News Guide Africa

Tag: Ghana IMF Program

  • Debt-to-GDP to be reversed to 55% by 2028 – Gov’t hopeful

    Debt-to-GDP to be reversed to 55% by 2028 – Gov’t hopeful

    Adnan Adams Mohammed

    The government is targeting to achieve a debt-to-Gross Domestic Product, (GDP), ratio of 55% by 2028 despite the exemption of pension funds from the debt exchange programme.

    According to a senior government official, all stakeholders are committed to ensuring a programme from the International Monetary Fund is secured on time to bring back live into the Ghanaian economy.

    Commenting after government and organised labour reached an agreement to exempt pension funds from the debt exchange programme, the Finance Minister said though exempting pension funds comes as a cost to government, government and organsied labour will work together to close the fiscal gap.

    “Obviously, the issue of exempting pension funds from it [debt exchange programme] is at a cost and we have committed – government  and organise labour – to work together to ensure that we find means of plugging a hole that would ensure that we would return to the 55% thresh hold (debt-to-GDP)”, Ken Ofori-Atta, has expressed optimism. “I think that we are all committed to it because we know it is important to lead us to a board agreement [with the IMF] so that we continue with this success that we have.”

    “We are all in the spirit of Christmas and with the partnership that we have, I want to thank everyone who participated in the way forward”, he pointed out.

    Mr. Ofori-Atta also said the 2023 Budget which the appropriation was passed by parliament last week further brings confidence to the economy.

    “Yesterday, as you know, at 4:30 pm, parliament passed the appropriation and the budget [2023] further bring confidence as to where we are going. So of course,  the strength have been renewed to the spirit of the direction of where the nation is going.

  • BoG suspends budget financing beginning 2023

    BoG suspends budget financing beginning 2023

    By Elorm Desewu

    The Bank of Ghana, (BoG) has disclosed that it would no longer finance government’s large budget overrun from next year 2023.

    According to the governor of the BoG, Dr Ernest Addison, “the country has fundamental issues that we have to address such as fiscal problems, very large deficits which is not getting the adequate financing and therefore central bank was providing the financing on a temporary basis. Hopefully by the end of this year, that would not be there to complicate the inflation management issue”.

    He said the financing of government’s deficit was just a temporary accommodation till the end of this year adding till the IMF’s program is successfully completed and implemented there will be no need for Bank of Ghana’s accommodation going into 2023. “In fact we do not expect the central bank to finance the budget into 2023 that should be a thing of the past” he stressed.

    Provisional data on fiscal operations for January to September 2022 resulted in an overall budget deficit of GH¢41.7 billion (7.0 percent of GDP), against a programmed deficit target of GH¢36.7 billion (6.2 percent of GDP). The corresponding primary balance was a deficit of 1.6 percent of GDP, against a deficit target of 1.0 percent of GDP.

    The higher-than-projected deficit was on account of revenue shortfalls alongside expenditure overruns. Total Revenue and Grants amounted to GH¢65.4 billion (11.0 percent of GDP), compared with a target of GH¢67.3 billion (11.4 percent of GDP), representing a shortfall of 2.8 percent compared to target and year-on-year growth of 33.2 percent.

    Total Expenditure (including arrears clearance and discrepancy) for the period amounted to GH¢109.4 billion (18.5 percent of GDP), above the target of GH¢103.99 billion (17.6 percent of GDP) by 5.2 percent. The resulting overall fiscal deficit of GH¢41.7 billion was financed mainly from domestic sources.

    But for 2023 fiscal year, the government is projecting a fiscal deficit of GH¢61,475 million, equivalent to 7.7 percent of Gross Domestic Product (GDP) and a corresponding Primary balance deficit of GH¢8,925 million, equivalent to 1.1 percent of GDP.

    Total Revenue and Grants is projected at GH¢143,956 million or 18.0% of GDP and is underpinned by permanent revenue measures – largely Tax revenue measures – amounting to 1.35 percent of GDP.

    Total Expenditure including clearance of arrears is projected at GH¢205,431 million or 25.6% of GDP.

    This estimate shows a contraction of 0.3 percentage points of GDP in primary expenditures (commitment basis) compared to the projected outturn in 2022 and a demonstration of Government’s resolve to consolidate its public finances.

