Adnan Adams Mohammed
Some finance experts have indicated the need for government to engage the International Monetary Fund at this moment of the country’s economic conditions.
They believe the continuous depletion of the country’s reserves as a major concern that requires urgent support from the Fund to enable the country secure concessionary loans at cheaper rates as well as the low domestic revenue mobilization entangled with rising global and local inflation due to the uncontrollable fuel and food price hikes.
Although, the government had in the past indicated its fear for the Fund’s fiscal disciplinary measures (expenditure restrictions), an Associate Professor of Finance at Andrews University in the United States has dismissed such misconception explaining that, the Fund does not impose restrictions on member countries, but rather helps with structural changes which may not affect government policies.
“IMF does not impose restrictions. What they focus on is structural changes and in that, some may affect government policies”, Dr. Williams Kwasi Peprah has said in an interview, last week, for his reaction on government’s decision to go to the IMF.
Also, in an interview with a former finance, banking and energy industry expert, Alex Mould, who was also the former Executive Director at Standard Chartered Bank and CEO of Ghana National Petroleum Corporation (GNPC), for his take on the ramification for going to the IMF said, it will restore discipline in the fiscal system which will intend restructure the economy for better outlook in the bond market.
“IMF will ensure discipline and that will bringing credibility back. They (government) can become disciplined and reduce the expenditure especially the discretionary expenditures are focused on the Manifesto policies that do not increase the Gross Domestic Product.”
He indicated that, IMF do not lend much but act as credit “derivative” where’s bilateral and other multi-laterals are under the “IMF umbrella” and seek such comfort to “assist” either by extension of tenor, grace period on interest payments, and sometimes haircuts (though rare) and additional funds.
Dr. Peprah,further expatiated that, going to IMF will help the country’s exchange rate to stabilise, trading with ease with the rest of the world.
“Normally, the IMF’s main aim is to ensure that international trade does not go into challenges. If you notice, the other side of the world is into manufacturing and they sell their goods in Africa. So Africa must have the money to pay for them. That’s why they asked governments to keep all the reserves so that they will be able to pay their bills [foreign] when they are due.”
“The second point is that the Fund facilitates international trade. So that is the reason why they provide lending to governments when they see that an impact on a country’s position will affect the other parts of the world. They do that to ensure that every country’s balance of payments is ok”, he explained.
“You will see another point when they are talking of balance of payments so that the international trade will not be distorted”, he added.
