12 February 2016

Ghana: IMF Position On Economy Rejected

Recent remarks by the International Monetary Fund (IMF) on the state of the Ghanaian economy have not gone down well with businesses, labour and some economists in the country.

These stakeholders have rejected the IMF's reference to the Ghanaian economy as one that is improving.

Last week, the Fund's Deputy Managing Director (DMD), Mr Min Zhu categorically told the media in Accra that "we see the whole economy moving in the right direction."

Mr Zhu who paid glowing compliments to government over its adherence to fiscal consolidation expressed the IMF's high expectations of Ghana's rebound in economic growth this year.

But business operators in the country say there is no such sign of improvement in the economy as their businesses cannot continue to suffer losses.

They told this paper the macroeconomic environment continues to suffocate their businesses while government's own policies are worsening their plight.

Chief Executive Officer of the Private Enterprises Federation (PEF), Nana Osei Bonsu stated that policies of the IMF are eroding the ability of Ghana's private sector to flourish.

He pointed out that the reckless imposition of taxes on businesses which is an ingredient of the IMF support programme was leading to job losses.

"We have high inflation; we have high cost of money; we have dumsor; we are unable to strategise due to the uncertainties occasioned by currency volatilities, all of which lead to high cost of doing business," he lamented.

According to him, most businesses are unable to re-tool appropriately and so are operating below optimization leading to massive job losses and the closure of many.

The PEF boss noted that there was no way the Ghanaian economy could be described as one moving in the right direction.

Beyond complaints from the business sector, workers say they are feeling the pinch of the country's economic downturn and cannot agree with the verdict of Bretton Woods Institution.

Secretary-General of the Industrial and Commercial Workers Union (ICU), Mr Solomon Kotei told this paper that "labour finds it difficult to accept the IMF's position; maybe the economy is moving in the right direction on paper but not on the ground."

According to him, "after unleashing new tariffs and taxes on Ghanaians if the IMF tells us that our economy is moving in the right direction, we find it problematic."

"Our incomes have shrunk drastically; my income that could afford me x+ y some years ago is now giving me x - y so where is the improvement?" the ICU boss queried.

Indeed, as far as the plight of labour is concerned, it is interesting to recall that workers have for the past three years suffered real wage decline as result of the rising inflation.

For instance in 2013, salaries for public sector workers saw a 10 percent increase while the average inflation rate for that year was 11.7 percent; in 2014, workers were given another increase of 10 percent (Cost of Living Allowance) but by then the average inflation rate had risen to 15 percent while end-year inflation was 17 percent.

The situation was the same in 2015 as workers received no less than 10 percent in wage increment, yet had to contend with a higher inflation of 17.1 percent. This means all wage increments have been neutralized by the rising inflationary pressures occasioned by the poor management of the economy.

Pointing out some of the issues based on which an economy could be measured as moving in the right direction, Mr Kotei said there should be increased exports over imports however Ghana remains highly import dependent, "and we continuously have seen our exports revenues drop."

"Cocoa has experienced a shortfall, gold is not doing well as it used to some time back and as for timber and the other minerals the least said about them the better," MrKotei lamented.

If you take gold, all the major mining companies have virtually carried out redundancies and are neither employing not recruiting, so unemployment is an albatross on our neck.

"For any expert to say that this economy is improving and moving in the right direction leaves much to be desired," ICU's Solomon Kotei ended.

Business Finder's interaction with some economists and on the issue revealed pessimism over the country's economic prospects in the medium term.

They were concerned about the fact that almost a year after signing onto the IMF programme, the expected policy credibility and confidence is yet to be restored.

Ghana's economic indicators compared with its peers remain far from impressive as inflation (17.7 percent), lending rates (26 to 36 percent ) and taxes on goods and services are among the highest if not the highest.

Indeed, the deterioration in the Ghana's business environment has resulted in firms relocating to neighbouring countries including Ivory Coast and Nigeria where they find a friendlier atmosphere.

Research fellow at the Institute for Fiscal Studies (IFS), Mr Leslie Mensah described the IMF statement as in harmony with the objectives of its programme with Ghana but "far from the reality on the ground."

"The programme has not performed as well as we would have hoped but the economy is still in a frail state," he said.

The present state of affairs has led some experts to conclude that Ghanaians must accept the reality of a lower standard of living.


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