  • Dollar to hit below GHC9.0 soon as Ghana-IMF reaches Agreement for $3bn ECF 

    Dollar to hit below GHC9.0 soon as Ghana-IMF reaches Agreement for $3bn ECF 

    Adnan Adams Mohammed

    Adnan Adams Mohammed

    Ghana’s local currency, the cedi which for past weeks was ranked the worst performing currency globally, is expected to regain strength against international trading currencies especially with the U.S dollar.

    The forecast comes as the government and the International Monetary Fund reached a Staff-Level Agreement on economic policies and reforms to be supported by a new three-year arrangement under the Extended Credit Facility (ECF) of about US$3 billion.

    The Fund believes, the government’s strong reform programme aimed at restoring macroeconomic stability and debt sustainability while protecting the vulnerable, preserving financial stability and laying the foundation for strong and inclusive recovery, was key in this decision.

    This is expected to boost investor confidence in the economy as well as shore up the foreign reserves. Also, almost all importers who needed the US dollar for their Christmas and New year imports have already closed their transaction, so there will be no much pressure and rush for the US dollar now.

    According to the Bank of Ghana currency trading dashboard, as at Friday, December 16, 2022, the dollar was selling at “GH¢8..0055 and buying at ¢7.9975.”

    Some weeks ago, the US dollar was trading around GH¢15. From beginning of the year, the cedi fell by more than 54% against the dollar.

    However, the staff-level agreement is subject to IMF Management and Executive Board approval and receipt of the necessary financing assurances by Ghana’s partners and creditors.

    To support the objective of restoring public debt sustainability, the statement added that, the government has launched a comprehensive debt operation. But the Fund said sufficient assurances and progress on this front will be needed before the proposed Fund-supported programme can be presented to the IMF Executive Board for approval.

    “The Ghanaian authorities have committed to a wide-ranging economic reform program, which builds on the government’s Post-COVID-19 Programme for Economic Growth (PC-PEG) and tackles the deep challenges facing the country”, the statement pointed out.

    “Key reforms aim to ensure the sustainability of public finances while protecting the vulnerable. The fiscal strategy relies on frontloaded measures to increase domestic resource mobilisation and streamline expenditure. In addition, the authorities have committed to strengthening social safety nets, including reinforcing the existing targeted cash-transfer program for vulnerable households and improving the coverage and efficiency of social spending”, it explained.

    The statement further said that structural reforms will be introduced to underpin the fiscal strategy and ensure a durable consolidation. These include developing a medium-term plan to generate additional revenue and advancing reforms to bolster tax compliance.

    It noted that the structural reforms will help create space for growth-enhancing measures and social spending. Efforts will also be made to strengthen public expenditure commitment controls, improve fiscal transparency (including the reporting and monitoring of arrears), improve the management of public enterprises, and tackle structural challenges in the energy and cocoa sectors, adding, “the authorities are also committed to further bolstering governance and accountability”.

    Continuing, the Fund said “reducing inflation, enhancing resilience to external shocks, and improving market confidence are also important program priorities. Accordingly, the Bank of Ghana will continue to strengthen its monetary policy framework and promote exchange rate flexibility to rebuild external buffers. As part of the authorities’ debt strategy, a domestic debt exchange has been launched. The authorities are committed to taking the necessary mitigation measures to ensure financial sector stability is preserved”.

    The IMF staff held meetings with Vice President Dr. Bawumia; Finance Minister, Ken Ofori-Atta and Bank of Ghana Governor, Dr. Ernest Addison, and their teams, as well as representatives from various government agencies.

    The mission team concluded by expressing gratitude to the government, Parliament’s Finance Committee, the private sector, trade union, and civil society representatives for their open and constructive engagement over the past few months.

  • Gov’t to shift focus to fiscal stability in IMF support… as negotiation progresses

    Gov’t to shift focus to fiscal stability in IMF support… as negotiation progresses

    Adnan Adams Mohammed

    The International Monetary Fund (IMF), in renewed effort to progress the stalled negotiation towards reaching a deal with Ghana has indicated that, the focus of support might shift from Balance of Payment to ensuring fiscal stability.

    According to the fund, it is possible to change the terms of support request of the government to better suited terms that solves the current challenge the economy faces. It thereby indicated that increasing revenue mobilisation is critical for debt sustainability while safeguarding social spending.

