Ghana: Negotiate to Reduce IMF Austerity Measures

Riots in Ghana (file photo).

The government has declared its decision to go to the International Monetary Fund (IMF) for a bailout and the IMF's Country Representative, Dr Albert Touna-Mama, has confirmed receipt of the request to support the country's own economic programme.

Since the news broke on Friday, various views have been expressed by both experts and non-experts.

The politicians' views can mostly be described as partisan and propagandist and coming from non-experts though there are some politicians who can provide expert knowledge to inform public comments.

The views from some of these non-experts tend to paint the picture that it is wrong to go to the IMF for support.

However, the experts like the Head of Research at the Institute of Fiscal Studies (IFS), Dr Said Boakye, says going to the IMF should have happened earlier in 2021.

Similarly, an economist and Doctoral Researcher at the University of Cape Town, South Africa, Eugene Bawelle, says the government should have done so in 2020, when the debt sustainability was a bit manageable.

Clearly, the experts' position could not be taken by the government, considering the fact that even in February this year, while garnering support for the passage of the bill to give legal backing to the E-Levy, the Finance Minister, Kenneth Ofori-Atta, told a gathering at a town hall meeting in Tamale, the Northern Regional capital, that "Ghana will not return to the IMF for a bailout despite the mounting economic challenges".

He explained that Ghana is a nation of pride and would seek from within solutions to the financial challenges it was facing.

Looking at the prospects of the E-Levy to bring in enough revenue to address the country's financial woes and at the time he was soliciting national support for it, the minister couldn't have said anything otherwise.

It would have been a great achievement by all Ghanaians if the E-Levy had raked in the expected revenue and saved the country from IMF support and conditionalities.

In fact, no one who professes to seek the good of the country should jubilate at the decision to go for an IMF bailout because it gives him the opportunity to castigate the government for the sake of it or for political gain.

The IMF exists to serve as a lender to modern governments and an overseer of international financial markets.

The global financial institution provides help for member

nations to fix balance of payments problems and fight off economic crises.

The IMF does not impose programmes on borrower nations; rather it tries to provide support according to the request of the borrowers.

However, to meet the request, it imposes conditionalities, which usually call for austerity measures that bring some economic hardship to the borrower nations.

A government statement so far says the engagement with the IMF would seeks to provide a balance of payment support as part of a broader effort to quicken the country's build-back in the face of challenges induced by the COVID-19 and, recently, the Russia-Ukraine crises.

The Minister of Finance adds thatit is to restore confidence in the economy and rebound it from the difficulties.

Since it is not clear what programme the country will present for the negotiation, some analysts are predicting the Ghana COVID-19 Alleviation and Revitalisation of Enterprises Support (CARES) and YouthStart, which is aimed at supporting youth-led enterprises.

Whatever it is, the Ghanaian Times believes the bailout, as usual, is to tame the country's worsening economic conditions and increasing public debt.

What is important now is that the team that will engage with the IMF should do prudent negotiation that can reduce the number of austerity measures and in the best interest of the country.

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