The Executive Board of the International Monetary Fund (IMF) on April 3, 2015 approved a three-year arrangement under the Extended Credit Facility (ECF) for Ghana in an amount equivalent to SDR 664.20 million or about $918 million in support of the authority’s medium-term economic reform program.
The program was aimed at restoring debt sustainability and macroeconomic stability to foster a return to high growth and job creation while protecting social spending. The Executive Board’s decision enabled an immediate disbursement of SDR 83.025 million or about $114.8 million.
This was as a result of poor economic management under the erstwhile Mahama led government causing Ghana’s economy to experience large fiscal and external imbalances under that led to a growth decline putting Ghana’s medium-term prospects at risk. Public debt rose to an unsustainable pace, recording a 72% debt to GDP ratio according to the IMF report in 2015 and the external position weakened considerably.
The NDC government embarked on a fiscal consolidation path since 2013, but policy slippages, fiscal indiscipline, reckless borrowing, rising interest rates, depreciation of the cedi, and acute electricity shortages known as Dumsor also constrained economic activities which led to high cost of doing business, collapse of companies, loss of jobs and high cost of living in Ghana.
The Mahama led government took us to IMF which subsequently imposed restrictions on us. Under the IMF conditionalities, government’s appetite for borrowing was tamed and limits were placed on government from going to the international capital market to borrow in order to improve the country’s debt distress situation and infrastructural deficit.
On the expenditure side, the IMF advised government to cut the wage bill, which has been one of the main reasons for the country’s fiscal imbalances by limiting the nominal increase in the total wage bill to 10 per cent and scrap the 10 per cent Cost of Living Allowance granted to workers.
Additionally, the Fund commanded government to freeze employment into the public sector and also do away with subsidies for utilities and fuel consumption by ensuring that the automatic adjustment formula was implemented to the core.
These prescriptions mirrored the IMF’s structural adjustment Programme for Ghana brought about hardships in the economy as subsidies were scrapped, public sector jobs frozen and wages kept at the minimum and also slowing down the developmental agenda of the Akufo- Addo led government.
However, in the mist of all these IMF conditionalities, the Akufo-Addo led government has been able to implement some remarkable social interventions like the Free SHS, Nurses and Teachers allowance, NABCO, Payment of outstanding arrears to contractors, Reducing cost of fertilizer by 50% for farmers, Scraping of Nuisance taxes , resolving Dumsor, reducing electricity tariffs drastically by 17.5% residential,30% non-residential, 10% mining sector and 25% cut for Special Load Tariff and 10% reduction in Water Tariff and still maintain fiscal discipline on the IMF Programme.
All these social interventions, policies and programs implemented by the Akufo –Addo government were to reduce hardships in the country and so we find it difficult to understand why the opposition NDC is blaming the current government for the hardship they created with their indiscretion in economic management.
The Akufo-Addo led government has shown beyond reasonable doubt that they are good managers of the economy which is reflective in the current macroeconomic stability in terms of the reduction of lending rate from 28% to 17%, inflation currently standing at 9.6% and the stabilization of the cedi.
The government is on track in getting out of the IMF program due to good economic management and meeting the main pillars of the program in terms of ensuring a sizeable and front-loaded fiscal adjustment to restore debt sustainability, focusing on containing expenditure through wage restraints and limited net hiring, as well as implementing new measures to mobilize additional revenues, structural reforms to strengthen public finances and fiscal discipline by improving budget transparency, cleaning-up and controlling the payroll, right-sizing the civil service, and improving revenue collection, restoring the effectiveness of the inflation targeting framework to help bring inflation back into single-digit territory and preserving financial sector stability to alleviate the potentially adverse impact of the strong fiscal adjustment on the most vulnerable in society and protect real income of the poor, which was dented by three years of high inflation. The government is committed to using part of the resulting fiscal space to safeguard social and other priority spending.
The completion of the 3-year IMF-supported Extended Credit Facility Programme will spur on government to implement its own policies to improve the quality of lives of Ghanaians. The end of the program means that we will have the space to design our own social and economic programs, without jettisoning the fiscal discipline and proper economic management necessary to give entrepreneurs the predictability and stability to plan properly, invest boldly to grow their enterprises, and create jobs-President Akufo-Addo
The Akufo-Addo led government in our estimation has done considerably well and must be given the necessary support to bring progress and prosperity to the good people of Ghana.