    The Fund has noted that, although it is premature to comment on the final form the financing programme for Ghana will take, In its latest Frequently Asked Questions (FAQ), said the Executive Board will decide the level of access (credit amount) and the final programme design. It further reiterated that the goal of the government’s economic programme, which would be supported by IMF financing, is to restore macroeconomic stability and ensure debt sustainability, support the credibility of government policies, restore confidence in the central bank’s ability to manage inflation and rebuild foreign exchange reserve buffers to make the economy more resilient to shocks.

    “Specifically, in the fiscal sector, an important policy objective would be to increase revenues, critical for debt sustainability while safeguarding spending on health, education, and social protections”, the Fund posited.

    A staff team, led by Stéphane Roudet, mission chief for Ghana, is visiting Accra from December1 to 13, 2022, to continue discussions with the authorities on the country’s post-COVID programme for economic growth and associated policies and reforms that could be supported by a new IMF lending arrangement.

    Ahead of the visit, Mr Roudet said: “We have had productive discussions with the Ghanaian authorities over the last few months and look forward to our engagement in Accra”.

    “Our objective for this visit is to make further progress toward reaching agreement on policies and reforms that could be supported by an IMF lending arrangement”.

    “The IMF remains fully committed to help Ghana restore macroeconomic stability, bring relief to Ghanaians in this time of crisis, and lay the foundation for more inclusive growth.”

    In Ghana’s 2023 budget, Finance Minister Ken Ofori-Atta said the government and the IMF have agreed on programme objectives, a preliminary fiscal adjustment path, debt strategy and financing required for an extended credit facility programme to be in line with the government’s Post-COVID-19 programme for Economic Growth (PC-PEG).

    The PC-PEG is the government’s blueprint to restore macroeconomic stability, promote debt sustainability, sustain economic recovery and support structural reforms.

    Updating the house on the negotiations so far, Mr Ofori-Atta said: “Mr. Speaker, since the government announced its engagement with the International Monetary Fund for a supported programme on July 1, 2022, we have made “substantial progress”.

    The Fund, he said, has assured the government of its “strong commitment and support in these difficult times”.

    On whether Ghana needs debt restructuring, the Fund said when an IMF member country requests financing, the Fund assesses whether the country’s policies are consistent with debt sustainability.

    This assessment is based on a Debt Sustainability Assessment (DSA) conducted jointly by the IMF and World Bank to determine whether the government is able to meet all its current and future payment obligations.

    The last DSA published in the 2021 Article IV Staff Report concluded that: “Public debt was sustainable conditional on a rigorous and credible implementation of the authorities’ medium-term consolidation plan to put debt on a declining trajectory and ensure continued market access.

    In their recent 2023 budget statement, the government assessed the public debt as unsustainable over the medium term. In this regard, the government has announced its  intention to conduct a debt operation to ensure debt sustainability.

    The Fund said “we welcome the authorities’ intentions to implement policies that will ensure the sustainability of public finances. However, the nature of engagements and debt operations between Ghana and its creditors are sovereign decisions”.

  • Ghana-IMF negotiation to reach success in Q1 2023 – Fitch

    Ghana-IMF negotiation to reach success in Q1 2023 – Fitch

    Adnan Adams Mohammed

    As the government keeps assuring Ghanaians of reaching a deal with International Monetary Fund (IMF) before end of 2022, Fitch Solutions thinks otherwise.

    The global financial institution maintains that, Ghana will only reach a staff-level agreement with the IMF by the first quarter of 2023.

    This will mean that the country could secure a programme from the Fund by the end of quarter 1, 2023 or the second quarter of 2023. However, in its latest paper on “Division within Ghana’s Ruling Party to Weigh on Political Stability”, the international research firm also said should the Finance Minister, Ken Ofori-Atta, be replaced, negotiations with the IMF would likely remain largely unaffected.

    “While Ofori-Atta remained opposed to an IMF bailout – we believe that he would take a more accommodative approach towards negotiations with the Fund. As such, we believe that a change of finance minister would most likely not impact the timeline of IMF negations and we would retain our view that a staff-level agreement will be reached in Q123 [quarter 1, 2023]”, Fitch Solutions intimated in the paper.

    Consequently, as the government places all its hope on the IMF funds to ensure availability of foreign currency (U.S dollar) to help strengthen the local currency, the delay in reaching agreement will likely worsen the current worsened economic situation in the country.

