Ghana’s government seeks IMF bail out in U-turn

By Jonas Nyabor

Posted on Monday, 4 July 2022 07:18
Ghana's Finance Minister Ken Ofori-Atta speaks during the G-24 news conference at the World Bank/IMF Spring Meetings, in Washington, Thursday, April 19, 2018. ( AP Photo/Jose Luis Magana)/
Ghana's Finance Minister Ken Ofori-Atta speaks during the G-24 news conference at the World Bank/IMF Spring Meetings, in Washington, Thursday, April 19, 2018. ( AP Photo/Jose Luis Magana)/

Amid protests over spiraling prices and the rising cost of living, the government of Ghanaian President Nana Akufo-Addo has reneged on its pledge not to borrow from the IMF after hitting the wall with its domestic economic recovery plan. 

On 1 July President Akufo-Addo announced that he has instructed Finance Minister Ken Ofori-Atta to open negotiations for a programme.

“The engagements with the IMF will seek to provide balance of payment as part of a broader effort to quicken Ghana’s build back in the face of challenges induced by the Covid-19 pandemic and, recently, the Russia-Ukraine crises,” a government statement said.

Until now, the government had ruled out the option of an IMF programme, settling for a homegrown economic recovery plan that included the introduction of a 1.5% tax on electronic financial transactions (E-levy) which sparked widespread protes.

A leading member of the New Patriotic Party, Gabby Otchere-Darko, disclosed on Monday that two months after its implementation, the E-levy was delivering just 10 percent of its projected revenue.

Several protests in Accra over rising fuel and food prices and misplaced government priorities have pressured the government to do more to staunch the economic downturn.

Seeking an IMF bailout will be politically contentious for the New Patriotic Party government.

Having lambasted the previous government under President John Mahama for borrowing from the IMF, the Akufo-Addo government is in the awkward position of having to explain why it has U-turned on this issue.

Ghana’s previous programme with the IMF, a $926m bailout, was agreed under Mahama in 2015 and ended in 2019. It came with tight conditions including a net freeze on employment in the public sector, a 10% cap on the nominal increase in the total wage bill, a tighter monetary policy stance and the removal of subsidies on utilities and petroleum products.

Standing ready

The IMF says it is standing by to help Ghana navigate the turbulence.

The fund’s resident representative in Accra, Albert Touna Mama tweeted on Friday: “The IMF stands ready to assist Ghana to restore macroeconomic stability; safeguard debt sustainability; promote inclusive and sustainable growth; and face the impact of the war in Ukraine and the lingering pandemic.”

Better late

Franklin Cudjoe, president of the think tank IMANI Africa in Accra, told The Africa Report that the government’s decision is in order, although a little too late.

“It is good that we have gone to the IMF, but it is a relief that has come a bit too late,” Cudjoe said. “I think the President and his men delayed unnecessarily. The IMF conversation will take about three months to finalize any deal. They should have been there much earlier to be able to negotiate better deals.”

A programme with the IMF will buy Ghana some credibility to attract and engage with investors on the international market, says Professor Peter Quartey, the director of the Institute of Statistical, Social and Economic Research in Accra.

“Once investors know that the IMF is in there to ensure fiscal discipline, it will give them positive signals and they will be more willing to engage Ghana,” Quartey told The Africa Report.

A good deal

Quartey says the onus will be on Ghana to negotiate the best possible conditions:

“We are not in normal times and the IMF should be flexible with some of the conditions that it will impose on the country,” he said. “But ultimately, getting a credible program is the responsibility of government and after signing unto the program, it must ensure it follows through it and exits at the appropriate time.”

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