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For balance of payment support: Ghana seeks IMF intervention

BY: Emmanuel Bruce & Maclean Kwofi
For balance of payment support: Ghana seeks IMF intervention
For balance of payment support: Ghana seeks IMF intervention

The country has formally requested the International Monetary Fund (IMF) to support its economic programme.

It follows a telephone conversation between President Akufo-Addo and the IMF Managing Director, Dr Kristalian Georgieva, on the country’s decision to apply for the fund’s support.

A statement issued in Accra yesterday, signed by the Minister of Information, Kojo Oppong Nkrumah, said the engagement with the IMF would seek to provide a balance of payment support as part of a broader effort to quicken the country’s build back in the face of challenges induced by the COVID-19 pandemic and, recently, the Russia-Ukraine crises.

This will be the 17th time the country will be seeking the IMF support.

It said the country was a member of the IMF and had recently received $1 billion for its COVID-19 response programme.

“Government expects the IMF support to boost its funding sources needed to execute its economic programme.

It is expected that capital markets and friendly sovereign countries may also contribute to the programme,” the statement explained.

IMF confirms request

The Country Representative of the IMF, Dr Albert Touna-Mama, has confirmed that the bank had received a request for the fund’s support for the country’s own economic programme.

“We can confirm that the authorities have been in touch to request Fund’s support to Ghana’s own economic programme,” he wrote on his Twitter handle.

“The IMF stands ready to assist Ghana to restore macroeconomic stability, safeguard debt sustainability, promote inclusive and sustainable growth, and face the impact of the war in Ukraine and the lingering pandemic,” he added.

Dr Touna-Mama’s post also expressed the fund’s readiness “to meeting with the authorities in the coming weeks to start the initial discussions”.

The IMF Ghana Office further explained that things were moving fluidly but until the negotiations started, the parties would not be able to determine how long it would take for a programme to be in place.

IMF was inevitable

In an interview with the Daily Graphic, Head of Research at the Institute of Fiscal Studies (IFS), Dr Said Boakye, said going to the IMF was inevitable and long overdue.

He said the government waited for too long, making things become messier than if it had gone earlier in 2021.

“What the government should begin to think about is to put together its own programme so that the IMF will help,” he added.

“IMF is not coming to prepare your budget for you. It will sit down with you and assess whether what you want to do is sufficient. So the government has to now sit down and begin to think about what can be done in terms of revenue mobilisation and expenditure cuts,” Dr Boakye stated.

He said the government must decide on which time frame it would want to use to bring the fi scal deficit to sustainable levels.

“In that regard, some of the flagship programmes may be affected, so if you want some to remain, then you have to do your own programmes so that the IMF can support them,” he said.

Dr Boakye also advised the government to engage policy think tanks and research institutions for broad-based consultations.

“The government would have to consult some experts and see the way forward. We at the IFS are ready to help the government put together our own homegrown solutions,” the economic researcher said.

IMF programme long overdue

In a separate interview, Economist and Doctoral Researcher at the University of Cape Town, South Africa, Eugene Bawelle, said the government’s decision to seek IMF support was a step in the right direction, considering the current economic situation.

Mr Bawelle said the government, however, delayed too long as this decision should have been taken in 2020.

“Some will like to blame it on COVID-19 and Russia/Ukraine conflict but the signs had been clear from 2019 that things were not moving in the right direction.

“The IMF decision has, therefore, come a bit too late. This is a decision the government should have made in 2020 when the fiscals were a bit good,” he stated.

The economist said the government should have gone to the IMF in 2020 when the debt sustainability was a bit manageable.

“Now, investors have lost complete confidence in the economy, inflation is spiralling through the roof, the highest in 18 years. The fundamentals of the economy are in a much more precarious situation than they were in 2020 or a year ago,” Mr Bawalle explained.

He said that might prevent the country from getting the full benefits of an IMF programme.

Programme

Although it is not clear what programme the country will present, some analysts are pointing to the Ghana COVID-19 Alleviation and Revitalisation of Enterprises Support (CARES) programme.

The first phase of the programme, which the Ministry of Finance estimates would cost GH¢100 billion, ended in 2020, which ushered in the second and third phases which have been running from last year and would end next year.

Also known as the revitalisation and transformation of the economy (2021-2023), the programme, according to the Finance Minister, Ken OforiAtta, would enhance the productive sectors of the economy via competitive import substitution and economic diversification.

It is mainly a support for youth-led entrepreneurial drives in information and communications technology, agriculture and agribusiness, fast-tracking digitalisation and building the country’s light manufacturing sector.

It will also develop the country’s housing and construction industry, which creates a lot of jobs to take care of the rising unemployment and establish the country as a regional hub in areas including oil, gas and petrochemicals, mining, financial services and manufacturing.

Just before the announcement to seek the fund’s support, the Ministry of Finance was preparing to launch the YouStart, which is aimed at supporting youth-led enterprises in all the areas outlined under the programme.

The Majority Leader and Leader of Government Business in Parliament, Osei Kyei-Mensah-Bonsu, yesterday told Parliament that the Minister of Finance would present the Mid-Year Review of the Budget Statement and Economic Policy of the government and Supplementary Estimates for the 2022 financial year on Wednesday, July 13, this year.

He said Mr Ofori-Atta would do so pursuant to the Public Financial Management Act, 2016 (Act 921).

Some economic analysts said the review and supplementary estimates would signal the direction the government would like to conduct the negotiations with the IMF.

So be it

The President of the Ghana Union of Traders Association (GUTA), Dr Joseph Obeng, said the trading community still stood by its position that the country did not need any assistance from the IMF.

However, he said if the government believed that seeking such assistance was the solution to the country’s economic woes, GUTA had no option but to support that agenda for now.

“If the current managers of the economy think we should seek support from the IMF, perhaps they have seen something we have not seen yet and for that reason we have no other option than to support and wait for the full details of the negotiation between the Minister of Finance and the fund,” he said.

Dr Obeng said it was the position of GUTA that if it was about the same old reason of restoring debt sustainability and strengthening monetary policy, “we can develop our own programme to do that here”.

“GUTA would have preferred that the government focused more on a new homegrown solution devoid of promises in its manifesto,” he added.

Kick out hardships

As the Minister of Finance starts engagement with the fund, Dr Obeng stated that the government must present to the IMF a solid programme with terms that would not bring hardships to businesses and the citizenry in general.

He said GUTA also expected the government to negotiate for a shortterm programme so that it could put its house in order and design homemade solutions to accelerate the development of the country’s economy.