    This has been confirmed by the paper as it stated that; “Worsening living standards amid rising consumer prices – inflation reached 40.4% year-on-year in October 2022, the highest reading since 2001 – and tighter monetary conditions have led to a 72.7% quarter-on-quarter increase in protests and riots across in quarter 3 2022. The country has also seen large industrial action in recent months, including a three-day retail strike in Accra in October [2022]”.

    Fitch Solutions also expects inflation to remain elevated in the months ahead.

    “Given that inflation is primarily driven by currency weakness, we expect price growth to remain elevated in the months ahead. Indeed, significant capital and financial account outflows caused by weakening investor sentiment will continue to weigh on the currency”.

    “Our view is further informed by the fact that previous periods of significant exchange rate weakness in Ghana all lasted roughly 12-14 months, suggesting that the cedi will continue to depreciate into quarter 1, 2023 (the current sell-off started in January 2022). This will keep inflation high, weighing on living standards and eroding support for the government”.

  • Social spending, Free SHS among IMF’s priorities in bailout support

    Social spending, Free SHS among IMF’s priorities in bailout support

    Adnan Adams Mohammed

    In the wake of increased call on government to scrap or review the Free Senior High School (Free SHS) program, as the country’s expenditure keeps outweighing revenues contributing to the current economic woes, the International Monetary Fund (IMF) think otherwise.

    Although, the Fund has noted that, it is too early to make any pronouncement as the negotiation is yet to climax but it can assure that, some social intervention programs will be protected.

    “We are still at an early stage in the discussions” with Ghana for a programme, “we believe that the free Senior High School (SHS) is an innovative policy that needs to be protected”, the Bretton Wood institution said in its Frequently Asked Questions (FAQs) page about its ongoing negotiations with the government of Ghana for a $3-billion Extended Credit Facility programme. “In general, IMF-supported programmes seek to boost social spending while encouraging both efficiency and sustainability.”

    “The IMF-supported programme would aim at protecting the vulnerable and creating conditions for an inclusive growth”, the Fund noted.

    Meanwhile, the Fund recently issued a statement in which it said a deal with Ghana would be announced as soon as feasible following their last visit to the West African country.

    An IMF team, led by Stéphane Roudet, met during October 11-19 in Washington, DC with Ghana’s Finance Minister Ofori-Atta, Bank of Ghana Governor Ernest Addison and their teams, to continue discussions on a possible IMF-supported programme.

    At the conclusion of the meetings, Mr. Roudet issued the following statement: “The Ghanaian delegation and IMF staff had very fruitful discussions on the authorities’ post-COVID programme for economic growth and associated policies and reforms that could be supported by a new IMF arrangement”.

    “We made good progress in identifying specific policies that would restore macroeconomic stability and lay the foundation for stronger and more inclusive growth.

    He said: “The IMF team and the Ghanaian authorities remain fully committed to reaching agreement on a framework and policies for an IMF-supported programme as soon as feasible”.

    “Discussions will continue in the weeks ahead, with a follow-up mission to take place expeditiously.”

    FAQs

    What are the next steps in the discussion for an IMF-supported economic reform program? What is the possible timing for an IMF programme?

    Following several visits in recent months to engage with the authorities on their homegrown reform program and broader stakeholders’ consultation, a Ghanaian delegation visited Washington, DC to continue discussions on policies and reforms that could be supported by an IMF lending arrangement.

    The Ghanaian delegation and IMF staff had fruitful discussions on the authorities’ post-COVID program for economic growth and reforms that could be supported by a new IMF arrangement. The teams made good progress in identifying specific policies that would restore macroeconomic stability and lay the foundation for stronger and more inclusive growth.

    The discussions will continue in the weeks ahead, with a follow-up mission to take place expeditiously.

    Can the IMF confirm reports that Ghana is seeking a three-year Extended Credit Facility programme of about $3 billion?

    The Extended Credit Facility (ECF) is the Fund’s main tool for medium-term support to countries facing protracted balance of payments problems, similar to Ghana’s. The duration of such arrangement is between 3 to 4 years and extendable to 5 years. Ghana requested a similar arrangement in 2014 and which lasted 4 years. However, the level of access and the final programme design is ultimately decided by the IMF Executive Board. Since negotiations for the programme are starting now, it is too early to comment on the final form the programme will take.

    Why is Ghana requesting an IMF programme?

