The International Monetary Fund (IMF) will in the coming days engage government on the status of the country’s program with the Fund. This was after Parliament voted to amend the existing Bank of Ghana (BoG) law.

This will allow for government borrowing from the Central Bank of up 5 percent of previous year’s revenue. 

The IMF gave this indication, in a response to an email sent to the IMF in Washington DC. Under the IMF program, an agency agreement was signed between the monetary and fiscal authorities to limit government borrowing to zero percent.

To give the agency agreement a legal backing, the IMF needed to enshrine the agency agreement into law and therefore as a key structural benchmark, the IMF required the passage of the BoG bill to reflect a key provision of zero financing from the Central Bank, which was agreed to by Government.

But the IMF in an email to Joy Business, the Fund maintains that "IMF staff will now access and discuss with the authorities the possible implications for the program of the adoption by Parliament of the Amended Bank of Ghana Act allowing the Central Bank financing of government".

The Washington-base lender, in the email, however, maintained that, under the IMF-supported program, the government committed to eliminating regular financing from BoG, adding that "There has been significant progress toward this objective and government has not received any new financing from BOG since the beginning of 2016."

"This is an important feature to support the credibility and effectiveness of the Inflation-targeting framework for monetary policy," the email said.

But the IMF maintains that it is critical that this important feature to support the credibility and effectiveness of inflation targeting, the framework of the BoG, which is critical to the success of the three-year program and beyond. 

For some economists, it was interesting that Parliament rejected IMF’s proposal of zero financing. This is because there was a provision in the Ghana’s program with the Fund, that still gave government a window of opportunity to borrow from the Central Bank in times of emergency of up to two percent of the previous year’s revenue and repayable over a 90 day period. 

However, government has, on the other hand, insisted that it has stuck to the provisions of the program and has no intention of borrowing from the Central Bank.

From governments point of view, the non-passage of the Amendment Bill in the form that the IMF wanted makes no difference since the zero financing has been followed through since the beginning of the year.

Guided by events of the past, then analysts will be watching government closely, in the coming weeks, especially from August ending to September as this is the time that serious budget overruns begin to take place ahead of elections.

In 2012, serious budget over-runs ahead of the elections started around this time.