Accra, Ghana, November 12, 2018//-A renowned economist and Professor at the University of Cape Coast (UCC), John Gatsi, has warned Ghana that its exiting of the three-year expanded International Monetary Fund (IMF) program may not create any extraordinary opportunities in 2019 and [ads1]beyond.
According to him, “Exiting an IMF program may not mean anything extraordinary. It is a rather a time to test our commitment to fiscal discipline, prudent debt management and avoid monetary policy management drawbacks”.
Prof Gatsi gave the warning when he was reacting to government officials’ euphoria over the exiting of the program.
He noted: “Ghana has a number of official program engagements with the IMF, mainly to help restore the country to a path of good economic governance and reduce risks of weak policy management.
The engagements in the past were only possible when our efforts were not able to address financial difficulties, high indebtedness and unattractive policies”.
Such exits, Prof Gatsi stressed have led to huge borrowing, high fiscal deficits and huge public financial management exposures.
“Borrowing has been high even under an IMF program, what happens without it? Perhaps, the past results may reoccur as government hints of huge borrowings in the 2019 budget”.
Prof Gatsi who is also the Head of Finance Department at the UCC Business School continued: “Anyone treating possible exit from the IMF program as an important element of the 2019 budget to be celebrated is assuring us of possible return to imprudence by economic managers”.
He however admonished the managers of the Ghanaian economy that; “the possible exit demands commitment to doing only what is right and nothing else”.
The program may officially end in April 2019 to ensure that proper assessment for the last quarter financial data is done.
Measures to address the burden of interest repayment, limited investment in capital projects and job creating avenues with equal opportunities, improved revenue performance are key demands for the exit, he added.
The IMF has insisted that the April 2019 completion date for Ghana’s program would mainly depend on meeting some critical targets during the mission review visit recent in September.
IMF country representative, Natalia Koliadina, said the seventh review would be very crucial “because it will indicate how far or how close Ghana is from the completion of the program and how achievable the targets are”.
“Everything depends on how quickly we can get in December data. I don’t expect that the Board will meet anytime later than April,” she said.
If Ghana fails to pass all the benchmark outlined, in the seventh review, there is the likelihood that the proposed April 2019 deadline could be missed, according to economists.
The key pillars of the program include a sizeable and frontloaded fiscal adjustment to restore debt sustainability, focusing on containing expenditures through wage restraint and limited net hiring, and measures to mobilize additional revenues.
Additionally, there are also the structural reforms to strengthen public finances and fiscal discipline by improving budget transparency, cleaning-up and controlling the payroll, right-sizing the civil service, and improving revenue collection.
Other pillars of the program are restoring the effectiveness of the inflation targeting framework to help bring inflation back into single-digit territory and preserving financial sector stability.
The Akufo-Addo-led government in May 2018 requested IMF to extend the program until December 2018, from its current end date of April 2019, to boost efforts to stabilize the economy. The extension would reassure markets and also likely bring in additional IMF funds to the program.
In 2015, Ghana entered into a three-year agreement for 918 million dollars to, help restore others, restore macroeconomic stability and policy credibility.
The program aims to restore debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending.
African Eye Report