    Ghana’s fiscal and debt vulnerabilities are worsening fast amid an increasingly difficult external environment. During the COVID-19 pandemic, Ghana’s public debt increased from 65 per cent to 80 per cent of GDP.

    At the same time, the government’s fiscal efforts to preserve debt sustainability were not seen as sufficient by investors, leading to credit rating downgrades, non-resident investors exit from domestic bond market and loss of access to international capital markets.

    These adverse developments, further exacerbated by the price and supply-chain shocks from the war in Ukraine, have led to a large exchange rate depreciation, a surge in inflation (29.8 per cent year-on-year inflation in June) and pressure on foreign exchange reserves in the past months. In this context, the government has requested assistance from the IMF, and we have kick-started the initial discussions on how to best address Ghana’s challenges. An IMF-supported programme aims to provide space for Ghana to implement policies which will restore macroeconomics stability and anchor debt sustainability while protecting the most vulnerable parts of the population. It should help create the conditions for inclusive and sustainable growth and job creation. This will help strengthen policy credibility, alleviate exchange rate pressures, and provide catalytic effect on financing.

    What type of programme is Ghana eligible for?

    The IMF’s various lending instruments are tailored to different types of balance of payments need as well as the specific circumstances of a member country. See the IMF Lending webpage for different types of BOP need and the available instruments.

    We are discussing with the ministry of finance and the central bank about the type of facility that would best fit Ghana’s needs. By way of background, the previous arrangement in Ghana was a three-year ECF in 2015-2018, which was extended by a year to April 2019.

    Is a programme the result of the spillover from the war in Ukraine?

    The war in Ukraine has triggered a global economic shock that is hitting Ghana at a time when the government’s room for manoeuvre is already greatly limited. The shock compounds other pressing policy challenges, including debt vulnerabilities, the COVID-19 pandemic’s social and economic legacy, and the ongoing tightening of global monetary policy conditions which increases the cost of international borrowing.

    What will be the objectives of an IMF programme with Ghana? The goal of the government’s home-grown programme, which would be supported by IMF financing, is to restore macroeconomic stability and anchor debt sustainability, support the credibility of government policies, restore confidence in the central bank’s ability to manage inflation and accumulate foreign exchange reserves to help the currency withstand headwinds.

    Specifically on the fiscal sector, an important policy objective would be to increase revenues, critical for debt sustainability while safeguarding spending on health, education, and social protection.

    Does Ghana need debt restructuring? When will a new Debt Sustainability Assessment (DSA) be published?

    When a member country requests financing from the IMF, the Fund assesses whether the country’s policies are consistent with debt sustainability. This assessment is based on a Debt Sustainability Assessment (DSA), conducted jointly by the IMF and World Bank, to determine whether the government is able to meet all its current and future payment obligations. The DSA is forward-looking and considers steps being taken by the member to ensure sustainability over the medium term.

    In cases where a country’s debt is assessed as unsustainable, the IMF is precluded from providing financing unless the member takes steps to restore debt sustainability, including by seeking a debt restructuring from its creditors.

    The IMF and World Bank still need to conduct a thorough update of the debt situation through a new DSA, which will then be presented to our Executive Board when it considers the authorities’ programme request.

    As background, the last DSA published in the 2021 Article IV Staff Report concluded that: “Public debt was sustainable conditional on a rigorous and credible implementation of the authorities’ medium-term consolidation plan to put debt on a declining trajectory and ensure continued market access.” Will the programme result in cut in the free senior high school programme, or other flagship social programs and infrastructure projects?

    We are still at an early stage in the discussions, but we believe that the free Senior High School (SHS) is an innovative policy that needs to be protected. In general, IMF-supported programmes seek to boost social spending while encouraging both efficiency and sustainability.

    As discussed above, the IMF-supported programme would aim at protecting the vulnerable and creating conditions for an inclusive growth.

  • Ghana’s US$3bn IMF bailout to be approved in Q4 – Fitch Solutions

    Ghana’s US$3bn IMF bailout to be approved in Q4 – Fitch Solutions

    Adnan Adams Mohammed

    Fitch Solutions has predicted that the International Monetary Fund (IMF) will approve the US$3 billion balance of payment (BoP) support package for Ghana in the 4th quarter of this year.

    The financial support which is expected to come in tranches, according to Fitch, at least US$1.0 billion dollars may be released to Ghana government by the end of the first quarter of 2023.

