On August 30, the International Monetary Fund (IMF) announced that it had agreed to a request by the government to lengthen the extended credit facility (ECF) with the country by a year, bringing to an end months of speculations around the programme.
This means that the programme, which was signed in April 2014, will now end in April 2019, within which period the country will rely on the fund’s support to stabilise the economy, instil fiscal discipline, strengthen the public financial management system and further bolster confidence in the economy.
Although long in coming, given our inability to meet most of the targets, the government’s request for extension represents a bold step that must be commended by all well-meaning Ghanaians rather than condemned.
Much as the New Patriotic Party’s stand on the programme prior to 2017 and the current extension are at variance, it is a manifestation of the government’s decision to put economics before politics in the management of the economy.
Beyond being an admission of the country’s need for support in the management of the economy, the action signals to the international community that the government is willing and ready to harness all available expertise and resources to help restore its economy.
This should help bolster investor confidence in the country, which, if properly managed, could translate into increased foreign direct investments (FDIs), expansion and retooling of existing businesses and a rejuvenation of the lackluster performance of the private sector.
For an economy with enormous potential growth, these multiplier effects are opportune and relevant to the realisation of the country’s growth aspirations.
But while we look forward to these to materialise, the GRAPHIC BUSINESS believes that the country now needs to aim and work at building a resilient economy that will not need IMF programmes to endorse its credibility to bring it back on track.
Although a belaboured point, there is no gainsaying that the country has, over the years, failed to translate these suggestions into actions to help create a robust, resilient, fiscally sound economy that can stand the test of time.
A case in point is the political business cycle, which has since 1992 become the bane of the economy.
Since returning to democratic elections in 1992, the strong appetite for power by the incumbents have meant that election-related pressures are always funded at all cost, resulting in a bulky expenditure that then threatens the economy in the years preceding the elections.
This has created a situation where after every general election, the 2016 one not being an exception, the country is forced to repair the economy and wait for it to be bruised in four years’ time.
This is why the paper strongly supports the setting up of the Fiscal Council, a Fiscal Responsibility Law and the limiting of the fiscal deficit to a range of between three and five per cent.
If initiated and strictly implemented, fiscal discipline will be entrenched, confidence will be restored and the country will no longer require IMF bailouts.
Until then, let us continue to keep our leaders in check to help avoid excessive and irrational expenditures, which is the bane of the fiscal discipline. – GB