Gov’t must be careful IMF deal doesn’t become its undoing – IEA’s Kwakye warns

The Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has warned the government to be careful that the $3 billion bailout approved by the International Monetary Fund (IMF) does not lead to problems.

Dr Kwakye said this is one of the most stringent IMF programmes he has ever encountered because the prescribed conditionalities leave no room for the government’s discretion.

“The government has boxed itself into a straightjacket. This is one of the most stringent programmes l have ever encountered.

“The prescribed policies and conditionalities leave no room for discretion. Gov’t must be careful that the programme doesn’t become its undoing” he tweeted.

His comments follow the assurance by the Minister of State at the Ministry of Finance, Dr Mohammed Amin Adam that the government would spend within limits to ensure it does not go against the deficit conditionality of the IMF.

“The minister has already set up a budget implementation standing committee which I chair, and that is supposed to ensure that whatever we spend on is approved, and whatever we spend on goes through a very rigorous process of approval so that we can keep our spending within our budget”, the Minister told Joy News.

He said: “If we will have any spending beyond the budget that will increase our deficit levels then we may not be able to meet the IMF requirement of deficit”.

“We’re supposed to record about 1.5% of primary balance and to be able to do that will require very significant fiscal discipline”, Dr Amin Adam pointed out.

He said the IMF’s condition that Ghana undergoes a front-loaded fiscal adjustment of about 5.1 percentage points, is “huge”, and “demands discipline; it demands hard work”.

“And, so, we are sensitising every sector of government including SOEs, and this is the reason why they all now are brought under the GIFMIS including the statutory funds; they’re all brought through the GIFMIS in order to give us visibility and also to ensure that we control the spending by every agent of government”.

Reacting to this in a tweet, Dr Kwakye said “The IMF programme puts the government in a fiscal straightjacket. It has limited room to maneuver.”

The Board of the Fund unanimously approved Ghana’s bailout on Wednesday, May 17 at a meeting in Washington after Ghana secured the Paris Club financing assurance on Friday, May 12.

The IMF Mission Chief for Ghana Stéphane Roudet also indicated that the $3 billion bailout would result in reforms in the energy and cocoa sectors.

He added that the programme would also result in reforms to encourage private sector investments and also build international reserves.

“There will be reforms in the energy and cocoa sectors,” he said during a joint Ghana -IMF press conference.

“It will be restoring macroeconomic stability, for higher and more inclusive growth. It has reforms that will make the economy more resilient and likely to withstand shock in the future,” he added.