Ghana IMF deal has proven to be one of the stumbling blocks on the new govt’s path towards achieving her major goal of transforming the country’s economy.
The government of Ghana, under the leadership of former President John Mahama, signed a nine hundred and eighteen million US Dollar ($918m) deal with the International Monetary Fund (IMF).
The former president had received massive backlashes from the public for signing the deal which was allegedly not approved by the Parliament. The deal has also been criticized by many Ghanaians from different angles.
The new Akufo-Addo government since assuming office, has been looking into how to achieve their major goal of transforming the country’s economy; and the IMF deal has really proven to be one of the stumbling blocks in their way.
Among several other high tasking promises, President Nana Akufo-Addo prior to the 2016 elections, assured Ghanaians that he will give an annual allocation of $1 million to every constituency, build a dam in every village and a factory in every district while still reducing taxes.
Now faced with the economic realities of the country, ranging from high indebtedness, inflation, to currency depreciation; the new government is really seeking out ways to get any possible relief from the various economic burdens she inherited from the past administration.
Important Facts About Ghana IMF Deal
The deal between Ghana and the International Monetary Fund is a $918 million three-year Extended Credit Facility Programme signed on 3rd April, 2015 by immediate past President John Dramani Mahama.
According to the terms of the deal, the total amount will be disbursed in eight (8) equal tranches. The first disbursement was made immediately after the Executive Board approval of the programme. And since September 2016, the sum of $464.6 million has been received from the Fund. The programme will end in April, 2018.
The deal which imposes strict targets for revenue collection and spending, is targeted at reducing inflation, public debt and budget deficit; facilitating high economic growth and job creation through agriculture and infrastructure investment. It also aims at strengthening the Bank of Ghana’s monetary policy framework, as well as rebuilding external buffers. Click here to get full details of the Ghana IMF Deal.
Targets not being met
New Finance Minister Ken Ofori-Attah has revealed that three of the programme’s targets are currently not being met. They include; the growth target, fiscal deficit target and the country’s primary balance.
Under the IMF programme, Ghana was supposed to present a bill for zero deficit financing from 2015 but parliament instead passed a law allowing 5 percent financing.
Out of the economic growth end of the year set at 5.3% for the country, only 3.3% was achieved by the previous government. Consequently, the budget deficit stood at around 8% at the end of 2016, as against the 5.3% targeted under the programme.
Moreover, the GHC7 billion expenditure arrears lately discovered by the new government has contributed a great deal to increase the economy’s deficit, putting the country in a more strait economic jacket. Following the discovery of the 7 billion cedis undisclosed expenditure, the Finance Minister said the shortfall in 2016 could be close to “double digits.”
Plans for Review of Ghana IMF Deal
The Finance Minister, Ken Ofori-Attah recently disclosed that government is planning to change some of the conditions in the country’s IMF deal to suit her fiscal policies. According to the Finance Minister, the government will be meeting with the necessary staff of the International Monetary Fund to discuss the review.
“We will need to sit down with the IMF to discuss how well the programme fits within our stated goals and objectives and discuss and agree on any tweaking that we may do going forward,” Ofori-Attah said while speaking to journalists.
Meanwhile, economists say the IMF cannot effect an overall change in its programme objectives, but interim targets can be modified in relation to the performance between each IMF review. The new government could therefore negotiate less burdensome conditions owing to the fact that targets set for the end of 2016 were not met.
Ofori-Attah however, assured that government is committed to strictly sticking to the fiscal discipline of the IMF deal, to ensure that it comes out of it strong; adding that the fiscal deficit for 2017 will be two to three percentage points lower than the 2016 figure.
The Finance Minister also made it clear that government has no intentions of terminating or extending the IMF deal. He said that they are rather committed to ensuring that the programme comes to an end at the stipulated time – April, 2018.