    Finance Minister, Ken Ofori-Atta, early last month revealed that, Ghana could get about US$3 billion from the IMF higher than the initial US$1.0 billion dollars the government wanted.

    “An IMF financial package of US$3.0 billion, which we expect to be approved in quarter 4, 2022, should alleviate pressure on Ghana’s external position in 2023”, Fitch Solutions foretold last week in its latest report on the country dubbed “Ghana’s Private Infrastructure Investment Set For Medium-Term Recovery”.

    “Ghana’s weak external position to strengthen on expected IMF deal, despite a widening balance of payments deficit caused by large financial account outflows, we believe that an expected IMF deal will help to support Ghana’s external position in 2023”.

    However, some analysts believe a Fund programme will not be approved until at least the end of quarter one, 2023.

    This is because the Fund is yet to conduct a Debt Sustainability Analysis (DSA) on Ghana’s debt.

    In the first quarter of 2022, capital and financial outflows increased by 188.7% year-on-year to $690 million, driven by net portfolio reversals and outflows of Foreign Direct Inflows.

    Combined with the country’s current account deficit, Fitch Solutions, said this has resulted in an overall balance of payments deficit of US$934 million in the first quarter of 2022, as against a deficit of $430 million in quarter one, 2021.

    “We expect net capital flows to remain in negative territory over second-half of 2022, given deteriorating investor sentiment towards Ghanaian assets, as reflected by the currency sell-off and rising bond yields. At the same time, Ghana is unable to tap international capital markets to finance the deficit, and this is putting downward pressure on its foreign exchange reserves, which have fallen to $7.7 billion in June, from $9.8 billion in January [2022].”

  • IMF’s Country rep defends mixed assessment of Ghana economy in July 2021

    IMF’s Country rep defends mixed assessment of Ghana economy in July 2021

    The International Monetary Fund’s Resident Representative to Ghana, Dr. Albert Touna-Mama, defended his outfit’s mixed assessment of Ghana’s economy during the July 2021 Article IV consultations, which said Ghana’s economic outlook was improving.

    Speaking on the Citi Breakfast Show,

    Dr. Touna-Mama, explained that the assessment that preceded the dire economic downturn in Ghana was based on projections.

    Ghana has now turned to the IMF for support.

    Such assessments are “made on a forward-looking basis, and we take into consideration the plans and policies that the authorities want to put in place to address whatever vulnerability,” he said.

    The IMF had noted, among others, that Ghana’s monetary policy stance was “broadly appropriate.”

    The IMF also welcomed the fiscal adjustments envisaged in the 2021 budget, while stressing that fiscal consolidation was needed to address debt sustainability and rollover risks.

    Dr. Touna-Mama conceded that there had been drastic changes on the global scene.

    “Last year there was still a debate globally on whether the amount of fiscal stimulus push by bigger economies, the US specifically, would generate inflation.”

    Since then, he said that “it has become clear, inflation is a factor and will remain with us for a long time.”

    He also noted red flags started to appear after the 2022 budget was revealed by the government.

    “That budget was really scrutinized given the direction and whether Ghana would be able to address those vulnerabilities.”

    After the 2022 budget statement, he recalled that Ghana’s Euro bond spread widened and “investors started requesting a higher premium in order to lend to Ghana.”

    “This was a signal that the direction they were seeing in the budget was unfortunately not convincing for them,” Dr. Touna-Mama added.

    This notwithstanding, he said the government was given a more blunt warning about the pitfalls ahead for Ghana’s economy last year.

    While the Article IV consultation features diplomatic wording, Dr. Touna-Mama said, “the report that we [the IMF] leave with the top policymakers is very candid and very direct.”

    Ghana’s economy has faced turbulent times in 2022, with inflation reaching a 19-year high of 29.8 percent.

    The cedi has also been regarded as the worst performing currency against the dollar after depreciating over 20 percent in 2022.

  • TUC against IMF deal

    TUC against IMF deal

    The Trades Union Congress (TUC) has described government’s decision to seek economic bailout from the International Monetary Fund (IMF) as a “tragic mistake and a sad one for Ghana.”

    According to the TUC, this will be the 18th time the country’s economy will be handed over to the IMF to manage and, thus, gives is a clear indication that “we cannot manage our own affairs.”

    President Akufo-Addo recently directed Finance Minister Ken Ofori-Atta to begin talks with the IMF for a bailout.

