Economy relatively stable under IMF deal - Economists

Some economists have welcomed impacts on the economy of the US$918m IMF budgeted support, which they say has helped to stabilise the local currency and placed the economy on a recovery path.

Their comments contradict earlier remarks by some analysts who questioned benefits of the IMF deal to the economy.

In an interview with the B&FT, a senior economist at the University of Ghana, Dr. Ebo Turkson, opined that the IMF programme has restored a measure of fiscal discipline that has substantially contributed to stabilising the local currency.

“Apart from a few challenges we are going through in terms of increments in taxes and the like, the IMF deal is on-track. The World Bank, as at the last time they reviewed the standard performance, gave Ghana a plus -- attributing it to the reform package the Fund has prescribed. In terms of cedi-stability, we can see some relative improvement over the past two months -- and I am sure the reform package is part of the reason we are seeing this,” he said.

He further added that the extended facility programme, which began in April last year, has brought about control in government spending, saying: “we can also see government not overspending too much. As we speak, there is a freeze on public sector wages, there is a freeze on employment; and these are some of the expenses that increase government spending. Therefore, we can say the IMF deal is on track and so we can commend the government for that.”

Dr. Turkson further advised government to cut down unnecessary spending and avoid imposing high taxes on industry, in order to help the economy get back on a good footing.

Dr. Turkson’s view is backed by the CEO of the Institute of Chartered Economists Mr. Daniel Anim-Prempeh, who told the B&FT that assessing the programme’s success and its effects on the economy at this stage (barely two years) and drawing conclusion that it is not yielding any good result is premature -- adding that the programme is showing some positives for the economy.

“I think it is also premature to conclude that the programme will not yield good results for the economy. However, I would like to say that the IMF programme has come with some difficulty in the form of scrapping utility subsidies that government used to provide for citizens; and even though we have not yet reached the expected stabilisation of the economy, we cannot deny the fact that the IMF deal has relatively stabilised the forex market. During the first quarter of this year we have had a fairly stable exchange rate, and this can be attributed to effects of the IMF programme,” he said.

Government last year reached a 3-year deal with the Washington-based lender for an economic assistance programme worth more than US$918million, with government required to meet certain conditionalities to access the facility -- albeit in tranches. So far, the country has passed two separate programme reviews and received a total of US$230million from the Fund.