Policy Analyst, Bright Simons, says Ghana’s expenditure cuts are not credible enough to cushion the government machinery while the country waits for the International Monetary Fund’s (IMF) approval.

According to him, the minimum time period for negotiation for an IMF programme is 6 months, however, Ghana’s negotiations might take longer especially when you take into consideration the fact that it took the country 8 months to get a deal in 2014.

He noted that between now and when the IMF facility is delivered, Ghana would struggle with getting money to oil the government machinery.

This he explained was because the loan facilities the government had indicated in Parliament it had secured are yet to be negotiated and the government faces stiff competition from other countries for the same loan.

“The challenge with those programmes is that none of those facilities is actually loan agreements, but the government is presenting the situation as if we’ve actually secured the funds and yet we’ve not.

“The two gentlemen in the room, the very eminent guests of yours in the studio have both read the agreement and they know that what we have is a term sheet and a term sheet is a starting point for a negotiation.

“You get the term sheet and based on that you negotiate a real agreement. Once you negotiate the real agreement there’s a disbursement schedule,” he said.

Bright Simons explained that aside from the stiff competition Ghana  would face from other countries for the same facility, the loan agreement from these facilities might take longer than expected, implying that the government would be left with no resources in the short term to run the country.

Also, government’s proposed use of the loan facility is in sharp contrast to the mandate of the fund. This he says, proves disadvantageous to the government.

Speaking on JoyNews’ PM Express, he explained “The UKAFPA facility which is the Ukraine Adjustment facility that we’re borrowing from is a new facility. They just set it up at Afreximbank in April 2022. As a new facility they have not even appointed a Fund Manager yet. That is still underway.

“The current request for that amount of money from different countries around the continent is 16billion the fund is only 4billion. That means there is a lot of competition for it, it is heavily oversubscribed. We want to use it for infrastructure; Afreximbank generally is not a big infrastructure funder. You find out that construction is literally in the area of 4%, so our expectation to use that money for roads means there’s going to be more due diligence work given that this is not their usual forte.

“On top of that when you look at the mandate of that fund the areas in which they wanted to invest with that fund, most of it is in commodity management and export management, they don’t want to use it to build roads.

“So there’s a big misalignment between what we want to use that fund for and the way the fund was set up. All that tells analysts that it’s going to be longer before we get that money; perhaps not even this year or end of the year. How are you then going to manage before then?”

He suggested that the only way to deal with the shortfall is through expenditure cuts.

Bright Simons, however, pointed out that Ghana did not have credible expenditure cuts which would make filling the gap very difficult.

“The problem we have currently is that our expenditure cuts are not credible. They’re not credible because if you look at our total spending alone it’s about 135billion cedis, discretionary is about 22billion cedis, if you decide that you’re going to do a 30% cut on discretionary fund then we need to see 6.5 billion cedis of cuts.

“Fuel cuts we’re not going to get more than 80 million cedis because at the last check it was less than 200 million. If you look at Travels and Meetings you’re not going to get more than 40million that means you’re talking about 120 million out of a target of about 6.5 billion. And that reflects in the adjustments that we saw in the figures that were presented where we had seen savings in the region of only about 220million dollars in the current budget when you look at the revised figures.

“So we’re still going to maintain total expenditure at 135 billion down from 137 billion, that is not a significant consolidation of the fiscal position. In simple terms, we need a more credible fiscal consolidation programme and the only way to do that is to cut waste,” he said.

He has called for an independent panel to review government spending and enforce these cuts as soon as possible.

“To cut waste, we need a spending review by independent panels. That independent panels will include members of the opposition, members of the chamber of commerce and other such organisations like the AGI and the rest and they should go through the spending patterns line by line and identify major wasteful programmes like Kelni GVG, all of these programmes that analysts and civil society movements have been fighting against which we have shown with extraordinary precision and evidence that they do not add anything to the country. There’s zero value for money.

“We should go after those programmes, cut them and have a selective default of those things in order to pave the way for a better restructuring through the common framework which is the only way out leaving the current fiscal numbers,” he said.