One year after IMF programme... Lessons must be learnt
Dr Amin Adam, Finance Minister
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One year after IMF programme... Lessons must be learnt - Prof. Bokpin

One year after implementing the three-year programme with the International Monetary Fund (IMF), Economist and Professor of Finance, Professor Godfred Bokpin says he doubts if the country has learnt any lessons so far.

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He said it’s been business as usual, as every single decision in the country has still been driven by political interest rather than national and economic interest.
Ghana, in May 2023, received approval from the board of the IMF to implement its three-year fund-supported programme to restore macroeconomic stability and debt sustainability.

This was after 10 months of negotiations, which saw the country meet five key prior actions which included the publication of the COVID-19 audit report, the implementation of electricity tariff adjustment, the signing of a Memorandum of Understanding (MoU) between the Ministry of Finance (MoF) and the Bank of Ghana to eliminate monetary financing of the central bank and the enactment of the necessary legislation to boost revenue.

In an interview with the Graphic Business, Prof. Bokpin said, “Ideally, the country would have learnt some useful lessons within this one year but I don’t think we have.

“Every single thing in this country is driven by politics, even though we are still under an IMF programme, every move by the government and the largest opposition party is aimed at the 2024 election.

“We are not building an economy for everyone and that is what we see in almost all the IMF-supported programmes. We mess up because we prioritise personal and political interest over national interest and then we go for a programme to correct some of those actions. When we make some progress, we come back to who we are and the cycle continues,” he said.

He said across the two main political parties, the goal has always been to build sustainable political structures not to build the country.

Additional steps 

Prof. Bokpin said if the country had learnt any useful lessons, it would have by now implemented additional measures to complement the programme.

When Ghana’s IMF programme was approved, officials of the IMF, led by its Managing Director, Kristalina Georgieva said the programme alone could not solve the country’s problems.

This was corroborated by President Akufo-Addo who also indicated that the IMF programme alone was not a panacea to the country’s problems.

Prof. Bokpin said despite this admission, there was not a single measure that had been implemented by the government in the last year to complement the programme.

“There is not a single thing that we can isolate as a standalone intervention to complement the programme.

“What have we done is to say we recognise the limitations of the IMF programme so we are doing this or that to complement that? Nothing, it’s been business as usual,” he said.

Progress made 

Ghana’s economy was faced with one of its most severe challenges in decades, with inflation hitting a 22-year high of 54.1% in December 2022, an unsustainable public debt which represented 93.5% of GDP and a weakening local currency.

One year after programme implementation, macroeconomic stability appears to be remerging. 

Inflation has dropped to 25% as of April 2024; GDP Growth rebounded strongly to 2.9% in 2023; the cedi has also fairly stabilised against the US dollar, depreciating by 6.4% on a cumulative basis between February and November 2023, compared to 53.9% over the same period in 2022. 

Prof. Bokpin said overall, the programme had brought some relative stability, adding that one couldn’t have imagined where the country would be without the IMF-supported programme, given the path on which the country was on.

“So one year on, we are seeing some stability that we can attribute to the IMF programme but we are not out of the woods yet. One year is too short to assess the effectiveness of the programme.

“It’s a three-year programme and the challenges confronting the country are such that it would take a while before things begin to come together in a manner that impacts Ghanaians positively,” he said.

He said there was a lot more that the country must do to completely come out of the woods.

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Slow pace 

As part of the conditions under the three-year $3 billion programme, the government was expected to restructure both its domestic and external debt.

The Domestic Debt Exchange Programme (DDEP), which was initially kicked against by the public, has been described as a success, with the government swapping old bonds worth GH¢82 billion for 12 new ones at reduced coupon rates and longer tenors.

On the external front, the government is still negotiating with both its bilateral creditors and Eurobond holders for debt restructuring.

Prof. Bokpin said the slow pace of the external debt restructuring had affected the progress of the IMF programme, causing some key timelines to be missed.

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Ghana’s progress under the IMF programme is tied to the progress it makes on the external debt restructuring front.

Although the country received staff-level approval for its IMF programme in December 2022, a board-level approval, which enabled the release of the first tranche of $600 million under the programme, was only possible after the setting up of the Official Bilateral Creditor Committee (OCC) co-chaired by France and China. 

The country owes bilateral creditors about $5.4 billion.

Also, although the country reached a staff-level agreement with the IMF on the first review of its programme, board-level approval, which enabled the release of the second tranche of another $600, was not possible until the country reached an agreement with the OCC in January 2024.

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Quite recently, although the country has reached a staff-level agreement with the IMF on the second review of the programme, the country is yet to receive board-level approval that would trigger the release of the third tranche of US$360 million.

This is because the country has yet to formalise its agreement with the OCC through an MoU.

On the commercial side, the government has re-opened fresh restructuring talks with its Eurobond holders who hold about $13 billion of the country’s $14 billion commercial debt.

The fresh talks have become necessary because the IMF rejected the interim agreement with the Eurobond holders as it fell short of the IMF’s debt sustainability target by one percentage point.

Prof. Bokpin said all of these have caused programme implementation to be a bit slow.

“The debt restructuring, which is a key part of the programme, has been slow and this has affected the progress of the programme.

“In the original IMF document, by May this year, we should have completed the second review and probably gotten the third tranche of $360 million but that has not been possible as of now,” he stated.

He said this, together with other uncertainties, was fueling market sentiment, leading to the recent slide of the local currency, which has depreciated by over 14% this year.

“We need to make quick progress and give clarity on the external front,” he said.

Election year

Going into the 2024 election, Prof. Bokpin said it was time for the government to ‘walk the talk’ on its commitment to fiscal discipline.

In 2004, despite the country just benefiting from the HIPC initiative which led to a total debt relief of $3.5 billion, Ghana still recorded a budget deficit of 3.2% of GDP against a target of 1.7%.

In 2008, the budget deficit went into double digits and more than double what was budgeted for, recording 11.5% of GDP against a projection of 4%.

The story was no different in 2012 as the country recorded a budget deficit of 12% against a target of 6.7%. 

In 2016, despite being under an IMF programme, the government still missed its budget deficit target. 

The overall budget deficit on a cash basis was the equivalent of 8.7% of GDP against an IMF programme target of 5.3% of GDP.

In 2020, COVID-19 expenses, coupled with election-year spending, led to the missing of the deficit target. The overall budget deficit on a cash basis was 11.7% of GDP against a revised target of 11.4% of GDP. 

In 2024, the government has set a budget deficit target of 5.9% of GDP.

Going into the 2024 elections, the government has committed to both Ghanaians and the international community that it would stay within the budget despite the spending pressures that come with elections.

The IMF has also indicated its confidence that lessons have been learnt and the country would stay true to the course of the programmes despite the election.

Prof. Bokpin said history was not on the side of the country when it comes to election-year fiscal slippages.

“If you look at the past alone, the idea is that our default position is to overspend but this will be a test to see if the government will be able to ‘walk their talk’ 

“It’s a bit too early to see how this will turn out because typically, the excesses tend to pick up significantly from August and the government must make sure it doesn’t lose control,” he said.

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