One month after the commencement of the three-year bailout programme with the International Monetary Fund (IMF), Ghana will soon undergo a review to justify the continuation of the support programme.
A mission from the Fund will be in the country from June 17 to 30 to assess the performance of the economy per targets set for the first month of implementation of the programme.
The Fund will be reviewing government’s pay roll reforms, the freeze on public sector employment (unless if highly necessary) and the issue of subsidies and cost management especially pertaining to the energy sector.
The bailout programme was approved in early April this year with the first $114 released to the Bank of Ghana (BoG) meant purposely to shore up the country’s international reserves and help stem the Cedi’s fall.
Barring any changes after the review, Ghana would receive the second tranche of the financial package from the IMF in July this year.
Analysts are already wondering the outcome of the review in the light of the worsening economic situation in the country and especially when government is already beating its chest over achievements it claims to have chalked in the first quarter of the year.
Minister of Finance, Mr Seth Terkper is optimistic the Ghanaian economy is on the path to recovery. Last week, the Minister said his government had since 2013 been implementing a number of measures to ensure macro-economic stability check fiscal overruns.
Even though he admitted setbacks such as the two-year long shortfall in gas supply and its damning implications for energy supply, commodity price volatilities, including the decline in gold and cocoa prices which badly affected government’s revenues, Mr Terkper was very optimistic.
“Growth is expected to pick up over the medium-term to 9.2 per cent in 2017, inflation will be reduced to 8.2 per cent and the fiscal and current account deficits will be reduced to 3.7 per cent and 4.9 percent respectively,” he said.
Further recounting the progress made so far, the Finance Minister maintains that the wage bill as a ratio of gross domestic product (GDP) had reduced from 8.9 per cent in 2012 to 8.7 per cent in 2013, 8.3 per cent in 2014 and was expected to decline further this year to 7.7 per cent.
Senior Lecturer and Head of the Finance Department at the University of Ghana Business School, Dr Godfred Bokpin acknowledges the genuine effort on the part of government to meet the IMF targets even though according to him, “the fruits are not being seen immediately.”
Interventions such as cleaning up the wage bill, ongoing reforms in terms of public sector financial management, reforms in the administration of tax are genuine efforts towards achieving the goals of the IMF programme, he observes but maintains that “in terms of tangible benefits, it will take some time for results to show.”
Dr Bokpin notes that the fact that inflation remains highly elevated is not good news, adding that “when the restrictions on the economy are put together within the context of the genuine efforts being made by government, we are not making the much needed progress that we should be making under normal circumstances.”
These are genuine challenges that dwarf government’s genuine efforts at putting the economy on a path of sustained recovery.
It is important to look at the success of the programme within the constraints because “if we had reliable energy supply and firms were hiring more people, we will see genuine improvement but workers are being laid off.
Dr John Gatsi, Senior Lecturer and economist with the University of Cape Coast (UCC) sees the upcoming review as crucial for both the IMF and Ghana.
“The review is in the mutual interest of the two parties and will provide a basis to determine the efficacy or otherwise of the support programme,” he points out.
He adds that the review will provide government the opportunity to showcase how it has complied with the conditionalities contained within the agreement.
Standard Chartered Africa research boss Razia Khan maintains that checking Ghana’s rising debt, could be the way to stabilizing the economy.
She says the public debt which is inching close to 70 per cent of GDP is Ghana’s biggest problem now, adding that things could improve greatly if much attention is given to the country’s debt issues.
The measures, dubbed “homegrown policies”, coupled with the IMF programme have so far failed to do the trick in the immediate to short term.
The country’s public debt as at March this year hit over GH¢88 billion according to the Bank of Ghana.
Some have argued that the amount could cross the 70 per cent mark, as parliament has approved new loans since the beginning of this year.
The IMF has warned that Ghana risks a return to the list of countries that could soon be classified as high debt distress countries.
Razia Khan says it might take a while before, investors react by bringing in capital after Ghana secured a programme with the IMF.
Ghana’s development partners have for more than a year remained on the fence holding on to their funds due largely to what has been described as uncertainty about the management of the economy.
Even though the European Union (EU) and the World Bank have recently commenced support to the Ghanaian economy, many including government and the BoG were expecting a sizeable release by this time.
But Razia Khan believes investors currently still have a difficulty seeing their way clear because there's a lot going on elsewhere in the world economy that attracts them.
She noted that it would be misplaced to expect that investors would react immediately, following the signing of the IMF programme with Ghana.
According to her, even though the long term prospects of the Ghanaian economy look bright, the present challenges would persist for a while. She pointed out that government ought to remain committed to fiscal prudence and continue to implement measures aimed at dealing with the public sector pay roll fraud.
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