First Published May 21, 2023
Buckle up. Things are not about to get better under this IMF Program because the Government continues to make the same bad choices that led us to this program in the first place.
First, using the cedi equivalent of IMF’s 600 million dollars as budgetary support is circumventing the zero BOG financing policy under the Program. Doing this throughout the program will essentially result in BOG financing of 30 billion Ghana cedis over the next three years. That is inflationary and will result in further depreciation of the cedi.
Secondly, the Program details as finally unveiled is still skewed towards revenue enhancement measures rather than significant expenditure reduction. These will fail for three reasons. There is a lack of political will and governance capacity to plug revenue loopholes that benefit cronies and political apparatchiks. Secondly, there is so much taxation the citizenry can bear and eventually they will force the government to back down. Thirdly, the measure used to conclude that Ghana’s tax to GDP is low is flawed as the components of inefficient government expenditure and underpaid work in our GDP is overlooked. We are therefore already at or near the limit where more taxes result in less revenue.
The program pays lip service to expenditure cuts when it should basically be asking for a halving of our budget by every means possible. The program, being a suggestion of the Government which is accepted by the IMF means that Government has no real intentions of performing the radical rationalization of expenditure that the country needs.
Finally, the implementation of most of the measures under the program leans toward supervision by government officials steeped in accounting acumen. The continuing leadership of Ken Ofori-Atta, a consummate investment banker and deal maker, does not bode well for a program seeking to balance the books. Neither is the newly appointed Minister of State for Finance, Mohammed Amin Adam, a known bean-counter.
Ghana’s 17th IMF Program was always going to be difficult as we went too late and too much damage has been done to the economy. This means this is the first program that required debt restructuring and a loss of access to the international finance market. The Government’s insistence on eating its cake and having its cake has made the pain significantly unbearable for most ordinary Ghanaians; while at the same time ensuring that persons in government or close to it continue to benefit from the largesse of the State.
However, the revelations of how government intends to proceed with the Program itself is critically frightening. This program as currently rolled out can entrench poverty and inequality for a significant section of Ghanaians for a decade by raising taxes and the cost of living to absurd levels. Its inability to half public expenditure will mean that bloated government will continue to be a feature of our economy for a long time.
This government doesn’t listen so I doubt what anybody says will change the current direction they are headed. The Opposition NDC seems too preoccupied with coming into power for the sake of coming into power to provide the counterweight we need at this time to such bad governance. Citizens can however continue to call the attention of the leaders to these issues. It is our future and those of our children that is at stake.
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