News Guide Africa

Tag: Ghana IMF Program

  • IMF Discussion: Govt’s fear is data reconciliation and disclosure – Economist

    IMF Discussion: Govt’s fear is data reconciliation and disclosure – Economist

    Adnan Adams Mohammed

    As Ghana has begun a crucial discussion with the International Monetary Fund (IMF) for debt management and policy credibility, an economist has intuited that, many government officials fear the aspect of data reconciliation and disclosures.

    The renowned economist with University of Cape Coast (UCC) urged government not to give in to the negative attitude of some fear government officials who fear the reconciliation and full disclosure of data, especially on procurement, and therefore advocating against the IMF program.

    Government of Ghana started IMF Program Discussion, last week, seeking ‘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.

    But, speaking to an Accra based radio station, Top Fm, last week when the economist was asked about what could be some details about the IMF discussion with the government, he said, there will be economic and financial data reconciliation and full disclosures with the involvement of the Ghana Statistical Service, Ghana Revenue Authority and Bank of Ghana.

    “Given the pronouncement by some key government officials in the past, it suggests that not all of them may like the decision, especially when disclosures will be required on many issues”, Prof John Gatsi, Dean of the Department of Finance at UCC, posited when asked about how he sees the commitment and unity of purpose of government officials towards IMF program. “Data credibility and transparency will be the starting point  of the formal  discussion with the IMF.”

    He added that starting an engagement with the IMF  and discontinue can signal  more doubt about economic management leadership and package the economy as risky to associate with.

    He said  any divided commitment to the discussion will isolate Ghana as confidence and policy credibility  will diminish further.  

    As he indicated that a lot may unfold this week as there is no prior engagement with stakeholders before the announcement, it is difficult to conclude whether or not the purpose of going to the IMF is in line with the real problem.  

    Prof. Gatsi explained that the problem of the Ghanaian economy is more of debt distress with contagion effect hence debt restructuring maybe what is needed but the outcome of the engagement with the IMF team will conclude on that.

  • News Guide’s Q&A with Alex Mould on IMF program

    News Guide’s Q&A with Alex Mould on IMF program

    News Guide Africa’s Adnan Adams Mohammed, engaged a renowned finance and energy expert, Alex Mould, in a question and answer session on Ghana’s economy and the engagement with the  International Monetary Fund (IMF) for a relief.

    This was to help our readers grasp with what the picture of the economy looks and what IMF program can bring to better the outlook of the economy.

    Below is the full Q&A:

    ET: Q1i. What does going to the  IMF actually mean?

    1ii. What do we gain by returning to IMF?

    1iii. Does IMF “bail” a country out?  What exactly does that mean ?

    1v. What is the alternative if we do not go into an IMF Programme  ??

    Alex Mould: By going to IMF the managers of the economy 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 (GDP).

    IMF will ensure discipline and that’s bringing credibility back. So yes, If a country is disciplined then no need for IMF

    IMF don’t 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 sometimes additional funds

    The only way out for them are as follows; Refinance principal that is amortized.

    Issue here is capital markets are “closed to Ghana. Our bonds are trading at 70% of their Par value (100%), yield is now 12.5%.

    If Ghana goes to capital markets today the interests rate will be 12.5%. So they won’t go (or can’t go).

    ET: Q2i. Can’t Ghana manage its own affairs out of this situation on its own without going to the IMF?

    2ii. Can’t Ghana raise anymore debt on its own without going to the IMF?

    2iii. Does IMF impose any conditionalities?

    2iv. How are these conditionalities arrived at?

    2v. Is Ghana as a going concern bankrupt or going into an ICU?

    Alex Mould:

    TOP 20 LIST OF THE MOST INDEBTED NATIONS IN THE WORLD.

