Before the IMF team returns…
ALMOST everybody is sick but only a few are courageous enough to seek help for their conditions.
When you see people in hospitals for treatment, it may not necessarily mean that their health conditions are worse than those not in health facilities for care.
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It could even be that those seeking medical treatment are prudent, forthright and forwarding-looking with their health, hence the decision to seek help early.
That is why the government's ongoing efforts to secure support from the International Monetary Fund (IMF) to stabilise the economy are commendable.
Cyclical excesses
In a global village where no country is an island and structures are in place to help each other across challenges, prudence requires that we fall on those buffers whenever we are hit hard.
But here is the catch: Resorting to the IMF, just as everybody does with the doctor from time to time, should be rare, not the norm.
Ghana’s record of 16 programmes with the fund since joining in 1957 (if you exclude the rapid credit facility (RCF) in 2021) means that the country returns to the IMF almost every four years for bailout.
That leaves much to be desired, especially given that the causes have been the same since the debut bailout in 1965.
Ballooning debt fuelled by unbridled borrowing, heavy and less efficient expenditures in spite of weak revenues, spiraling inflation and a falling currency run through the causes in all the 16 programmes.
Needless to say that the same factors lead the pack on why the country is back this year, asking for support that can come with up to $3 billion in funding to stabilise the economy and open up the markets for another round of borrowing.
But where do we go from here?
Start right
First, we need to start right.
The country needs to be properly mobilised around the quest for an IMF support.
As the government and the IMF team prepare for second round of talks later this month, the politicking should give way to national consensus building on how we can handhold ourselves out of the deep.
The Executive must secure the support of Parliament, labour, the private sector as well as civil society and the media on the need for tough decisions to reboot the economy.
A public buy-in reduces apathy and lessens the obvious hurdles that the government will have to cross to get through a fund-supported programme.
Beyond psyching the citizens up for the tough measures, it is evidence of the commitment and ability of the leaders to get the country together to address the challenges.
These are key success factors for IMF programmes.
Social interventions
Indeed, this consensus could be the foundation to opening up internal discussions on thorny issues such as the viability of and alternative funding sources for key social intervention programmes in the midst of the crisis.
While the likes of the free senior high school (SHS), Agenda 111, YouStart, planting for food and jobs, one district, one factory, one village, one dam and the school feeding programmes have delivered results, it is obvious that they cannot continue in their current form, especially under an IMF programme.
The country, therefore, needs to be united in deciding the form and structure that the initiatives, particularly the free SHS programme should take.
Although the government has hinted of plans to review all the 16 flagship programmes, not much has been done.
It is, therefore, advisable that a committee of experts, including representatives from academia and civil society be constituted to examine the performance, challenges and way forward for these programmes.
These results could be incorporated into the 2023 Budget to set the stage for a fiscal consolidation programme that prunes amorphous social spending.
Good faith
We also need to show good faith in addressing the challenges that brought us here.
If there is one unique thing that makes IMF-led programme more effective than self-initiated and implemented policies, it is the discipline that the fund exerts on public financing and economic management in general.
As the country beckons the fund over, it needs to show faith to that discipline.
Unbridle borrowing and inefficient spending must begin to give way to structured debt raising and prudent spending.
In that regard, a clear decision on the National Cathedral, the size of government and the amount it saps, and the new ministries created to undertake roles initially handled by agencies will be significant, especially to the IMF and the international community ahead of a deal.
Net freeze
Recruitments into the public sector also need a stern look.
Last month, the Institute for Fiscal Studies (IFS) described the wage bill and debt service cost as the ‘choke’ to public finances, given their rigidity.
The public wage bill is one big headache to public finances and any attempt to expand it must be backed by concrete evidence of necessity and funding source.
Unfortunately, that has largely not been the case.
A case in point is the recent announcement to recruit about 5,000 senior high school (SHS) graduates into the health sector.
Coming on the back of the challenges that faced the Nation Builders’ Corps, one wonders if we are wiling to fix the rigidities weakening public finances.
This is not good enough, especially coming at a time when the country is seeking a bailout to address challenges that include a ballooning wage bill.
Elevy
Revenue mobilisation also needs another shot in the arm.
The Elevy has been a disaster and efforts to reduce the negativity around it and make it more effective should be prioritised.
It is a bad tax but the current economic challenges means that we have less policy options.
The levy’s rate should, therefore, be lowered and the threshold raised to help make the ‘pain of paying’ negligible.
Precursor budget
Beyond these, the 2023 Budget has to bear the imprints of the IMF.
Having failed to win market confidence with the last four key policy documents (the 2021 and 2022 budgets and midyear reviews), the government now has a rare opportunity to convince investors.
Projections must be realistic and new programmes shelved.
The budget must show good cause to fiscal consolidation and a credible plan to build buffers for the cedi and fund foreign exchange obligations.
These are critical in winning the support of investors onto an IMF programme that we so badly need to use in regaining trust for the markets to reopen for debt raising.