The purpose of this opinion is not to judge how appropriate the latest decision of Ghana to seek IMF help is but to raise broader issues and emphasize that the IMF is indeed a rescuer though we pretended in times past.
Problems drive countries to IMF …
Countries go through a concentric cycle of economic management troubles. The trouble may emanate from an epidemic, natural disasters, external shocks among others, but ultimately transformed into economic and financial problems. Simply, human existence is socioeconomic in nature and nobody can solve human problems without economic and financial implications.
Lockdown …
People are genuinely apprehensive about the need for a lockdown because of livelihood concerns. The government could be said to be delaying its ultimate decision because of lack of funds to deal with the huge financial demands of a lockdown.
One of the potent measures to mitigate sporadic spread of the Coronavirus has been lockdown, but in the Ghanaian and African context, it will be a disaster if such lockdown plans do not include livelihood support strategies. These strategies call for financial support which African governments do not immediately have, hence the motivation to approach the IMF. The IMF had always served as a rescuer to Ghana under both NDC and NPP. The first opportunity by the NPP to govern this country under the 1992 Constitution, Ghana was rescued by the IMF & World bank through the HIPC initiative. Also, between 2017 and 2018 Ghana benefited from an IMF program via the extended credit facility agreement from April 2015. It is now normal for the government of Ghana to apply to benefit from the Rapid Credit Facility (RCF) which is an existing credit facility in the portfolio of facilities by the IMF. This means the vilification of the IMF by some top political and media actors during the recent ECF exit was inappropriate and ill-informed. There are definitely some negatives when dealing with the IMF but those vilifications now typify a sense of ungratefulness on the side of those who engaged in the conduct.
Though the RCF is generally to deal with poverty reduction when developing countries face balance of payment difficulties, Ghana qualifies under emergency factors due to the Coronavirus which portends to compromise growth prospects and seriously undermine balance of payment position.
The main feature of the RCF is the zero interest rate with grace period covering about 5.5years for 10-year maturity loan. This defines the concessionary nature of the RCF as against most of the recent market-based loans (commercial loans) with greater burdens of repayment.
This loan does not attract program based reviews and evaluation by the IMF, but Ghana must prove how the facility will address underlying balance of payment issues and deal with the Coronavirus pandemic from public health crisis management perspective and financial support to vulnerable families.
While waiting for the IMF concessionary loan, a lockdown proposal should be executed using some mediating factors. These mediating factors include:
1. Interim rent waivers/subsidies or extension for low income families;
2. Interest payment postponement and debt restructuring for low income households and micro and small businesses;
3. Strategic financial and fiscal stimulus arrangements for businesses.
Government should look at the Coronavirus crisis management comprehensively to establish objectively the effects on budget implementation, vulnerability of businesses, temporarily job losses especially for informal sector, self employed, effects on the financial sector and general support services.
Seeking IMF support to quickly fight Coronavirus effectively and reduce risk to frontline health professionals and stop the spread is essential. Hopefully, life should return to normal, same with economic activity, when our rescuer, the IMF, intervenes rapidly.
