[ 2017-01-16 ]

President Akufo-Addo [right] with Ken Ofori-Attah, Fianace Minister designate

IMF hints at bailout renegotiation as it engages new gov’t in weeks
The International Monetary Fund (IMF) has given
indication it is open to renegotiating some
success benchmarks of its ongoing 3-year External
Credit Facility (ECF) programme with the
government of Ghana, following government’s
inability to keep to the 5.2percent fiscal deficit
target.  

In an email response to questions posed by the
B&FT, a spokesperson of the Fund in Washington
said a team “will be ready to visit Accra in the
coming weeks to discuss recent economic
developments and hear from the authorities about
their plans for engaging with the Fund going
forward.”

Ghana, the response said, appears unlikely to
achieve its fiscal objectives for 2016, given the
outturn for the first three quarters of the year,
calling for “stronger efforts.”

The Fund expects the overall fiscal deficit, on a
cash basis, to be some 2 to 3 percentage points
higher than the 5.2 percent of GDP that it
projected in September, “owing to a weak revenue
performance and higher than planned capital
spending.”

Prior to the December 7 elections, the IMF had
insisted the programme, which it described then as
“broadly satisfactory,” would not be affected
should there be a change of government.

But after the immediate past Finance Minister,
Seth Terkper, in his last press interaction
following the elections, confessed that government
will miss the fiscal target, the Fund appears to
have relaxed its earlier tough posture, saying
“We will deepen our engagement after the new
finance minister has taken office.”

Some analysts have said it would be virtually
impossible for the new government to carry out the
extensive tax cuts it promised whilst keeping to
the bailout programme, especially as public debt
remains a major problem.  

Although the Fund’s last review of the bailout
programme, published in late September, commended
the then government on its performance, it warned
about the poor revenue performance, among other
things, which it said could impact negatively on
the 3-year deal.

As it turns out, the poor revenue performance, as
well as the John Mahama-government’s “higher
than planned capital spending” in the run up to
the polls, culminated in leaving the Fund
programme in a less favourable state for the new
administration.

“Going forward, this means that stronger efforts
will be required in order to achieve the fiscal
consolidation targeted under Ghana’s
Fund-supported Extended Credit Facility
program,” the IMF said.

“Further discussions on this will be held with
the authorities during an upcoming IMF staff visit
to Ghana.”

The incoming Finance Minister, who remains pivotal
to the ambitious economic programme of the
government, is most likely to ask the Fund to
relax its austere measures in order to allow the
new government roll out key campaign promises.

The new government has promised varying tax cuts
as a means of stimulating economic growth and to
create jobs for the mass of unemployed youth.

The upcoming talks will, among other things,
afford government the opportunity to put forward
its approach in dealing with the out-of-hand
public debt, which hovers around 70 percent of GDP
or a whopping GH¢112billion.

Source - thebftonline.com

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