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IMF Program: Mould answers FAQ as gov’t starts formal engagements

Adnan Adams Mohammed

After months of rejecting proposals, the government has finally accepted to engage the International Monetary Fund (IMF) for a relief program.

President Akufo-Addo, last week, ordered the Minister for Finance, to commence formal engagements with the Fund after a telephone conversation with the president and the IMF managing director, Kristalina Georgiev.

Earlier this year, Ken Ofori-Atta, who has been hesitant about going to the IMF for a relief program, indicated that, going to the IMF again will have dire economic implications. But, in an interview with a finance, banking and energy industry expert, for his take on the knottiness 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”, Alex Mould, former Executive Director at Standard Chartered Bank and CEO of Ghana National Petroleum Corporation (GNPC) in a question and answer session with Economy Times. “They can become disciplined and reduce the expenditure, especially, the discretionary expenditures which are focused on the manifesto policies that do not increase the Gross Domestic Product.”

A statement signed by the Information Minister, Kojo Oppong Nkrumah, announcing government’s readiness to engage the IMF said, government is looking for balance of payment support.

“The engagement with the IMF will seek to provide balance of payment support as part of a broader effort to quicken Ghana’s build back in the face of challenges induced by the COVID-19 pandemic and, recently, the Russia-Ukraine crises.”

For past months, domestic revenue mobilization was not performing to budgetary expectations, coupled with the inability to raise money from the international capital market due to the downgrade of the economy by credit rating agencies, some experts have suggested to the government to seek the support of the International Monetary Fund (IMF).

Meanwhile, Mr Mould has ‘slapped Ghanaians in the face’ for our lack of reading attitude as many keep asking him for answers on what IMF programs is all about although he had issued answers to some Frequently Asked Questions (FAQ) some five months ago in February this year.

“I wrote a paper in February 2022 (just 5 months ago) explaining this. No one reads – that’s the problem. Everyone thinks it’s normal NPP bashing.”

Below are Alex Mould’s answers to IMF ProgramFAQ:

1.  So how much is the govt looking to get from the IMF?

It’s not the quantum of money that The IMF will give Ghana.

It’s more serious than that !!

It’s what The IMF bring to the table – Credibility

IMF is a credit enhancer – Acts as credit derivative at low cost

Ghana is basically filing for bankruptcy

It’s like Chapter 11 – a reorganization of debt with a performance improvement plan (PIP) managed by a trustee

IMF is the Trustee

So, basically (a useless word), Ghana needs to reschedule its debts – mainly with the multi and bi-lateral Creditors (other Govt controlled financial institutions)  that lend us money – and also be given new debt (fresh liquidity) by these same institutions to balance our budget (especially the essential expenditure lien wages and arrears on projects already started) since our revenue (mainly from Taxes) are not enough to cover the ff:

– our wages (of Govt workers mainly civil and public servants , Parliament, Office of the President, judiciary, teaches , nurses/doctors etc etc);

– our debt service (mainly interest payments , and some principal repayments)

– our Arrears of projects and programmers started (free SHS, Roads, Energy subsidies (mainly to Power generators; and subsidies paid to underperforming SoEs that are not profitable – TOR, and many others)

– new programs approved in the budget; (some of which are unnecessary and

So, we have a credit crunch and a liquidity crunch.

Our domestic Borrowing ranges between 20-26% from 12-19%

The short term rate (relative to the 7-10Yr rates) have jacked up exponentially indicating more or a liquidity crunch for Govt

No institution or country  is going to reschedule  Ghana’s  debt if they don’t have credibility; they have shown ineptitude and lost all credibility and by going directly to capital markets in the past, to borrow heavily, they avoided the clutches of astute lenders – the multi and bi- lateral creditirs – who would demand good financial management and best practice in good governance

These Capital market debt is held by institutional investors who only worry about the price of these bonds and just make their money on trading the bonds ie selling and buying these bonds (and that by the ways is Ken Ofori Atta’s strength – not managing an economy)

Hence we had to go to the IMF!!!

2. Is it anywhere near what they have borrowed so far?

The IMF itself does not lend that much

What the IMF brings to the table is credibility and allows other creditors lend more to Ghana by giving  them the comfort that *someone* is watching these “maverick” managers of Ghana’s economy

What the IMF basically is telling all the other lenders is that they (IMF) will institute measures via a performance improvement plan to put a stop to bad management so that the managers of our economy do not revert to their bad management practices which got them into this  mess i.e they will watch the Govt so that they do not mess up again

So, IMF will put Ghana on a “program”and will have a performance improvement plan (PIP) which will detail how they’re going to bring back stability to the economy; reduce inflation; stop the run on the Cedi; and manage the economy properly basically- by focusing on what really matters i.e creating real jobs and letting majority of the people have an income that can meet their needs; as well as providing the social net for the vulnerable;

Ghana needs to improve its credibility among its lenders  (and credit Rating issued by Moody’s, S&P and Fitch) ) and that’s why Ghana is going to the IMF; it’s like going to the park with your mother – she won’t let you do stupid things!!

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