Caption: Ghana’s National Economic Dialogue on post-IMF strategies.
By Toma Imirhe
Reliable sources at the Ministry of Finance claim that although the President John Dramani Mahama administration is fully committed to the upcoming National Economic Dialogue, as promised in his 120 day social contract, the recommendations that emerge from the two day meeting may not have a major influence on the 2025 fiscal year budget proposals that Finance Minister Dr Cassiel Ato Forson will present to Parliament on March 11.
Finance Minister officials, speaking privately and off record, give two core reasons for this.
One is the sheer tightness of the timelines involved in preparing the 2025 budget. Although Dr Forson himself, his technical team at the Ministry and the President’s special advisor on the economy, Seth Terkper – who was himself the Finance Minister during President Mahama’s first term in office – have extensive practical experience in budget preparation, the impending Dialogue will end less than a week to the budget presentation to Parliament. This simply does not give enough time to incorporate the policy directions agreed at the Dialogue, and the consequent implications for budgetary allocations on both the expenditure and revenue sides.
Normal practice requires government agencies to present budget proposals well in advance of the Finance Ministry’s actual allocations but this has been largely truncated by the change of political administration with ministers only being confirmed by Parliament a couple of weeks ago.
The second reason is that Ghana is in the middle of a crucial International Monetary Fund programme which is supposed to release a US$3 billion financial bail out to the government, but this is subject to the Fund’s satisfaction with the country’s economic policies and consequent performance. Already, the Mahama administration has held talks with the Fund to renegotiate some key terms of the programme, such as the target to achieve tax revenues equivalent to 24% of Gross Domestic Product by 2026. The incumbent government correctly sees this as unattainable – the current ratio is below 16% – and wants attainment of the target moved further down the line.
However, while the IMF staff mission to Accra agreed in principle to consider adjusting some key aspects of the programme – and even has offered technical support towards this – the Fund wants its core to remain intact. But that core is its customary insistence on demand management driven policies which have always worked over the short term in the past, even as the Mahama administration rode to power on supply side expansionary policy promises.
Government does not want populist supply side economic management proposals made at the impending dialogue, if incorporated into the 2025 budget, to turn the IMF away, just a month ahead of its 4th review of Ghana’s progress which should lead to approval of another tranche of the financial bailout which it direly needs.
In addition to these considerations, left unsaid is government’s worries that such suggestions made at the Dialogue may conflict with the economic policy promises on which it rode to power.
Consequent to all this, government has apparently decided to be guided by the reviewed IMF programme for now, and incorporate the sensible but deviant suggestions at the Dialogue into its medium term framework.
However some finance experts worry that this tack is reminiscent of the strategy adopted by the Akufo Addo administration in 2017 which similarly postponed its supply side strategies until it exited from the previous IMF proramme in 2019 and then adopted them, ultimately taking the country back into macroeconomic instability. In response though, the Mahama administration insists that its superior fiscal expenditure discipline – and no COVID to throw a wrench in the fiscal position – will ultimately produce much better results than what the Akufo Addo administration achieved.
