Ghana Goes to the IMF
Against the backdrop of denunciations, admonitions and condemnations from some quarters, including the ruling party, President Nana Addo Dankwa Akufo-Addo at a June 30, 2022 cabinet meeting instructed the minister of finance to begin an engagement process to invite the International Monetary Fund to intervene in restructuring the Ghanaian economy, the government’s statement said on Friday, July 1. This follows a series of demonstrations and threats of strike actions by workers against the rising cost of living in the country. The engagement with the IMF will seek to provide a balance of payment support as part of a broader effort to quicken Ghana’s build back against the challenges posed by Covid-19 and then the Russian-Ukraine crisis.
Central bank governor Ernest Addison said in May that Ghana faced a balance-of-payments deficit of $934.5 million in the first quarter of 2022, compared with $429.9 million in the same period last year. This will be Ghana’s 17th program since independence in 1957. Having enjoyed a steady growth since 2017 the abrupt decision by President Akufo-Addo to invite the IMF reverses his election campaign promise that the country could prosper without international aid: Ghana Beyond Aid.
The steady growth that characterized Ghana’s economy from 2010 with the discovery of oil on the country’s shores was dissipated by the Mills-Mahama administration that had to resort to an IMF bailout of US$918 million to restore confidence in the then wavering economy. Then Candidate Nana Akufo-Addo criticized the Mahama administration for its decision to bring in the Bretton Woods institution with its draconian conditions affecting a cross section of the Ghanaian working population. The NPP administration from 2017 was able to reduce inflation from 17.6 percent in 2016 to 9 percent and out of the IMF’s clutches.
The sudden appearance of the Covid-19 pandemic not only ended the government’s so-called honeymoon but a stanched economic growth. Many critics of government may not agree with government but the global effects of the pandemic remains self-evident. Government blames the current economic debacle on external factors, including Covid-19, the Ukraine crisis and slumps in the economies of the United States of America and China. Finance Minister Kenneth Ofori Atta in Parliament in June this year said pandemic-related expenditure amounted to Ghs18.19 billion (US$2.76b). The IMF and World Bank provided US$1.23b as relief for Covid-19. Additionally Ghana’s 20 percent of imports from Russia doubled in price. Experts claim that the root of Ghana’s woes is fiscal. Of course it is.
Experts say the root of Ghana’s problem is likely fiscal, as it utilizes continuously greater loans to plug its double-digit fiscal deficit. “Our biggest problem is that around 60% of our expenditure continuously goes towards paying public sector workers or interest payments,” said William Duncan, founder of the Ghana-based Spear Capital & Advisory. “It’s been a cycle through the last three governments.” Nothing has changed but the ruling government was acerbic in its criticism of the then NDC administration. In 2015 Ghana’s debt stock was 54.2 per cent of GDP. By the end of 2021 according to government data, it had risen to 76.6 percent. Government hopes to get help from the IMF to pay that debt so the country regains access to international capital markets while it rolls over existing debt after recent credit rating downgrades cooled lender interest. Ghana’s Eurobond trading has become expensive and would again need the IMF’s help to make the country gain access to a more affordable credit and terms. Ghana needs to tone down so many of its social intervention programs. Notably, the fee-free senior high school program either needs restructuring or it could crumble as it may not be sustainable. Several such programs may be moribund and may follow the fortunes of the free senior high school program. And it is such programs of intervention that could also generate political disaffection and ill will among the government’s supporters. The NPP is fast depleting its political capital.
Already, several NPP members and sympathizers perceive the government as a lame duck. The 7th parliament of the 4th Republic is a hung Parliament and its speaker is an opposition kingpin. Work in parliament has stalled most of the time owing to lack of consensus and cooperation from the opposition. The infamous e-levy had a hard time passing and the opposition bragged about ensuring that it received even more opposition from the public. Its projections to accrue enough funds to support some of its programs in the future is stalled and probably the government’s rush to the IMF might be a reason.
Occupy Ghana, a Non-Governmental Organization (NGO) has detailed some remedies in Ghana’s economy that could have helped, if not to pay some debts, but also to deter embezzlement and misappropriation in the country’s fiscal engagement. It cites a 2020 World Bank report in which Ghana was proudly mentioned in an anti-corruption action and which inspired similar laws and actions in some sister African countries. While those African countries took a cue from Ghana to reduce or stop corruption in government, Ghana failed to follow up its anti-corruption move and the rot remained.
Many Ghanaians also mention with surprise and anger why Ghanaian governments including the NPP administration have allowed the country’s foreign mining companies to get away with murder literally. While the country goes begging for peanuts the white man is stealing our minerals blind, people say. The percentages that purportedly constitute taxes and royalties are no more than a sop in the bucket.
Amandla asks why should we go to the IMF when we have all these treasures to profit from? We once asked the then minister of finance in the Kufuor administration, Yaw Osafo Maafo about it and he admitted that we might as well keep our minerals in the ground, not with the foreigners exploiting them essentially for free.
The IMF is a global public institution open to all member states. Some go for advice, and some go for bailouts, etc. Ghana has made 17 appearances with nothing to show for. Ours couldn’t have been any spectacular no matter how many times we had been there. We, however, bear with Occupy Ghana that inspired by the Ghana Without Aid promise, the government decided against its own promises not to go to the IMF and supported by many Ghanaians, to do just that. Ghanaians feel let down, to say the least.
Admittedly the NPP administration deserves some commendation for some social intervention programs it introduced, but apparently it bit more than it could chew!
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