Ghana-IMF meeting

Since July 2022, when the Government of Ghana decided to go to the International Monetary Fund (IMF) for assistance, many varied opinions have been expressed concerning this move with the Minority saying that they have been vindicated because the government should have indicated its intention far earlier than it did.

Since 2017, the Akufo-Addo Administration has been able to manage the country very well, ensuring that GDP growth for 2017, 2018 and 2019 were very impressive. Introduction of policies such as One District One Factory, Planting for Food and Job as well as many other programmes have all put the country on course towards rapid economic recovery. It was thought that this would be the general trend in the ensuing eight to 10 years for the country.

UNFAVOURABLE CONDITIONS

Unfortunately, this was not to be and the entire world was hit adversely by certain unfavourable economic conditions. These unfavourable conditions brought economic difficulties which made life unbearable for the country.

The outbreak of the COVID-19 which affected Ghana and the rest of the world forced the world to spend huge sums of money to fight the pandemic. President Akufo-Addo made it clear that he would prefer to fight hard and save lives rather than lose these lives. To him, once lives are lost, they cannot be brought back, so it was better to use available resources to fight the pandemic.

Even if all resources are depleted while lives are saved, there would be an opportunity to fight for economic recovery and improve upon the lives of the people in order to bring the standard of living to a satisfactory level. This appears to be what is happening now and this is one reason the government has been forced to go to the IMF for assistance.

HIGH CRUDE OIL PRICES

Another reason Ghana has been forced to go to the IMF is the outbreak of the Russia-Ukraine war which has brought untold hardships to countries in the world. Crude oil prices rose far above 100 dollars per barrel and countries in the world, both developed and developing, had no choice but to pay for unbearable fuel prices.

In Europe, Canada, America and elsewhere in the developed world, inflation rose very high and made economic life extremely difficult. The situation was even worse in developing countries whose incomes were generally low. In both developed and developing countries, this trend of unfavourable economic life has continued till today.

IMF BAILOUT

As a result, over 100 countries from various parts of the world had to go to the IMF for assistance.

This is the fundamental reason Ghana, like many other countries in Africa, had to turn round to the IMF for economic and financial bailout. Seen in this way, the reason for Ghana’s decision to deal with the IMF is not due to mismanagement of the economy. Rather, the unfavourable external economic conditions are the factors that have pushed the country from its economic growth to an area of unbearable pressure which has forced the government to go for IMF bailout.

COMPREHENSIVE DSA

The Government of Ghana commenced discussions with the International Monetary Fund on Monday, September 26, 2022. According to the government, a comprehensive Debt Sustainability Analysis (DSA), which is a key requirement for securing an IMF-supported programme is currently ongoing.

This is a necessary requirement to ensure that Ghana’s debt is on a sustainable path. A release by the Ministry of Finance on September 26, 2022, said, “The Government of Ghana is putting together a comprehensive post-COVID-19 economic programme which will form the basis for the IMF negotiations.

The COVID-19 bailout programme has become necessary because Ghana was forced to deplete its entire resources in combating the disease. Having gone through this experience, it has become necessary for government to put down a programme to justify why the country needs a bailout from the IMF.

WHAT IMF PROGRAMME SEEKS TO ESTABLISH

The programme seeks to establish a macro-fiscal path that ensures debt sustainability and macroeconomic stability underpinned by key structural reforms and social protection. The IMF mission that arrived in Ghana on September 26, 2022, is currently in talks with the Ministry of Finance and the Bank of Ghana.

If the IMF team leaves the country, negotiations will still continue between Ghana and the Fund until an agreement is reached. It is this agreement that will be implemented by the government of Ghana under the supervision of the Fund.  

The Debt Sustainability Analysis (DSA) is an IMF-supported programme which is anchored in the analysis of a country’s capacity to finance its policy objectives and service the ensuing debt without unduly large adjustments, which could otherwise compromise its stability.

IMF FORMAL FRAMEWORK

To this end, the IMF has developed a formal framework for conducting public and external Debt Sustainability Analysis (DSA). This serves as a tool to better detect, prevent and resolve potential crises.

Here, the framework has been made operational since 2002. The objective of the framework is threefold. In the first place, it accesses the current debt situation. Here, it looks at its maturity structure, whether it is huge, small, bearable etc.

Secondly, the framework identifies vulnerabilities in the debt, that is, whether there are loose ends or other conditions that will result in repayment difficulties. This also helps to access the debt situation.

Finally, the framework helps to examine cases where such difficulties can emerge to create problems in terms of the restructure of the debt and whether payment can be smooth or difficult. At the end of it all, the Fund would be able to know the position of the debt of a country.

FRAMEWORK IMF TO DETERMINE DSA

Ultimately, this framework would help the IMF to determine the Debt Sustainability Anslysis of a country and come up with solutions for the way forward. The Debt Sustainability Analysis (DSA) is not applied to all countries in the same way. The Fund examines each country on case by case basis.

What this means is that two countries may have similar situations but the IMF may apply different programmes to different countries, depending on available conditions and programmes and their justifications. When all these things have been done, the nature of the bailout programme would now be made available to the country concerned.

As of now, no one knows the nature of the programme to be implemented by the IMF. Negotiations would have to be complete before the IMF programme and its conditionalities can be made available. Thus, members of the Minority and their cohorts cannot assume that they know what the outcome would be. If this is the case, then their exaggerations of the situation must stop since it would not serve the interest of anyone in the country.

Email address/whatsApp number of author:

Pradmat201@gmail.com (0553318911)