IMF Deal Delay To Slow Ghana’s Economic Progress

Ghana's economy might see little or no growth this year if there continues to be a delay in securing a programme with the International Monetary Fund (IMF), Dr Raziel Obeng-Okon, a lecturer at the Ghana Institute of Management and Public Administration (GIMPA), has said.

He lamented the delay is affecting the country’s economy adding that a deal with IMF is a right step to add credibility to the prudent management of Ghana’s  fiscal position as well as offer support for its external financing requirements for 2015.

President Mahama disclosed last week that Ghana is now looking at having a programme with the IMF by the end of March 2015. That was the second time the President had moved the date forward.

The country has been engaging the Bretton Woods Institution since September 2014 for a three-year package that might see Ghana raking some US$1 billion from the Fund. The president had earlier announced before the close of 2014 that the deal with the Fund would be finalised by January 2015.

“The delays might stagnate our progress because our debt-trap has become a vicious cycle which would be difficult to unwind. There are several factors which point to a difficult year for 2015 without an IMF programme,” Dr Obeng-Okon noted.

The GIMPA lecturer outlined the major factors as including the financial burden resulting from the high total debt to GDP ratio; high recurrent expenditure especially personnel emoluments and administration; corruption within the public sector; negative impact of crude prices on oil revenue; huge cost required to fix the energy crisis; among others.

He mentioned that to solve Ghana’s high financial leverage position requires a very strong discipline on the fiscal side and financing on concessionary terms. He said an IMF loan provides a cushion that eases the adjustment policies and reforms that a country must make to correct its balance of payments problem and restore conditions for strong economic growth.

“The IMF has what it takes to pull the breaks and restore conditions for growth,” Dr Obeng-Okon affirmed, warning that: “The high debt position may become a vicious cycle and a trap difficult to unwind without any intervention.”

He reckons that even though government is eager to finalize the process, the IMF team must be convinced of the economic programmes and measures put in place. He maintained that the road to IMF is “tortuous but necessary due to the numerous challenges created by the high loans not link to a corresponding domestic revenue generation.”

Dr Obeng-Okon however discredited claims by a section of the public that the delay in securing the programme is a signal that it (programme) might not see the light of day.

He was of the view that the delays might be genuine “because the IMF programme involves a number of multiple tasks that must be undertaken before the final deal is signed.”

Dr Obeng-Okon added that these take time because the IMF team needs to be convinced before endorsing the country’s blue print. He however said the IMF team has made good progress in recent weeks on the plan to clean up the payroll, finalise the remaining details of the government's medium-term reforms, as well as firm up financing assurances for the possible programme.