The government has been urged to begin discussions with the World Bank management on the graduation process from a low income country status to that of middle income.
According to experts, the country has to seek clarification on expectations as the country graduates from International Development Assistance (IDA) of the World Bank on how to repay loans which were accessed during the period under IDA and also how to access funds from International Bank for Reconstruction and Development (IBRD). This is important in ensuring consideration of the full range of implications and obligations for early repayments and potential for access to IBRD.
Additionally, the government has been encouraged to plan for its aid exit from other donors over the medium term, as well as focus on domestic revenue generation to replace any lost revenue streams.
Similarly, Ghana has to aggressively pursue oil sector and financial management reforms to maximize revenue, improve public expenditure quality and enhance investor confidence about the future risks as the country graduate from IDA to its new status.
These submissions were made by Dr. Todd Moss, Vice President of the Center for Global Development, USA, at a roundtable discussion organized by the Institute for Economic Affairs (IEA).
Speaking on the theme "Ghana's Middle-Income Status: Prospects and Implications", Dr. Moss indicated that Ghana's economy has been growing faster than anticipated and this came with new responsibilities. "With the rebasing and the discovery of oil in commercial quantity, the country has now moved from Low Income Country (LIC) to Lower Middle Income Country (LMIC) of which we need to be celebrating instead of being worried about the new status."
With the new status, Ghana in the next three to five years will graduate from IDA, and therefore not qualify for concessionary loans and other assistance that the country enjoyed when it was a low income country.
"Not only will Ghana cease to receive funds from IDA, but it may have to accelerate repayment of its existing debt. When the operational cutoff is breached three years in a row by a creditworthy borrower, an accelerated repayment clause is triggered that allows the World Bank to double its principal repayments," he said.
Dr. Moss pointed out that, once the country graduates from IDA, it will have to repay its debts to IDA at a faster rate otherwise the debt could double and if caution was not exercised this could plunge the country back to a low income status.
The country, according to Dr. Moss, now qualifies to access credit on the world market with higher interest rate as well as shorter repayable terms because the country is seen differently.
He noted that, even as Ghana leaves the IDA it will become eligible for IBRD lending, which could result in even larger inflows, at higher interest rates and under a new loan decision process.
He said Ghana's relationship with external agencies, would certainly affect the perception other countries have about Ghana and that in turn could lead to a policy change, both positive and negative implications. "As perceptions of Ghana's attractiveness to investment destination improve, the country should see a wider range of private financing options. Income status is one indicator of maturity and ability to repay."
Dr. Moss advised that the managers of the economy make known to the populace the issues on the ground. He believes prudent use and maximization of resource would help the country achieve the desired status which could be sustained.
"The country would have to develop other sectors of the economy. For example, the export, agriculture, local industries, private sector, among others to help sustain the growth and not run out like Gabon," he said.
Commenting on the subject, Hon. Papa Owusu Ankomah, MP for Sekondi, indicated that the new status was a challenge to the leadership of the country to sit up and put measures in place to reflect the new status.
"The people should have a sense of urgency. Let the people understand that things have changed. The dependency nature of our people should change. It is very necessary for growth."
Mrs. Elizabeth Villars, CEO of Carmellote espoused the position of Hon. Owusu-Ankomah, saying that Ghana had since independence been highly dependent on donor inflows, thereby providing impetus for the donor agencies to influence the country's policies.
"It is time we looked for good and responsible leaders who can lead us and change the fortunes of the country. With what is currently happening in the Euro zone, we as a country should know that we cannot depend on them any further," she submitted.
During the discussion session, many of the participants agreed that the time was ripe for the country to wean itself from donor support, hence the need for the government to implement measures to move the economy forward. Conversely, some of the participants were pessimistic about the country's ability to be self reliant.
A Deputy Minister of Finance, Mr. Seth Terkpeh, who chaired the forum, admitted that governments over the years had failed in many sectors and therefore more needed to be done. "There is the need to sit up to straighten things and make the best of the new status," he said.
He also noted that the government would have to reduce subsidy on services and reduce domestic borrowing which was more costly.
Mr. Terkpeh submitted that the government had put in place the Petroleum Revenue Management law to show how revenue generated from the oil sector would be used, to forestall any possible mismanagement.
He indicated that the government would work hard to sustain the new status. "Over the years we (Ghanaians) have been waiting for a time like this when the country would grow. The last time the country went into the negative was in 1983. We will do everything in our power to sustain the new status," he emphasized.