    1. USA ($18,286 trillion)

    2. UK ($7,499 trillion)

    3. France ($5,250 trillion)

    4. Germany ($5,084 trillion)

    5. Netherland ($4,124 trillion)

    6. Luxembourg ($3,900 trillion)

    7. Japan ($3,408 trillion)

    8. Italy ($2,285 trillion)

    9. Ireland ($2,236 trillion)

    10. Spain ($2,036 trillion)

    11. Canada ($1,791 trillion)

    12. Switzerland ($1,699 trillion)

    13. Australia ($1,563 trillion)

    14. China ($1,437 trillion)

    15. China Hong Kong ($1,416 trillion)

    16. Singapore ($1,300 trillion)

    17. Belgium (($1,194 trillion)

    18. Sweden ($938 billion)

    19. Austria ($629 billion)

    20. Norway ($623 billion)

    TOP 10 MOST INDEBTED AFRICAN NATIONS TO CHINA, IMF AND WORLD BANK.

    1. Angola ($25 billion)

    2. Ethiopia ($13.5 billion)

    3. Kenya ($7.9 billion)

    4. Republic of Congo ($7.5 billion)

    5. Sudan ($6.4 billion)

    6. Zambia ($6.5 billion)

    7. Cameroon ($5.5 billion)

    8. Nigeria ($4.8 billion)

    9. Ghana ($3.5 billion)

    10. DR. Congo ($3.4 billion)

    SOURCE: World Bank Annual Report for 2021.

    From the data above we can deduce that, the issue is not about the quantum of a country’s debt.

    It’s about the quantum of debt relative to your earnings from taxes and even more specific is the sustainability of your payments of your debt service from your unencumbered revenue without going to borrow again to pay for paying your debt service.

    The fear they have of going to IMF is that, IMF will only go into agreement with Ghana government on a program of discipline. Note this, IMF never imposed anything on a government.

    The government provides their plan, a Performance Improvement Plan (PIP), which the IMF agree. The IMF only monitors that they follow their own plan.

    ET: Q3i. Why are we in the position we find ourselves since we just came out of an IMF Programme?

    3ii. What were we supposed to do?

    3iii. What did we do wrong after coming out of the last programme to send us back to the IMF again?

    Alex Mould: Issue here is that, capital markets are “closed to Ghana. Our bonds are trading at 70% of their Par value (100%), yield is now 12.5%. If Ghana goes to capital markets today the interests rate will be 12.5%. So they won’t go (or can’t go).

    Ghana could not manage its expenditure very well and generating much less revenues. This forced the government to resort to borrowing incessantly. So, the fiscal deficit and debt accumulation kept widening.

    Ghana’s current outlook on the debt market is not positive. The Market never lies. Our debt price has dropped 30%. Why is Capital markets saying so? Are they wrong?

    The price dropped far before Fitch released the bomb. The market players (investors) always knows before the rating agencies report their findings. Rating agencies only report numbers already known to the market.

    Why is it that Nigeria and Ivory Coasts – our immediate peers- Bond prices are close to par (100%).

    First of all  let’s get the numbers right. GDP is not government income; it is total income in the country.

    Government income is about 12-16% of GDP. 2022 Domestic Tax income is going to be about GHS74 billion.

    Total debt is GHS350 billion (approx) and goes up even if they don’t do anything because 50% of it is in US Dollars and when the Cedi depreciates our debt gets bigger. The debt service is principal and interest

    Interest debt service is GHS37.5 billion and Wages and compensation is GHS36 billion. These two expenditures are greater than our Domestic tax revenue.  

    Principal repayment this 2022 is about US$8 billion but in 2025 will be over US$22 billion. That is when the problem will arise if we can not get into the capital markets to refinance and get the bilateral and multi-laterals to support us.

  • Finance experts support gov’t decision to engage IMF

    Finance experts support gov’t decision to engage IMF

    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.

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

    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!!