    A statement issued by Information Minister Kojo Oppong Nkrumah on Friday, 1 July 2022, said: “The President of the Republic, Nana Addo Dankwa Akufo-Addo, has authorised Finance Minister Ken Ofori-Atta to commence formal engagements with the International Monetary Fund (IMF), inviting the Fund to support an economic program put together by the Government of Ghana.”

    “This follows a telephone conversation between the President and the IMF Managing Director, Miss Kristalina Georgievs, conveying Ghana’s decision to engage with the Fund,” the statement said.

    “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 in the face of challenges induced by the Covid-19 pandemic and, recently, the Russia Ukraine crises

    The economy has been in rough waters for some time now.

    Fuel prices keep rising, the cedi keeps depreciating, inflation keeps soaring, and the cost of goods and services and keep rising.

    As of March 2022, Ghana’s total debt stock stood at GH¢391.9 billion.

    The TUC in a statement signed by its Secretary General, Dr Yaw Baah kicking against the IMF bailout said IMF programmes have only imposed unnecessary hardships on Ghanaians with practically nothing to show for them.

    “The solutions proffered by the Fund are not appropriate for our economy. They scratch the edges of the problem without tackling the fundamental issues facing the economy,” the statement noted.

    The TUC stated that instead of an IMF programme, the government can achieve sustainable economic growth and development “if we build consensus among the key stakeholders through a genuine social partnership.”

    Read details of the TUC statement below:

    COMMENCEMENT OF FORMAL ENGAGEMENTS WITH THE INTERNATIONAL MONETARY FUND (IMF)

    On July 1, 2022, the Minister for Information released an official statement to inform Ghanaians that President Akufo-Addo has directed the Minister for Finance to commence formal engagements with the International Monetary Fund (IMF), “inviting the Fund to support an economic program put together by the Government of Ghana”. The statement further underlined Cabinet’s endorsement of the decision by the President to seek IMF support.

    The Trades Union Congress (TUC) considers this decision by government a tragic mistake and a sad one for Ghana. This will be the eighteenth time our country’s economy will be handed over to the IMF to manage. It is very sad because it is a clear indication that we cannot manage our own affairs.

    We fully acknowledge the impact of global developments on Ghana’s economy. At the same time, the current state of the economy suggests that the robust economy government claimed to have built before the pandemic was not resilient enough. It must have been built on a “foundation of straw” but Ghanaians were told that our economy was strong and stable.

    It is now very obvious that the economy of Ghana is in a desperate situation. But we are of the firm view that handing over the management of the economy to the IMF is not the solution to our problems. In the Fourth Republic alone, we have implemented five IMF programmes. These IMF programmes have only imposed unnecessary hardships on Ghanaians with practically nothing to show for them. The solutions proffered by the Fund are not appropriate for our economy. They scratch the edges of the problem without tackling the fundamental issues facing the economy.

    1. The negative social implications of the religious manner in which IMF-sponsored programmes were implemented during the structural adjustment period are still very fresh in our memories. Tens of thousands of public sector workers lost their jobs, unnecessarily. For example, the last IMF-Extended Credit Facility programme (2015-2018) was conditioned on government freezing employment in the public service, among other conditionalities. This meant that while CHIP Compounds were without skilled medical personnel, trained nurses were picketing at the Ministry of Health and Ministry of Employment and Labour Relations for jobs. That IMF programme produced an association of unemployed graduates for the first time in the history of our country. The programme also led to a steep decline in real wages. The hardships all these IMF programmes brought on Ghanaians were enormous and needless. What we got in return was an economy still overly dependent on production and export of raw materials and import of manufactured products. Most of our productive sectors such as mining, petroleum and telecommunications are still being controlled by foreign companies.

    Our history of engagements with the IMF provides ample evidence that IMF-sponsored programmes and policies cannot change our economic circumstances. If we learn from history, we would know that countries that have succeeded economically such as South Korea, Singapore and China did not follow the neo-liberal policies based on the Washington Consensus which provide the basis for all IMF-sponsored programme.

    The only reason a government would want to seek IMF bailout is to look for short-term quick fix to our perennial economic challenges. Ghana has done this seventeen times and government has just announced the commencement of engagements for the eighteenth IMF-sponsored programme. One thing is very certain – the eighteenth IMF programme will not solve our problems. Therefore, we should be prepared for the nineteenth, twentieth and more programmes in the next few years, even though it is so obvious that IMF programmes pay practically no attention to the removal of structural constraints to sustainable growth and development.

