BORROW NO MORE… IMF Tightens Noose On Mahama’s Gov’t

When the government of Ghana signed a three year financial management agreement with the International Monetary Fund (IMF) to help salvage the economy from its downward trend, little did it know that the Bretton Woods Institution has something under its sleeves.

Almost two years into the programme, the IMF has, not only imposed tight control over government expenditure, which has resulted in a freeze on government sector employment, which the latter has denied though, but is actually asking the Mahama government to pass a law that would make it impossible for the government to resort to reckless borrowing from the Central Bank.

The Chronicle understands that under the current Bank of Ghana Act, the government cannot borrow more than 10% of the previous year's revenue, a condition which Seth Terkper and his team have agreed to enforce rigorously under the current three year programme with the IMF. But since the previous year's revenue shows the economic strength of the country, the IMF is insisting that there must be zero borrowing from the Central Bank.

Since this directive runs counter to the law establishing the BoG, the Bretton Woods institution has ordered the government, through the BoG, to send a bill to Parliament to amend portions of the law, to make it impossible for the government to borrow from the Central Bank.

The Chronicle sources in both government and Parliament, however, confided in this reporter that the ruling party is unhappy with the orders of the IMF, because it amounts to interference in the internal affairs of a sovereign state.

It is, therefore, likely that the bill to amend the BoG Act might not be passed into law by the lawmakers.  Industry players who spoke to The Chronicle, however, explained divergent views on the orders from the IMF.

According to some of them, the Bretton Woods Institution was forced to take the decision, because it did not want to see the situation where the government would resort to reckless borrowing after the three year programme to erase the economic gains achieved, and then come back to it for succor.

Others were also of the view that even if the BoG Act is amended to tighten the hands of the government, the latter can still go to the commercial banks to borrow at even higher rates. Another source also told The Chronicle that even though the programme is still ongoing, the government has gone to the international capital market to borrow in the form of Eurobonds, and can do same with the local banks if the BoG Act is amended.

The excessive borrowing by the government from both the Central Bank and other sources, especially in the run up to the 2012 general elections, resulted in the huge budget deficit (GH¢8.7 billion), which affected the foundation of the economy. Though the deficit has been reduced, the economy has still not bounced back, forcing the government to seek the IMF intervention with its attendant conditionalities.

Meanwhile, the Member of Parliament for Obuasi West, Kwaku Kwarteng, has expressed concern over the supplementary budget submitted to Parliament on Monday by the Finance Minister, Mr. Seth Terkper.

To him, the supplementary budget is going to reduce funding for critical sectors of the economy.  The following is a full press statement he issued on the budget.

1. At the beginning of 2016, gov't sought parliamentary approval to spend some GH¢50 billion on gov't business. That was granted.

2. On 25th July 2016, gov't went to Parliament to say that they are broke, and things are not going well, so they need approval to do the following:

a. Reduce pension payments to old men and women, and reduce gratuities and social security payments by GH¢293 million.

b. Reduce capital expenditure by some GH¢284 million. That is to say, govt is seeking to reduce spending on roads, schools, hospitals, and other infrastructure projects by GH¢284 million.

c. Reduce spending on the provision of goods and services to Ghanaians by GH¢410 million. That is to say, money to buy chalk for basic schools, sanitation services, etc., will all be slashed by GH¢410 million.

d. Reduce transfer into the National Health Fund by GH¢19.6 million.

3. After reducing all these services to Ghanaians, gov't says they will still have problems, unless Parliament approved for them an additional GH¢1.89 billion on top of the money given them at the start of 2016.

4. Where will this additional money come from? Gov't says that the money will come from the energy sector levies. But that will still not be enough, so they will go and borrow to make up the difference.

5. In spite of all these, there is no assurance in the supplementary budget as to when dum-so will end, so that businesses can operate smoothly and create jobs.

There is no assurance that the high electricity tariffs will go down. There is no assurance that lending rates will come down so that businesses can borrow and expand to create jobs. There is no assurance that cost of living will go down. There is nothing!

6. Yet, in this same supplementary budget, gov't praises itself for turning the lives of Ghanaians round!

7. This is what it has come to!

By Emmanuel Akli