IMF diagnoses Ghana’s economic challenges, says “pain is unavoidable”

Even before the Government of Ghana (GoG) agrees terms of an “assistance” package with International Monetary Fund (IMF), the institution has diagnosed the fundamental cause of Ghana's economic challenges and is ready to offer a cure.

In a meeting in Washington with leaders of top global policy think tanks, including IMANI Ghana, the IMF said Ghana's current financial challenges had been occasioned by a “ballooned fiscal spending”, particularly in respect of the wage bill and debt servicing obligations.

According to the Founding President and CEO of IMANI Ghana, Franklin Cudjoe, the IMF said almost Ghana's entire annual budget is spent on paying wages and servicing debt, leaving very little money for infrastructural development.

The IMF pointed out that the macro economic instability - depreciation of the Cedi, rising inflation - is being fuelled by the fiscal situation, adding that reducing the fiscal expenditure will inflict unavoidable pain on ordinary Ghanaians.

It said its negotiations with GoG would last less than six months and that its focus would be on Ghana's balance of payments.

The IMF said it would ask the World Bank to provide budget support and urge the USAID to continue supporting financial governance in the country, according to Cudjoe's account of what transpired at the meeting.

Two weeks ago, President John Dramani Mahama directed his economic management team to open talks with the IMF and other development partners for assistance in reviving the country's ailing economy.

The directive came after the Presidential Advisory Council met on August 1, 2014 to discuss a range of issues affecting the economy.

The IMF will be expected to help tame Ghana's mounting inflation, stabilise a declining currency and rising bond yields that have combined to strangle the economy, which had been the fastest growing economy in 2011, when it achieved a 14 per cent growth.