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The writer
The writer

Friend or foe? Sixth Ghana-IMF romance revisited

The International Monetary Fund (IMF) is one of the Bretton Woods institutions. The IMF is a specialised agency (has its own charter, governing structure and finances) of the United Nations that provides policy advice and financing to countries in economic difficulties and also helps developing countries achieve macroeconomic stability.

Through its economic surveillance, the IMF has become the foremost institution that multinationals and donors fall on to ascertain information with regard to the performance of a country.

Ghana’s romance with the IMF dates back to 1966. Since then, one government after another has entered into separate but similar forms of loan arrangements with the organisation.

I stand to be corrected but IMF conditions and advice in times of crisis always center around the following:

•             Push for wage bill freezes or cuts

•             Spending cuts

•             Reduction of deficits

•             Prompting government to pass on rise in food and fuel cost to citizens

•             No flexibility to defer debt payments

•             Structural reforms such as raising utility tariffs, tax reforms aimed at strengthening indirect taxation, financial and energy sector privatisation or trade liberalisation.

Some analysts consider the policies of the IMF as a necessary evil rather than a preferred strategy but a majority of people find Ghana’s relationship with the fund akin to a bad marriage. Others criticise IMF-supported programmes in Ghana as ineffective, unjustifiably restrictive of government spending and unreasonably interruptive of the much needed expansions to the education and health labour force.

U-turn

Ghana’s U-turn to the IMF in 2014/2015 raised numerous questions, given the concerns about the previous impact of IMF conditionality on the Ghanaian economy.

The big question, to quote a renowned economist in Ghana, is “whether the IMF bailout would provide the anchor necessary to propel Ghana’s economy on a path of sustained growth and prosperity”. It is indeed questionable that $940 million would be enough to meet the country’s need for the proposed three-year (an average of about $313 million per year) period.

From our experience when the government issued a US$1 billion sovereign bond in 2013, it proved to be so insufficient that another US$1 billion had to be issued in 2014. That also turned out to be insufficient. “So, what difference would US$313 million a year make ?”

Robert J. Barrow, a renowned professor of economics at Harvard University and a Senior Fellow of the Hoover Institution, opined in 1998 that “The IMF doesn’t put out fires, it starts them”. He cited bailouts in Brazil, Mexico, Russia and Korea, stating that bailouts increase “moral hazard” by rewarding and encouraging bad policies by the government and that the IMF might consider changing its name to the IMH – The Institute for Moral Hazard.

The discussions on Ghana’s sixth romance with IMF have been insightful, pernicious and full of food for thought. The voice and contributors of the citizenry confirm that we are people seeking genuine answers to the economic problems of Ghana and that we want to put the economy first. It reminds me of the Korean governance model and ideology which is: as a country let us seek economic empowerment first before politics and culture.

It is said that economic freedom will accord us political freedom, an enhanced cultural life and wellbeing. However, as Maxwell Anderson opined, “When a government takes over a people’s economic life, it becomes absolute, and when it has become absolute it destroys the art, the minds, the liberties and the meaning of the people it governs.”

This is exactly the sad situation in which we find ourselves as citizens of this country because Ghana’s economy has been mismanaged by successive governments since the days of the Convention People’s Party (CPP).

The prevalent habit of running to IMF is contrary to Nkrumah’s popular ideology that “the black man is capable of managing his own affairs.” We are always tightening our belts, since as Eric Fromm puts it: “if you want a “big brother” (IMF) you get all that comes with it”.

Woes

The economic woes of Ghana over the years are largely self-inflicted and therefore can be said to be homegrown diseases. Ghana’s problems are truly homegrown and the majority of the solutions lie in the hands of the people of Ghana. A few of such homegrown diseases are: the value for money negative audit findings of the people on the national payroll, the need to cut down on the government wage bill, the downsizing in government ( political appointees conundrum), the Monetary Policy Committee inability to find lasting remedy to the depreciation of the Cedi and the fast erosion/running out of the national reserves.

Others are the budget deficit culminating from spending spree and the wastage, corruption and mismanagement (the irresponsible behaviour challenges).

The cure to these ills in the economic management of this country is simply to ensure sanity in our fiscal management. The principles of discipline and responsible behaviour are not rocket science that requires international support.

The large scale asymmetries  and pathologies in Ghana’s economic and public administrative structure, for example the malfunctioning domestic market, which, among other things, fuel inflation;  increases in the wage bill out-pacing productivity gains; growing fiscal deficit and sky-high debt-to-GDP ratios; outstanding levels of corruption and waste; minimal investment in infrastructure; and downward trend in tax revenue receipts are the causative factors bringing us down as a nation and throwing us to the IMF for bailout support, government after governments since 1966.

It is a shame and it is high time we became disciplined and responsible in the socio-economic management of our nation.

Romance with IMF

Ghana has in the past flirted with IMF on a number of occasions as chronicled below:

1.            IMF and CPP government romance in (1960-66 )

2.            Ghana’s first encounter with the IMF (1966-72) extending through PP government led by Dr K.A Busia in1969.

3.            Ghana’s second encounter with the IMF (1983-2006) involving PNDC/NDC and NPP- the era  of Economic Recovery Programme (1983-86) followed by the Structural Adjustment Programme and the PAMSCAD- Programme of Action to Mitigate the Social Cost of Adjustment.

4.            Ghana’s enrolment in IMF/ World Bank’s Heavily Indebted Poor Countries Initiative (HIPC) of NPP (2001-2007) – The John Agyekum initiative.

5.            IMF loan to Ghana in 2009-an amount of US$602 million to support its stabilisation programme in IMF’s Extended Credit Facility to support Poverty Reduction and Growth Trust. -The Professor Attah Mills era of borrowing to support Public Financial Management (PFM) initiative.

6.            2015 IMF marriage with Ghana for Extended Credit Facility of about US $918 million (SDR 664.20 million) – The John Mahama economic distress containment programme.

Ironically, in the five encounters with IMF till 2009, Ghana’s economy after ‘recovery’ goes into a coma again barely on average of three years after the end of the intervention. The nose dive is always diagnosed and found to reveal the same symptoms of ill health:

•             Budget deficit balloons

•             Inflation rises sharply

•             Overall balance of payment records a deficit

•             The cedi falls in the face of exchange rate volatility

•             Revenue collection experience  severe downturn

•             Corruption, waste and fiscal indiscipline shows its ugly heads

Seemingly, Ghana is experiencing the same old age, unending illness in 2017, as echoed by the New Patriotic Party (NPP) government after going for the sixth IMF bailout.

Cure 

I believe the cure for our sickness as a country, which is the cardinal starting point of the home grown solutions, is discipline and

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