse the remaining tranches since Ghana has not come out of the programme.

“This tells you that if you don’t present proper data to the fund, there is a punishment. This does not show confidence in the economy. We went to the IMF because we wanted policy credibility.

“If the Minister of Finance thinks that disbursing the fourth tranche means there is confidence in the economy, then where are we going? And in any case, under any IMF programme, our economy is not going to grow. It just stabilizes the macro-economy so the deficit comes down, so the debt to GDP comes down, but in terms of growth, the country suffers. No country has experienced significant growth under an IMF programme.”

The IMF Executive Board met on Wednesday and approved Ghana’s economic performance under the third review.

-Adnan Adams Mohammed

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