    What we need now are measures that tackle the structural constraints to economic and social development. Those measures must include policies and programmes aimed at ending the domination of foreign companies in the most productive sectors of the economy, minimise our dependence on natural resources and build a robust manufacturing base. An economy which is dependent on few natural resources will continue to face fiscal challenges.

    We believe strongly that we can achieve sustainable economic growth and development if we build consensus among the key stakeholders through a genuine social partnership.

    In 2019, the Government of Ghana, represented by the Ministry of Finance and Ministry of Employment and Labour Relations and Organised Labour represented by the Trades Union Congress (TUC) and private sector employers represented by

    2. the Ghana Employers’ Association (GEA), collectively referred to as Social Partners, signed a Memorandum of Understanding (MoU) with the following objectives:

    a. Provide a mechanism for building a sense of cohesion, trust, self-management, and engage in frank and open discussions with mutual sacrifices and contributions from all stakeholders to champion the course of Ghana’s development;

    b. Provide a platform for reaching national consensus on transformation and development issues;

    c. Provide a post-IMF Extended Credit Facility local development partnership arrangement among Social Partners to ensure the irreversibility of macroeconomic gains;

    d. Undertake analysis on key development issues and advise government on same;

    e. Deliberate and make inputs on national development policy discourse, including the National Budget;

    f. Serve as an internal mechanism to foster accountability; and

    g. Inculcate a culture of social cooperation between workers, employers and government at all levels of the Ghanaian society.

    Our understanding of the unilateral decision by Government to commence engagements with IMF, without any consultation with the social partners, amounts to a declaration of the end of the social partnership initiated in 2019 with the above-mentioned objectives.

    We would like to remind government that, as part of the negotiations for the 2021 and 2022 base pay, we agreed to the four and seven percent pay increases respectively on condition that government will not declare redundancies in the public service and that government will continue to employ young people into the public service.

    We would like government to note that the working people of Ghana will do whatever it takes to prevent the imposition of needless hardships on them and the good people of Ghana.

    [SIGNED]

    DR. YAW BAAH

    SECRETARY GENERAL

    ACCRA, 3RD JULY 2022

  • Mid-year budget review to be presented this week

    Mid-year budget review to be presented this week

    Adnan Adams Mohammed

    The Finance Minister, this week present the mid-year budget review to Parliament.

    As government has initiated discussion with the International Monetary Fund (IMF), many Ghanaians and policy analyst expect tough economic policy changes, especially with cutting down on expenditure and possible cancellation of many social intervention programs as well as how to increase domestic revenue generation.  

    The government indicated it has started an engagement with the IMF to seek ‘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.” The Ghana Union of Traders’ Association (GUTA) has once again underscored the need for government to review the tax exemption regime to curtail revenue losses in the mid-year budget.

    According to the Association, there is a lack of urgency in the way the exemption bill is being treated despite indications that the government’s latest revenue generation strategy, the electronic transfer levy, is woefully failing to meet government targets.

    “We find it difficult to understand why they are still not being able to revise the tax exemption policy. It is not helping anybody, including the government. We need taxes to grow, and the tax exemption policy has not helped”,  President of GUTA, Dr. Joseph Obeng said in an interview last week.  “If anything, it has not helped to create employment. This tax exemption is going to help foreigners. What do we have to show if it doesn’t reflect on employment creation? It needs to be looked at as soon as possible, especially as government is going to the IMF program. They should rethink through and do something about it.”

    The call by GUTA follows calls by many stakeholders to government to put in place measures to ensure the State is not deprived of billions of cedis, through tax exemptions every year.

    The Tax Exemptions Bill was laid in Parliament in the first quarter of 2019 to, among other things, “rationalise the current exemptions regime on taxes, levies, fees and charges by varying, where necessary, and consolidating existing statutory provisions on tax and other exemptions and to provide for the administration of exemptions”.

    But since then, nothing has been done. In November last year, the Minister of State at the Ministry of Finance, Charles Adu Boahen, announced that plans were far advanced for the passage of the Tax Exemptions Bill.

    According to him, Cabinet is deliberating on the final draft of the Bill.

    Already, data from the Institute for Economic Affairs (IEA), shows that Ghana loses over GHC 5 billion every year through tax exemptions alone.