JOYBUSINESS understands government is likely to extend programme with the International Monetary Fund (IMF) which should be ending in April next year. 

The likely extension sources say has been influenced by the previous administration’s inability to achieve the deficit target and implementation of key structural reform measures.

According to a source close to government, “it was clear that by the end of December 2016 most of the benchmark targets had been missed and in some cases by very wide margins”.

JOYBUSINESS understands that the current state of the programme requires the IMF to re-calibrate the entire program targets to ensure consistency with the evolution of the new administration’s economic priorities.

Sources say issues regarding the pace of fiscal adjustment needed to bring the program on track, beginning steps to address or resolve weak banks in the banking sector would have to be forcefully addressed.

The Fund, according to reports is threating not to go to its board before June if Ghana does not agree to extend the programme.

Speaking to some analysts in the US, they say, the Akufo-Addo government’s effort to re-profile its debt which has resulted in a significant shore-up of the Central Bank's reserves require that the whole framework would have to be re-looked again.

What is not clear at this stage is whether the programme would be extended to end in December 2018 or in April 2019.

There is also apprehension on the part of investors that a push too hard to complete the program on schedule by April 2018 could foster negative investor perception.

This is because government would want to end the program as quickly as possible to enable it to pursue prudent macroeconomic policies.

From the view of investors, IMF’s role in ensuring prudent implementation of macroeconomic policies including protecting the public purse is key in fostering confidence in the economy.

Others with knowledge of the negotiations also say the cost of quickly completing the program April 2018 as scheduled might be more than just extending to December 2018 or even to 2019.

However, government officials hold a different view and seek to assure the investing community of their determination to build strong institutions to guarantee a strong policy environment even in the absence of the IMF.

It argues that within the first 100 days of assuming power, it has implemented difficult policy measures that past administrations had failed to execute.

These includes decision to cap exemptions, a policy measure that has been recommended by the Fund to the past administration, lowering the transfer limit on earmarked funds. There is also the move to amend the recently passed PFM Act by introducing elements of a Fiscal Council to enhance budget processes.

Managers of the economy also cite monitoring and working to establish a financial stability council to provide deeper surveillance of the financial sector are examples of the government’s commitment to ensuring that institutions work.

Senior Minister Yaw Osafo Marfo on programme extension

In an interview with Senior Minister, Yaw Osafo Marfo, on the extension of the programme, he indicated that the current debate about extension was being exaggerated.

Speaking to JOYBUSINESS Editor George Wiafe in Washington DC, Mr. Marfo argued that since Ghana’s program was expected to end in April 2018, the Fund will obviously be around to provide its input for the 2018 Budget.

Regarding whether the programme will end in April or not, he said, “is either here or there and basically, much ado do about nothing, because the IMF programs are measures in cycles”

He added, and I quote: “The IMF itself supervised the deterioration of the indicators, how do you expect a deficit of 5 percent and end up with deficit on a cash basis of close to 9.0 percent and 10.2 percent on commitment basis. Despite the FUNDs surveillance powers it could not control the excesses of the previous administration let alone the discovery of huge arrears. On the basis of dis-lodgement of the economic indicators, it would be impossible to implement all new actions and bring the economy back on track within six months”. The former minister of finance added that, “that is the reason why I told the IMF that they are poor supervisors, because all the statements they issued during their mission portrayed that Ghana was on the right path”. The former minister is of the deep conviction that Ghana should be able to take its destiny in its own hands by build strong institutions.

 

Finance Minister’s earlier response on programme extension issues

Finance Minister Ken Ofori Atta had earlier told JOYBUSINESS government will be able to implement all the required reforms to help complete the IMF programme as scheduled. 

His response follows concerns that government might have to embark on a “front-loaded adjustment program” to bring the economy back on track and to also help meet the April 2018 deadline for programme completion.

Speaking to JOYBUSINESS’s George Wiafe on the sidelines of the IMF/World Bank spring meetings in Washington DC, Mr. Ofori-Atta said these tough measures and reforms would have to be implemented even if the country was not under a fund program. He added that the programme should not be seen as one which is putting undue pressure on government. 

“We are confident that we will meet the targets that we have set this year, and remember that the FUND will be with us, as we work through the 2018 budget, and we are truly committed to ending the program in April 2018,” he said.

The minister noted that completing the program in April 2018 will not necessarily result in Ghana doing away with the IMF because “the Fund will still be with us under its Post-Programme Monitoring instrument”.

The minister also rejected suggestions that he is pushing hard to complete the programme on April 2018 because of borrowing restrictions and fiscal prudence.

“I think we are getting the issues completely wrong, this is because issue we need to contend with as Ghanaians is whether the fund was there or not with a 70 percent Debt-to GDP-ratio and with all the fiscal indiscipline”.

Government needs to take bold steps to correct these imbalances, for which we have begun, and that is really the fundamental thing he also noted.