IMF deal dilemma as IFS warns against cancellation

With about a year and three months to end Ghana’s three year austere programme with the International Monetary Fund (IMF), it is uncertain whether the deal will be left intact or canceled completely by the new government.

Business Finder is learning that plans by the new administration to renegotiate some aspects of the country’s programme may not be as smooth as expected.

This is because government’s priorities are at variance with conditions of the Fund.

Government’s Nominee for Monitoring and Evaluation, Dr Anthony Akoto Osei has hinted the IMF agreement could be heading to Parliament since the previous government failed to do so.

Dr Raziel Obeng-Okoh, Lecturer at GIMPA maintains that the difficult areas that will need thorough deliberations include how to provide the promised tax cuts within a tight fiscal space; broadening the tax base and enhancing tax compliance; strengthening control of the wage bill; enhancing public financial management and spurring growth under a tight fiscal regime.

According to the Executive Director of the Institute for Fiscal Studies (IFS), Prof Newman Kwadwo Kusi, “the fundamental decision the new government has to make is whether to continue with the programme or terminate it; terminating it will not be a good choice so the government will have to look at the programme and the areas that it thinks will need re-negotiation it has to pursue that.”

The IFS points out that government has its priorities while the IMF has its conditions, wondering where the reconciliation could come from.

“The government can go back to the IMF and to renegotiate or take a second look at the deal; whichever areas they are not comfortable with, after knowing the exact state of the economy they should be able to re-negotiate,” Director of Research at IFS, Dr John Kwakye said.

He noted that there were issues such as the budget deficit, the kind of fiscal adjustment path needed to be pursued.

“One of the conditions of the programme was a freeze on employment in the public sector. At a time when the new government has a policy objective of increasing employment, is there room for re-negotiation?” he pointed out.

With the issue of taxes, the IFS reminded government that “there are a lot of taxes in the IMF programme meanwhile the new government has promised to eliminate and reduce some taxes ;how do we reconcile these?

Having taken over the reigns of government, I will advise the new government to critically analyse the financial position of the country; should they renegotiate with the IMF? What are the implications?

Meanwhile renowned economist Dr Joe Abbey has noted that  the IMF cannot be blamed for the current challenges faced by Ghana’s economy.

The immediate past Mahama-led administration ended the year spending far more than previously thought and there are concerns this could result in the budget deficit reaching almost nine percent.

The country’s debt in relation to the value of the economy has also crossed the dreaded 70 percent mark. and it has missed out on end of year inflation target of 13.5 percent.

The development has resulted in some questioning effectiveness of the IMF program, especially when all the review meetings showed that Ghana was on track with its consolidation programme.

But Dr Joe Abbey says the fund acted based on data presented to them.

The Finder