‘Lasting fiscal discipline needed to consolidate IMF bailout’

An investment banker, Mr Kofi Benteh, has appealed to the government to roll out realistic homegrown permanent fiscal measures to augment the International Monetary Fund’s (IMF) bailout to help boost and sustain investors’ confidence.

He said the financial rescue to the economy would surely stir confidence of the international community and its “surrogates” and that local businesses also needed to be made confident in the economy by government demonstrating sustainable long-lasting approach to fiscal discipline.

Mr Benteh, who is the vice President of Global Investment Bankers Limited, told the Ghana News Agency on Tuesday that the government must guard against complacency with the financial rescue to the economy and focus on implementing permanent fiscal disciplinary measures.

He said IMF programmes did not encourage “reckless behavior and no country would deliberately court crisis even if its assistance would be forthcoming because the economic and social pain that come with it is simply enormous.”

Mr Benteh said due to its severe conditionalities, countries did not fancy entering IMF programmes unless they absolutely had to, and that explained why Ghana had insisted on its homegrown solutions.

He said the bailout implied managers of the economy have “thrown in the towel and cannot wait till fruition of the homegrown policies”. “We have come to this level because we are seeing an exodus of foreign exchange due to very unfavorable balance of payment and widening budget deficit among others,” he added.

He said IMF bailout in whatever form it took involved a loan that largely comes with “very stringent conditions” hence, government needed not necessarily draw down on the full package.

Mr Benteh said the loan package would increase forex supply in the economy and provide direct funds to the Central Bank to support payment of debts falling due whilst limiting the adverse effects of repayments on the “cedi-dollar war”.

“If exchange rates are stabilized and excessive speculations avoided, the business sector will revive and improve output,” he said, adding but many people view the IMF with disdain and argue that their intervention causes more harm than good.

He said it was expected the IMF would impose the necessary reforms on the economy, some of which are homegrown policies that had already commenced by government. These include privatization of state owned enterprises, control of money supply, fiscal discipline and fighting corruption.

The IMF bailouts have mainly been directed towards stabilization support and restoration of market confidence to a battered economy, but Mr Benteh cautioned that with its enforced disciplinary measures, government ought to insist on self-discipline otherwise “all the pain the economy will suffer will be in vain”.