It’s too late to renegotiate IMF programme- Economist

Government has been advised not to push for a renegotiation of the IMF programme that requires among other benchmarks that government achieves a zero percent financing of its budget from the Bank of Ghana.

Parliament is currently debating the provision with most MPs stating on the floor of the House that the present 10 percent budget financing can be reduced to 5 percent to allow government some space to access funds from the Bank of Ghana.

Speaking to Citi Business News, a senior lecturer at the University of Ghana Business School, Dr. Lord Mensah maintained that even though reducing the budget financing to zero may not be practical now, the government was fully aware before signing the agreement, hence must work at achieving the target despite the the views of parliament.

“For now government can do little about the programme. They should have realized it earlier and negotiated it. They should have foreseen it. They accepted the package and the package has being rolling. I think it's too late,” he said.

Dr. Mensah warned that it will be difficult to renegotiate the terms since the conditions are strictly set to compel countries to achieve financial discipline.

He suggested that parliament can be allowed to peg the figure from 10 percent financing to 5 percent while government assures the IMF that it will work gradually to achieve zero percent despite the law.

“If I were to be the Finance Minster and I am to go to the IMF, this will be my proposal, that it could be 5 percent now. The next year looking at how the government stays discipline it can reduce to 4 and then gradually to zero,” he stressed.

He maintained that the condition has a negative and positive outcome on the economy with the former out weighing the latter.

“Without external financing governments cannot grow. The central bank acts as a mediator in terms of all government transactions. So when a government is expecting funds the central bank can pre-finance,” he said.

He pointed out that situation gets bad only when the central bank is unable to control the level at which it finances government's budget.

He stated that Ghana's issue has always come up due to the way the governors of the BoG are appointed which sometimes results in a lot of influence from a government.

Mona Quartey hints of renegotiation
Speaking to Citi Business News’ editor Vivian Kai Lokko after the presentation of the 2016 supplementary budget in parliament, Deputy Minister of Finance, Madam Mona Quartey  hinted that government may have to renegotiate the provision if parliament reduces the figure from 10 percent to five.

Terkper rules out  renegotiation
Finance Minister Seth Terkper later announced  that  government will not renegotiate the terms under the programme.

His assertion contradicted  Madam Quartey’s assertion.

Mr. Terkper stated that, “let's be patient till when parliament takes the decision but if  even in the event that parliament comes out with the number above five, does it warrant a renegotiation of the IMF agreement?. I will say no” .

He stated that government is considering many factors to protect critical sectors of the economy.

He pointed out for example that, because of the ECOWAS convergence criteria and some emergencies, government was critically assessing the practicality of the zero financing.

IMF programme with Ghana
On Friday, 3rd April, 2015, the Executive Board of the International Monetary Fund (IMF) approved a 3-year Extended Credit Facility (ECF) Programme for Ghana.

A total amount of SDR664.20 million (US$918 million) will be given to Ghana as balance of payments support over the 3-year period.

The total amount will be disbursed in eight equal tranches. The first disbursement was made immediately after the Executive Board approval of the programme.

Government is currently waiting the third tranche after an IMF team visited Ghana to undertake an assessment.

By: Lawrence Segbefia/citibusinessnews.com/Ghana