  • Ghana-IMF Program: Sammy Gyamfi Writes On His Facebook Wall

    Ghana-IMF Program: Sammy Gyamfi Writes On His Facebook Wall

    The attempt by NPP communicators to equalize and rationalize the decision of the Akufo-Addo/Bawumia government to go for an IMF bailout is pathetic and ridiculous to say the least. This is particularly so given the kind of negative commentary that President Akufo-Addo, his Vice, Alhaji Bawumia and other leading figures of the NPP have made about IMF programs in time past.

    If the erstwhile NDC/Mahama administration had revenue inflows of over US$5 billion to manage “Dumsor”, (a crises that was largely inherited) and the external shocks we suffered in 2015 like this NPP government had to manage COVID-19; If the erstwhile NDC/Mahama government had three (3) oil fields with an average daily production capacity of 170,000 barrels and an average international market price of $80 per barrel like the Akufo-Addo/Bawumia government has had in the last five (5) years; I dare say, that there would not have been any need for Ghana to have joined an IMF program in the year 2015.

    It is indisputable that the current Akufo-Addo/Bawumia-NPP government is the most resourced government in Ghana’s history. They have had access to more oil revenues, tax revenues and borrowed funds than any government in history. In all, they have had access to over GHS500 billion in total revenue as compared to the about GHS200 billion that accrued to the NDC/Mahama government.

    They are left with no other choice than to seek an IMF bailout now because they have wasted all the unprecedented revenues that have accrued to them on consumption, profligacy and corruption. Today, posterity has exposed their hypocrisy, deceitfulness, recklessness and emptiness. The least they can do under the circumstances is to burry their arrogance, swallow their pride, accept responsibility for the mess they have created, accept that they have been useless in the manner they have mismanaged the economy and apologize for the excruciating hardships they continue to impose on the Ghanaian people.

    To continue in this vainglorious attempt to defend their new low will only expand the bottomless pit they have plunged themselves into. Leadership that accepts responsibility and shows sensitivity to the plight of the people is what Ghanaians yearn for in a time like this and not the puffed up arrogance and intransigence this government continues to display.

    Sammy Gyamfi Esq.

    National Communications Officer, NDC

  • COVID Blame-Game And Mismanagement: Makes Ghana a candidate for an IMF program

    COVID Blame-Game And Mismanagement: Makes Ghana a candidate for an IMF program

    By: Prof. John Gatsi

    Generally, countries opt for an IMF program when the economy is under economic and financial distress with the aim of  achieving stability.

    The pandemic provided Ghana with opportunities and challenges. There has been expanded expenditure but also quicker access to resources.  Weak prioritization of  the use of abundant  supply of funds created huge fiscal gap . Election related expenditure , travel expenses and National cathedral expenses did not indicate the country was really in distress.  Unexplained  high borrowing beyond unsustainable levels , entangled the inbuilt resilience of the economy as interest payment burden undermine fiscal prudence. Policy credibility and confidence have been compromised and mutilated .

    In 2001, NPP government engaged the IMF for the HIPC Initiative , inherited and extended an IMF program from 2017 to 2019.  In 2022  an NPP government has officially requested for an IMF program  for the restoration of policy credibility and confidence .

    In terms of expenditure and funds related to Covid-19 , Ghana experienced positive net benefits as the funds raised were more  than the expenditure incurred.   So if the fresh  and ongoing engagement with the IMF is pandemic induced, then it is  pandemic mismanagement.

    The intention of government to engage the IMF is to stabilize the economy and  learn some basic lessons of prudence and productive expenditure.

    All the statements made against going to IMF including  only lazy governments go to the IMF and the global economy is in distress cannot change the fact that Ghana has opted for an IMF program.

    Though we have global economic challenges , not all countries are going to the IMF due to the pandemic and Russia- Ukraine war. If you are going to the IMF it must be related to the way the pandemic has been managed. Global economic developments are always contributors to economic instabilities that direct countries to the IMF , be it international crude breakdowns, droughts,global financial meltdown, global commodity price collapse etc.