Sunday, 24 February 2019

Independent Fiscal Council can serve as Ghana’s IMF, Group proposes as Ghana exit IMF in April

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Adnan Adams Mohammed

The Economic Governance Platform, comprising 15 civil society organisations, has called on the government to put in place the needed measures and resources to help the Fiscal Responsibility Advisory Council, as well as, making it independent in its operation to replace the International Monetary Fund (IMF) in ensuring fiscal discipline and other checks in the management of the economy. 

President Nana Akufo-Addo, delivering his State of the Nation Address stated that, in order not to repeat the cycle of returning to the Fund immediately after exiting, “Ghana will have to ensure that systems are put in place like the Fiscal Council, which are to ensure discipline in the management of the economy, are as effective as possible.”

Early this year, government established a Fiscal Council, appointed by, and is to act as an advisory body to, the President. Its function are spelt out as: “To develop and recommend to the President fiscal responsibility policies for the maintenance of prudent and sustainable levels of public debt, ensuring that the fiscal balance is maintained at a sustainable level, and the management of fiscal risks in a prudent manner, to achieve efficiency, effectiveness and value for money in public expenditure.”

An independent Fiscal Council (FC) can therefore help to give credibility to government statements and policies, World Bank Director for Ghana, Henry Kerali has said at the opening of the Economic Governance Platform workshop organized last week, adding that, “for example, in some countries the FC can review and comment upon the realism of the revenue and expenditure forecast, which the government is obliged to use as the basis of the budget.”     

President Akufo-Addo in Parliament, last week reiterated his government’s commitment to maintaining the needed discipline to ensure that Ghana does not return to the International Monetary Fund (IMF) for the 17th time.
 
“We’ve just concluded the program with the IMF and with continued discipline, we shall sign off from the deal in April. This is the 16th time Ghana has had to go to the IMF in its history. We cannot make the progress we all desire unless we are consistent and disciplined in the management of our economy. We have gone through another round of painful impositions to get to where we are today with healthy fundamentals.

“As we prepare to exit from the IMF program, we expect the impressive figures and good performance to continue. We are very much aware that this is not the first time we have had such good set of figures, but we’re determined to do things differently this time around. We’ve imposed on ourselves fiscal discipline, we’re paying off legacy debts and deepening good governance practice and business confidence is growing. We will maintain the discipline and bring progress to our country”, President Akufo-Addo expressed.

A team from the IMF this week completed the 7th and 8th reviews under the Extended Credit Facility program which Ghana entered into in 2015.

An approval from the IMF board in March should lead to Ghana exiting the program after April 3rd.

Ghana program with the IMF for US$918 million which was approved on April 3, 2015, aims to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.

The government has given assurances that the economy will remain resilient and robust even after the International Monetary Fund (IMF) program is over.

Chairman of the Finance Committee of Parliament Dr. Assibey-Yeboah in an interview said, he is confident Ghana will successfully exit the extended credit facility program after April 3rd.

“Clearly Ghana is exiting the program after April third as already agreed upon. You’ll recall that we went to the fund for policy credibility. So if you exit they have to sign you off. We want a clean bill of health, so the IMF team will go to the board at the end of March after which the board will decide as to whether or not Ghana has successfully completed the program.”

Throughout the various reviews, Directors of the IMF have commended Ghana on a number of things, welcoming the deceleration in inflation as well as the progress made in the strengthening the banking system, in particular through the approval of timebound recapitalization plans for undercapitalized banks.

On the things that need to be worked on, the Directors emphasized the need to tackle energy sector inefficiencies, particularly improving the management of the State Owned Enterprises (SOEs). They also advised that ongoing debt restructuring efforts are helpful but are no substitute to stemming the SOEs’ financial losses.

While highlighting the progress Ghana has made under the program, Dr. Assibey-Yeboah went on to share some of the benefits of successfully exiting the program for Ghana.

“If we successfully exit the program, then we are found to be creditworthy, it affects our ratings, it affects the cost of borrowing and we are able to tap into other markets because the IMF says these people are credible and they are creditworthy.”

He finally added that apart from the disbursement of the final tranche of about $118 million from the IMF, Ghana was looking at receiving other disbursements from bodies like the World Bank as a result of successfully exiting the program.

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