Ghana is no longer interested in IMF

Ghana will no longer need financial support from the International Monetary Fund (IMF). If that happens, Ghana will join the growing list of developing countries backing out of IMF blueprint for economic growth.

The Minister of Finance and Economic Planning Mr. Kwadwo Baah Wiredu announced this last Thursday when he presented the 2007 budget to Parliament.

“Our disciplined management of the economy and the use of IMF resources have resulted in unprecedented economic stability and economic performance that has positioned the country for accelerated growth”, Baah-Wiredu told the House.

He explained that the latest Poverty Reduction Growth Facility (PGRF) expired on October 31, 2006 and that the government has decided to exit the PRGF and the use of the IMF’s financial resources, while continuing to pursue our development agenda in line with the country’s aspirations.

Government he said will now enter the international capital markets by 2007, taking advantage of stable macroeconomic conditions as well as the confidence of the markets in the economy which is reflected in the B+ sovereign rating of the economy.

In addition, government will seek more funding by requesting access to the non-concessionary loan window of the World Bank and African Development Bank.

“Government sees this as a major turning point in the economic history of Ghana and will be approaching it with all the necessary precautions,” he said.

The Minister further promised that the size of borrowing will be well within the debt sustainability of Ghana. Ghana, he said has had a long and fruitful relationship with the IMF which has supported her economic programme with annual disbursements in 20 of the last 23 years.

In spite of the announcement, Baah-Wiredu said Ghana will continue to meet its Fund obligation as an active member, adding that Ghana will also take advantage of the Fund’s Policy Support Instrument.

This, he said will enable the country to seek ongoing IMF advice and endorsement of economic policies in order to provide positive signals to the nation’s development partners as well as the global economy.

“While reliance on donor-provided grants and concessional loans has served well, there is, however, the need to expand the scope and structure of financing if government is to meet its goal o f scaling up investments for accelerated growth from the current six percent to eight percent annually.

In this regard, the Minister said the government will establish a high powered project evaluation unit to access and monitor projects benefiting from these resources to ensure that they can be justified in terms of economic returns. On policy initiatives towards economic independence, the Minister said the government has built a strong political, social and economic foundation from which it is now ready to launch a new and intensified thrust for accelerated growth.

“As we shift to a new development paradigm, numerous challenges will confront us,” the Minster said adding, “This year’s policy initiatives are geared towards confronting these challenges.”

Some of the initiatives include promotion of home ownership, diversification of sources of funding, enhancement of revenue, tax relief and incentives as well as improvement in the business environment.

Elaborating on the progress Ghana has made in the business environment, the Minister said Ghana’s ranking in the 2007 World Bank Doing Business Report was 94th compared to last year’s rank of 102nd.

Besides, Ghana was rated among the top 10 reformers on the ease of doing business despite the fact that some of the scores reflected the misinterpretation of local requirements.

Furthermore, the Minister said government is strengthening the implementation of the Financial Administration Act of 2003, the Public Procurement Act 2003 and the Internal Audit Act also of 2003, to further ensure transparency and reduction of corruption in the delivery of government services.

Mr. Baah-Wiredu moreover, said government is developing a national index that tracks the costs of doing business in the country while improving the process of reform by opening up the process of design and implementation to more stakeholders in order to build consensus and ownership.

Ghana’s decision to wean itself from IMF financial support is a step in the right direction for some civil society activists.This is because the IMF came under heavy criticism in the last Social Watch report which was launched in Singapore in September during the World Bank and IMF annual spring meetings. Commenting on the activities, especially governance of the Fund and the Bank and on aid in general, the report said only a fraction of aid money actually goes to help the poor in developing countries. This is because administrative costs, technical assistance, accounting for debt relief and tying aid to purchases in donor countries are some of the reasons why about 60 percent of aid money is not available as money that can be spent on real and urgent development needs.

The report also said since 1991, net transfers and net disbursements from the International Bank for Reconstruction and Development (IBRD) of the World Bank have been negative.

According to the report, “The financial viability of the IMF has come to depend on the financial instability and crisis in emerging markets.”

Since there are no crises to solve, the IMF is finding it difficult to maintain itself and pay its staff of approximately 2,716 from 165 countries.

“All major emerging market economies, except turkey have now paid off what they owed and exited from IMF Supervision leaving only the poor countries as its sole regular clientele,” said the Social Watch Report which is prepared annually by a coalition of international NGOs. The IMF lends from its PGRF a very small proportion of the financing made available to developing countries.

At the end of 2004, outstanding PGRF credits were less than 9,900 billion US dollars or 10 percent of outstanding total IMF credits.

In 2005, total PRGF lending approved was less than 500 million US dollars. Information available at the IMF website indicate that as at July, 2006 its outstanding loans to 74 countries was $28 billion, of which $6 billion to 56 countries were on concessional

The International Monetary Fund was created in 1945 to promote the health of the world economy. Headquartered in Washington DC, it is accountable to the governments of the 184 countries that make up its near-global membership.

It was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, U.S. in July 1944. The 45 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s.