IMF Programmes Stabilise Economic Symptoms

The International Monetary Fund (the IMF) completed its 5th review of the Extended Credit Facility (ECF) programme Ghana has with the Fund a couple of weeks ago. The IMF’s 5^th review of Ghana’s ECF programme paves the way for its completion, even if there is a 6^th review. The symptoms still exist even as the programme is about to end.

There is substantial evidence supporting the view that programmes of the International Monetary Fund (the IMF) often address symptoms of crisis such as balance‐of‐payments shortfalls, fiscal deficits, currency instability rather than the deeper fundamental structural economic, institutional or governance problems of borrowing countries, including Ghana.

Economic managers must understand that the IMF’s core mandate is to help countries deal with external imbalances – balance of payments, currency pressures, dwindling reserves, and restore macroeconomic stability – fiscal discipline, debt sustainability, monetary policy stability etc. The IMF’s conditionalities are supposed to include structural reforms only when they are critical for the programme’s success. The IMF itself, for instance, noted that structural conditions should be included in IMF programmes only if they meet a macroeconomic relevancy test — they are essential to achieving the macroeconomic goals of the programme.

Studies show that IMF programmes do feature structural‐policy conditions such privatisations, labour market reforms, deregulation and others, but their scale, economic impacts, and consistency with domestic context vary. IMF programmes and policies do not tackle the underlying causes of balance of payments and other fiscal challenges of member countries, they rather provide short-term relief and propose stabilisation policies for countries in difficulty. Ghana’s repeated IMF programme cycles reflect the failure to fix the fundamental structural problems of Ghana and ensure structural transformation.

Ghana turned repeatedly to the IMF for short-term relief programmes rather than emerge permanently from them, suggesting the underlying structural issues remain unresolved. It signifies Ghana has not learnt development-centered behaviours that can adequately address its fundamental structural problems. Ghana having multiple consecutive programmes with the Fund gives a signal that there are unresolved structural problems, and they cannot be resolved by the current Extended Credit Facility (ECF) programme.

The structural problems of Ghana, and many borrowing countries in Africa include: dependence on primary commodity exports, limited diversification of the economy, weak domestic production and manufacturing capacity, large and unexploited informal sectors, limited export competitiveness, governance issues like weak institutions, corruption, ineffective state capacity, inadequate infrastructure, low human‐capital development and investment, poor domestic revenue mobilisation, restricted tax base, heavy reliance on imports and low value‐added production. There is evidence that many IMF programmes and policies do not have the policy capacity required to address any of these fundamental structural issues.

Various IMF programmes focus on managing the immediate crisis by stabilising the currencies of borrowing countries, reducing deficits via austerity measures to ensure fiscal discipline and restructuring of debts rather than transforming the borrowing country’s economy’s fundamental structural features. That is why whenever the IMF attempts structural reforms, it is ineffective in doing so.

Its prescriptions in the form of fiscal tightening, monetary restraint, and policy discipline, usually aim to restore confidence and policy credibility. This way, the IMF acts like a doctor treating an emergency patient: the IMF, like the doctor, stops the bleeding. The deep cuts in the body of the patient causing the bleeding are not treated. The prescriptions help to stabilise macroeconomic variables. But stabilisation is not transformation.

Ghana’s current Extended Credit Facility (ECF) with the IMF, like the 16 programmes before it, promises stability and growth. And indeed, it has achieved some results: inflation has eased, fiscal balances are improving, and reserves are recovering. But our economic fundamentals have not been necessarily altered. The country continues to rely on imported goods — from rice to refined petroleum — while exporting mostly raw materials. The tax system leans heavily on consumption rather than production. Domestic manufacturing remains narrow. These realities are structural, not cyclical, and they require deliberate industrial and institutional reforms, which IMF programmes hardly deliver.

IMF programmes are not economically terrible; they are simply inadequate to focus on the fundamental structural challenges of member countries. For lasting progress, countries like Ghana must pair IMF stabilisation with bold, home-grown strategies that turn short-term recovery into structural and long-lasting economic restoration.

Emmanuel Kwabena Wucharey
Economics Tutor. Advocate and Religion Enthusiast.

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