Ghana committed to IMF programme — Resident Representative
The International Monetary Fund (IMF) has affirmed Ghana’s commitment to the Extended Credit Facility (ECF) programme in spite of some outstanding targets the country needs to achieve.
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“The authorities have demonstrated their commitment to the IMF-supported Extended Credit Facility (ECF), including their continued work on a few areas which need to be completed before the Board meeting,” the IMF Resident Representative, Ms Natalia Koliadina, said in response to a Daily Graphic email sent to seek clarification on progress of the programme.
She explained that during its mission to Accra in April this year, the IMF staff reached general understanding with the authorities on the main areas that would support the completion of the third review under the ECF.
She mentioned the areas that demanded work as a new Public Financial Management Law, an amendment to the Bank of Ghana Act, a strategy to address the debt of state-owned enterprises, and reconciliation of fiscal accounts for 2015.
Board to consider renew
“Subject to work on these being completed and prior actions met, IMF staff will finalise the preparation of the required documentation for the Executive Board’s consideration of the review,” Ms Koliadina pointed out, adding that it was not unusual for the IMF Executive Board to consider a review several months after the completion of a mission.
“We expect the prior actions to be met without delay, paving the way for the consideration of the third review by the Board,” she stressed.
Explaining the hiccups to meeting the targets and timelines, the Minister of Finance, Mr Seth Terkper, told the Daily Graphic that from the practice notes and conventions in Ghana’s dealing with the IMF under previous programmes, such prior actions usually had been limited to powers and responsibilities within the executive arm of government only, without stretching to the deep involvement of the other arms of government.
However, some of the prior actions in the current programme bordered on structural reforms and therefore, required parliamentary approval, the first time that such demands had extended to two arms of government.
“The legislature is one of the three arms of government and in accordance with the international practice of separation of powers, the executive has no control over the processes and procedures of Parliament, especially where some of these processes are enshrined in the 1992 Constitution,” Mr Terkper explained.
His explanation, therefore underpins the reason why some of the prior actions (front-loaded conditionalities) seem to have taken a longer time than anticipated.
Minister’s assurance
But Mr Terkper has given assurance that the actions would be completed.
“There should be no need for panic moments. The Republic of Ghana is committed to the processes and even elements which are critical to prudent financial management are already being implemented. Notable among these is the Zero Financing by the Bank of Ghana which is being implemented without the passage of a law but also not breaching legal concerns
IMF Balance of Payments Support
The government suffered credibility issues due to persistent flouting of targets set under previous budgets from 2012, such as jumps in inflation, fiscal and current account deficits, high interest rates and a depreciating currency.
Donors withdrew budget support leading to an austere budget in 2012 which had a shortfall of about 25.1 per cent from donor support, mainly grants for programmes and projects. Grant disbursements in 2012 amounted to GH¢1.16 billion, below the targeted GH¢1.55 billion, a variance of about GH¢400 million.
The government therefore, returned to the IMF in April 2015 for balance of payment support and technical assistance, in return for taking certain actions to forestall economic decline and boost growth.
After its August 2015 mission review, the IMF expressed satisfaction at the progress of work by Ghana.
“Implementation of the programme has so far been satisfactory with all August 2015 performance criteria met. Despite a difficult global environment, economic outcomes have been broadly as anticipated, with growth estimated at around four per cent during the first half of the year and inflation at around 17 per cent.”
In line with the programme, the fiscal deficit is expected to decline to 7.3 per cent of GDP in 2015, down from 10.2 per cent of GDP in 2014,” the IMF said at an end of a review mission on November 5, 2015. However, the Minister of Finance has hinted that the fiscal deficit as a percentage of GDP will be far less than 7.0 per cent for the 2015 fiscal year.
Satisfaction
The IMF statement further indicated satisfaction about progress in implementing fiscal structural reforms, though at a slower pace than expected in some areas.
The reforms include new tax laws – including the Customs Act, 2015 (Act 891) and Income Tax Act, 2015 (Act 896) – and the Ministry of Finance’s process to bring together all laws that bother on public financial management to infuse a more structured approach to national revenue generation and expenditure management.
The Public Financial Management Bill, a fiscal responsibility plan for Ghana which will defy all pressures, irrespective of any changes in government, when passed into law will not only repeal several Acts such as the Financial Administration Act (FAA) and the Loans Act, but will give also make budget implementation more rigorous with control and commitment.