KB Asante: Voice From Afar column
Should Ghana approach the IMF in its present economic predicament?
The answer is an obvious yes. In our present circumstances we should avail ourselves of the facilities available in an organisation to which we belong.
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In the days when the world was sharply divided into two ideological camps, an approach to the IMF was an anathema to those who oppose the capitalist or market economy system.
True socialists are still apprehensive of the IMF philosophy but recognise that its ‘stock-in-trade’ of prudent financial and economic management is necessary for that development which can promote the well-being of the people.
What then is the IMF? In the ‘Foreign Policy Making in Ghana’ published in 1997, I wrote: “The International Monetary Fund (IMF) was founded in 1945. Its main function is to make funds available to members with payment problems.
The resources of the fund are for its entire membership and, therefore, a member borrowing money is expected to return it as soon as its payment problems have been solved, so that other members may also borrow in time of need. The IMF, therefore, requires that a member must demonstrate how it intends to solve its payment problems before it advances any money. The repayment period is normally between three to five years.
It is, therefore, clear that certain conditions must be met before the IMF releases funds to a member in trouble. Ideally, the country borrowing should decide what set of conditions would be acceptable.
The set of conditions which would satisfy the IMF in a particular case is known. They may be harsh but there are possibilities within the World Bank group and within bilateral relations to mitigate the effects.”
Now, Ghana is a member of the IMF even if a very small player. With some North African countries, it provides an executive director of the IMF. We had Dr Amon Nikoi as Executive Director in the early days and we were reasonably active in its activities.
The IMF has changed a lot since 1949. Its core functions, however, still remain. Article I of its Articles of Agreement states the purpose of lending as giving confidence to members by making the general resources available to them under adequate safeguards.
Thus they are provided with the opportunity to correct maladjustments in their balance of payments without resorting to measures which may destroy ‘national or international prosperity’. IMF financial assistance has been extended to support natural disasters, post-conflict situations, broad economic transition, poverty reduction, as well as economic development and currency crisis.
Such is the variety of its services that about 80 per cent of its member countries have used IMF credit at least once. If my memory is correct, Winston Churchill’s ‘doctor who never cured any one’, Britain’s Chancellor of the Exchequer, Dr Dalton, sent Britain to the IMF on the devaluation of the pound sterling in 1949. And so our ‘partners’ are not beyond submitting to the IMF.
We should, however, know exactly why we go to the IMF. Holding the hands of ‘partners’ as children will not help. We should know exactly what these partners can do. IMF assistance may not be sufficient and a World Bank loan may be needed. Often for countries like Ghana, World Bank assistance is not possible without submitting to IMF measures and the financial support of some of our ‘partners’. We should know what ‘partners’ can do and not allow them to simply think for us.
Our political leaders, especially those in the government and the political party offices, should know a little about the ‘Bretton-Wood’ institution to which the IMF and World Bank belong.
The United States dominates the World Bank and the Europeans, the IMF. When Dominique Strauss-Kahn messed himself up as the head of the IMF, another French citizen, Christiane Lagard, took over as the IMF boss. Regional grouping can influence the decisions of these organisations but real political knowledge and mature footwork is required to promote the national interest in the Bretton-Woods institution.
It is puerile for negotiations to be guided by ‘partners’ as it is a pathetic dereliction of duty by authority to adopt an equivocal attitude towards the negotiations and not make things clear to the public.
Some observers believe that the Senchi meeting was designed to achieve a consensus which would guide an approach to the IMF and the World Bank. It is claimed that the main opposition party had hint of this and, therefore, their refusal to attend the Senchi meeting. The party did not want to be associated with some of the difficult or harsh measures which might be accompanied with assistance. But so far as the government is concerned, it asked for and the people granted it the opportunity to serve the best interests of the nation. It must, therefore, so act and should have taken immediate action on the Senchi consensus.
We cannot allow the economy to drift aimlessly. Some may consider the Single Spine Salary Structure to be beyond the capacity of the budget. Inflation may, therefore, be allowed to cure this ‘error’. But inflation may create problems of salary insufficiency to the lower-paid workers who featured greatly in the recent demonstrations.
The present economic and social problems cannot all work themselves out. The government must take bold decisions, including going to the IMF.
Negotiations with the IMF should not be one-sided. Ghana should put forward credible measures which would satisfy IMF requirements.
Meanwhile, the negotiation should anticipate the consequences of some of these measures and measures must be put in place to mitigate their effect, especially on the poor.
The difficult economic situation cannot be resolved by taking refuge in economic jargons. The times demand policies which aim at establishing projects and services to create jobs. Local production must be increased and imports curbed, in spite of the opposition of those who benefit from imports.
Rules must be obeyed and procedures enforced. Tortuous disciplinary processes must be expunged from the system. Above all, corruption must be exposed and punished. It is difficult but it can be done. We have no alternative. We must maintain our economic well-being and social stability.