Just like a student who cannot progress to the next grade because he failed his exams, an economist with the University of Ghana Business School says Ghana cannot back out of the IMF programme just yet because it failed to meet it targets.
Prof Godfred Bokpin insists for Ghana to graduate from the IMF programme it must first meet set targets agreed before the country entered the programme.
He was reacting to the reports of a one year extension of the IMF programme which is likely to see the programme end in December 2019 instead of the initial December 2018 agreed with the new government.
The John Mahama administration signed a $918 million credit facility agreement with the International Monetary Fund (IMF). The three-year arrangement signed in April 2015 under the Extended Credit Facility (ECF) was in support of the country’s medium-term economic reform programme. It was to end in April 2018.
However, there was an eight months extension by the new administration under Akufo-Addo to align the IMF programme with the budget to be read for the 2019 financial year.
For a government that criticized the previous administration for going to IMF and succumbing to all its conditionalities, it was a great subject of controversy when it emerged that the NPP government was extending by just eight months.
Just when the dust on the eight months extension was about to settle, it has again emerged the country has agreed to another one year extension.
This has triggered a vehement controversy, with both the governing New Patriotic Party and the opposition National Democratic Congressing accusing each other for the state of affairs the country finds itself.
The NPP says it had to extend the IMF programme because the previous NDC government failed to meet the target set by the IMF.
“Mr. Speaker, the promises to the Ghanaian people were, however, not kept. In fact, virtually all the targets under the IMF programme, as at December 2016, have been missed.
Fiscal indiscipline, once again, reared its head in the 2016 election year,” the president said during the budget statement.
He pointed out that the total projected expenditure for 2016 was GH¢43.9 billion (26 per cent of GDP), but actual expenditure amounted to GH¢50.3 billion (30.2 per cent of GDP).
He said even though the country overspent in 2016 it failed to raise the projected revenue for the same year.
“The total revenue target for our country was GH¢37.9 billion (22.7 per cent of GDP), but the actual revenue came in at GH¢33.2 billion (19.9 per cent of GDP).”
As a result, the president said “As compared to a target of 5.3 per cent under the IMF programme, the fiscal deficit for 2016 was 9 per cent of GDP on a cash basis and 10.2 per cent of GDP on a commitment basis (that is on the basis of expenditures undertaken but not yet paid for). It should be recalled that, at the time Ghana entered into the IMF programme to restore fiscal discipline, the fiscal deficit was 10.2 per cent of GDP. It is very clear, therefore, that the objectives set out in the programme have not been achieved,” he said.
In an interview on the Joy Fm’s SMS Thursday, Deputy Finance Minister Kweku Kwarteng in justifying why the IMF programme had to be extended by one more year, raised the same points about missed targets, something the Minority Spokesperson on Finance Casiel Ato Forson was quick to object to.
In discussing the matter on Newsnight Prof Godfred Bopkin said Ghana had no choice but to extend the programme.
“We have come to a situation where the reality tells us that we needed to swallow our pride” he said, adding, Ghana made some progress in the first year of the programme but things changed in the election year.
“In April 2015 to December 2015, whatever progress we made under the programme were effectively reversed. So technically what that meant was that we were off the programme. We sat for an exam and we failed we cannot graduate.
“The extension is a logical outcome of where Ghana finds itself,” he said.
Asked what accounted for the missed targets, he said the answer is not far from the fiscal indiscipline that happened in all election cycles from 1992 to 2016.