The Finance Minister, Mr Seth Terkper, is confident that the International Monetary Fund (IMF) programme with Ghana will bolster renewed credibility in the country’s home-grown policies.
That, he said, was expected to unlock about GH¢1.4 billion ($350 million) in budget support from Ghana’s development partners after the country had successfully sealed IMF confidence boosting reforms.
This follows renewed confidence in the country by the development partners who have withheld critical budgetary support from Ghana after the country suffered some economic gilt as a result of falling commodity prices, rising debt and growing trade and fiscal imbalances.
Mr Terkper insisted that the huge overruns were largely necessitated by oil revenue shortfalls and a huge compensation bill, not reckless spending.
He was upbeat that the move by the IMF to step in with a $918-million credit facility over a three-year period to stabilise the economy would pave the way for some offshore inflows from the development partners.
Already, the African Development Bank (AfDB), the World Bank and other development partners have played key roles in the consultation process with the IMF and appreciated the government’s home-grown policies with the IMF programme that is designed to put the economy on a path of stabilisation.
But Mr Terkper said in an interview with the Daily Graphic that the immediate release of $114.8 million from the $918 million, which is expected to provide some balance of payment support, would boost the country’s reserves and help shore up the cedi that had already dropped by eight per cent since January this year.
Hopes in oil field development
In addition to the IMF package that has begun flowing in, the government hopes to use potential hydrocarbon resources to stabilise the economy and bolster growth.
The country’s new oil fields were on schedule to start production next year, as development had passed the half-way stage, according to a source at Tullow, the lead operator.
The offshore Tweneboa, Enyenra and Ntomme (TEN) project, which will have a peak production capacity of 80,000 barrels per day (bpd), is expected to cost close to $5 billion.
Ghana, which exports cocoa and gold, joined the league of African oil producers in late 2010 when it began pumping crude oil from its offshore Jubilee fields, with the current average output at 100,000 bpd.
Port expansion
The government has also embarked on some infrastructure expansion programme in phases to modernise the country's ports. When completed, it will segregate bulk cargo operations from containerised or roll-on roll–off operations, since a new bulk handling terminal will be constructed.
IMF-backed home policies
Under the IMF deal, the country is expected to tackle its deficit and debt problems by scaling back public sector wages and salaries, restructuring and improving the ability of state-owned enterprises such as the Electricity Company of Ghana (ECG) and the Ghana Water Company Limited (GWCL) to collect their debts, better tax collection and more efficient administration.
The fund also wants further structural reform by reducing the wage bill and freezing public sector employment into non-critical areas but health and education and the scrapping of the government’s subsidy programme.
It also expects the government to hike taxes, freeze new tax exemptions and undertake a more robust assessment of large taxpayers.
Skepticism about reforms
Sceptics say while the government has made efforts to cut its expenditure, implementing further cuts in a country where elections are won on infrastructure projects executed in the final months of an electioneering year will prove tricky.
This is starkly the case, as Ghana has a record of fiscal indiscipline in election years in the Fourth Republic, characterised partly by expenditure overruns and growth in borrowing which often lead to an expansion of the budget deficit and distort the balance in the macroeconomy.
The other overruns stem from single spine policy implementation.
During Ghana’s last general election in 2012, for instance, a budget deficit of 4.8 per cent became 6.7 per cent in the supplementary budget and eventually ballooned to 11.8 per cent in December 2012.
Some analysts are doubtful of the government’s resolve to follow through the three-year IMF programme as the country goes to the polls next year amidst predictions that the substantial fiscal tightening that the fund has prescribed will prove politically difficult to implement.
The government will find it politically tricky to make the cuts to fiscal spending needed, while an adverse outlook for commodity prices will dent export performance.
Government assurance
But the Finance Minister said the deal with the IMF was an endorsement of the government’s own home-grown policies with the IMF.
Re-echoing President Mahama’s statement, Mr Terkper said the success of the IMF assistance programme for Ghana would depend on Ghanaians themselves, not the Breton Woods institution.
He said it was a challenge for the government, for instance, to live within its means and exercise fiscal discipline.
“The government is also expected to improve its domestic revenue mobilisation drive,” Mr Terkper said.
Source: Graphic Online
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