A return to the IMF to be disastrous for gov’t – Finance Minister
The Minister for Finance, Ken Ofori Atta has revealed that it will be disastrous for government to return to the International Money Fund for financial assistance
Speaking at the government’s town hall meeting to discuss the E-Levy on Thursday (27 January), the minister said the passage of the E-Levy will prevent the country from going for financial assistance from the IMF.
He said, “When we were in the IMF program, we couldn’t pay for nurses and teachers, we couldn’t hire anymore because there were restrictions on that, I mean it’s just really thinking you can go back to Egypt in a way we have forgotten how difficult and tenacious how that master from Washington was.
“So, we can deal with them for them to give us advice but we need not ever get into an IMF programme. So, if we don’t do this E-Levy, we’re just pushing ourselves in a way that would potentially end up in such a disaster.”
Meanwhile, Dr Adu Owusu Sarkodie, a senior lecturer at the Department of Economics at the University of Ghana, has suggested to government that it returns to the International Monetary Fund (IMF) for financial support.
However, Dr Sarkodie said that the decision on whether or not to return to the IMF will depend, among other things, on the government’s ability or otherwise to borrow from multilateral institutions, pass the E-Levy Bill and reverse the new benchmark value and road toll policies.
His comments come after the international ratings agency Fitch downgraded Ghana’s long-term foreign-currency issuer default rating (IDR) to B- from B with a negative outlook.
Last year, Ken Ofori-Atta, the Minister for Finance said the government is determined not to return to the International Monetary Fund (IMF) for any sort of bailout programme.
There have been reports that government is in the process of going to the IMF for some support to address the current pressures on revenue, rising debt stock and “troubling budget deficit.”
But speaking in an interview, Ofori-Atta stated that the government has no plans to resort to the IMF for support.
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According to him, seeking help from the IMF will retrogress the government’s efforts of developing the country “Beyond Aid.”
“We have to confront the fact that we can be masters of our own destiny and why do I need the IMF to tell me what to do? We came out of the IMF quickly when we came into power in 2017.
“They (IMF) remain trusted advisors, but whether that instrument of being under the IMF is the only way for a country to grow, I beg to differ. I’m not sure that, that’s not the path in emancipating one’s economy.”
Additionally, the Deputy Finance Minister, John Kumah, has revealed that government would not seek financial support from the international market to manage the economy this year.
He noted that government has drawn out certain measures to cater for its expenditure without relying on the international market for assistance.
The Deputy Minster indicated that government has set aside $750 million out of the $1 billion it received from the IMF as Ghana’s Special Drawing Right (SDR), apart from raising revenue domestically.
According to him, that is approximately the amount needed by the Akufo-Addo-led government to meet its target expenditure for 2022.
“In 2022, government is looking more within to raise the financing. The good news for Ghana is that the IMF gave Ghana Special Drawing Right (SDR) of $1billion dollars and we spent $250 million of that in last year’s budget. We still have $750million sitting in Ghana.
“So we don’t have to go out to the market to borrow. We have factored that and all the external financing we are looking at is just about $750 million for us to be able to achieve the expenditure target for 2022.
“We think that we have enough capacity within our domestic market to be able to raise enough financing to achieve the budget target,” he remarked.
His comment comes as a response to concerns by citizens after Fitch downgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B‘ from ‘B-’ with a negative outlook.
Fitch in their report noted that, “Government’s ability to deliver unplanned fiscal consolidation effort could be hindered by the heavy reliance on domestic debt issuance with higher interest cost in the context of an already exceptionally high-interest expenditure to revenue ratio.”
But Mr. Kumah, disagreed with the agency’s findings as the country in 2017, sought no assistance from the international market to meet its expenditure target.
“That is where we disagree with Bloomberg, Fitch and some of these rating agencies. It appears that if Ghana says that we are not going to the international market, then we don’t have an alternative to finance our expenditure in this country.
“This is not the first time Ghana has not gone on the market. In 2017, Ghana didn’t go on the market and yet we met our expenditure target and revenues. They have their doubts but one year is not far away. Just like they doubted us in 2021, we delivered,” he stressed.
The Deputy Finance Minister emphasised that “an economy growing above 5 per cent in Covid and meeting its revenue target cannot be said to be having a negative outlook.”
“I believe that if this is the basis of concern for them to be rating us at the levels that they are doing, we are very surprised,” he said.
Meanwhile, John Kumah, who is also the MP for Ejisu, has assured the public that government will continue to manage the economy in the best interest of its citizens.
“We are all entitled to disagree but I want to assure the country that irrespective of other people’s lack of confidence in us, we have strong confidence in our ability to deliver the best and manage the economic affairs of Ghana in the best of means possible. All the targets we have set for 2022 shall be met by the grace of God,” he stated.
