IMF Bailout: Gov’t vows to enforce Enhanced Domestic Economic Programme
Government, has noted its commitment to enforcing the Enhanced Domestic Economic Programme (EDP) as it prepares to engage the Fund on a Balance of Payment (BoP) Support Programme to help turn around the country’s economic fortunes.
In a Q&A document on Ghana’s request for an IMF bailout published by the Finance Ministry, the Ministry noted the Enhanced Domestic Programme (EDP) is a 3-year fast-tracked macroeconomic stabilization programme that seeks to restore policy credibility and achieve fiscal and debt sustainability.
The programme is heavily driven by a mix of robust structural reforms and revenue, expenditure, and financing policies.
The proposed programme seeks to achieve the following objectives:
- Improve the credibility of government policy and restore investor confidence in the economy, thereby, regaining market access, boosting DP disbursements, and unlocking other financing sources;
- Restore debt sustainability and macroeconomic stability to support green growth, economic transformation and job creation while protecting social spending;
- Strengthen the Central Bank’s Monetary Policy Regime; and build buffers to strengthen resilience to economic shocks
According to the Ministry, the anticipated conditionalities to be imposed on the country will be centred around the government’s own Enhanced Domestic Economic Programme which it is committed to enforcing.
“When a country seeks support from the IMF through a funded programme, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial support. These policy adjustments are conditions for IMF lending and serve to ensure that the country will be able to repay the IMF. The member country has primary responsibility for selecting, designing, and implementing policies to make the IMF-supported programme successful.
“This system of conditionality is designed to promote national ownership of strong and effective policies. This means that, in the case of Ghana, the conditionalities are expected to be centered around our own Enhanced Domestic Programme which the Government is committed to enforcing,” stated the Ministry.
Fidelity to PRMA Act to prevent future requests for IMF bailout
Meanwhile, erstwhile Minister for Finance, Seth Terkper, has noted that strict adherence to the Petroleum Revenue Management Act by the incumbent and successive governments will help curb the country’s continuous requests for bailouts from the IMF.
According to the former Minister, the build up of the Sinking Fund, Stabilisation Fund and other sovereign wealth funds as demanded by the PRMA Act, would help provide buffers the government can fall on in times difficulties or crisis.
The former Minister noted that, the build up of sovereign wealth funds which he called “policy support programmes” are practiced in several countries, with those countries depending on monies accrued in the funds to support their immediate fiscal needs.
However, government’s decision to discontinue the build up of the country’s sovereign wealth funds has resulted in its inability to gain access to the required funds to finance expenditure, interest and amortisation which has resulted in its request for an IMF programme.
Adding that, the government, by not being faithful to the PRMA Act has shot itself in the foot.
“Saving some of the petroleum revenue in the Sinking Fund, Stabilisation Fund and the others will help prevent Ghana from going to the IMF. As a country we should have been building up our sovereign funds but we haven’t been doing that (sic).
“A lot of countries do policy support programmes so that when their resources (fiscal resources) are not enough they go into their sovereign funds and take money from there (sic).
“With we going to the IMF, I believe that the government has shot itself in the foot by not being faithful to the PRMA Act,” he remarked in a media brief on Monday, July 4, 2022, discussing Ghana’s request for a Balance of Payment (BoP) support to the IMF on July 1, 2022.
He made the assertion amid Ghana’s unsustainable public debt stock and low tax revenue that is only able to cover interest payments and compensation, leaving the government to borrow further to cover amortisation, its flagship programmes, among others.
Q&A ON IMF by Fuaad Dodoo on Scribd
