'IMF's $114m Can't Save Cedi'

Professor Newman Kusi, Executive Director of Institute of Fiscal Studies(IFS) say the International Monetary Fund (IMF) support of $114.8 million can not stop the depreciation of the local currency against major foreign currencies.

This, he said, was because the amount would not have any significant impact on the balance of payment since the country had recorded huge interest rates and fiscal deficits.

Prof Newman Kusi, who made this known in an interaction with some journalists in his office in Accra, said sustained and significant flow of foreign currencies could stabilize the country's economy and improve the cedi.

'Last year, government went to the market to raise $1 billion in addition to the $1.7 billion cocoa syndicate loan to curb the free fall of the cedi. The $2.7 billion which was realized was able to temporarily save the cedi. After a short time, the cedi started depreciating again.

'This tells you that if $2.7 billion could not save the cedi from falling, how would $114.8 million save the cedi?' he said.

Prof Kusi said 'the comfort that Ghana can derive from signing the IMF deal is that all the grants that have been locked up or frozen by our development partners would be released.'

According to him, owing to the IMF deal, Ghana's development partners have agreed to increase their support to the country.

The IMF programme is expected to ensure policy credibility and restore the confidence of foreign investors in the economy.

IMF Fiscal Measures
The Fund is asking government to undertake some fiscal measures within the next few months in order to access the rest of the money.

Some of the fiscal measures include cutting down of the wage bill, removing subsidies, increasing domestic revenue mobilization and cleaning the public payroll.

Prof Newman Kusi said government cannot undertake those fiscal measures, stating 'I can't see how possible government can undertake this fiscal measure, especially when 2016 is an election year.'

He said fiscal consolidation cannot take place with speed as envisaged by the IMF.

'I can't see how the economy, which is slowing down by 3.5 percent in 2015 will pick up to 6 percent in 2016 to generate more revenue and cut expenditure to be able to bring down fiscal deficit from 7.5 percent to 5.5 percent. It is not going to happen, not in an election year,' he indicated.

Calls for Review
He therefore called for a review of the programme, stating that there was no way government could meet the conditions of the programme in its current form.'

BY Cephas Larbi
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