Commentary

Will Ghana seek another IMF bailout?

By Ebenezer Out Okleya

The Ghanaian economy is debt trapped with a public debt stock of 344.5 billion Ghana Cedis. The Cedi keeps depreciating, with no fiscal space for capital investment, and a budget deficit of 15.7 percent. This macro-economic distress has forced government to introduce the controversial Electronic Transaction Levy (E-Levy) which has taken over the airwaves in recent times. Government is bent on introducing the E-Levy despite strong opposition from industry players, academia, citizens, and more significantly the biggest opposition party; the NDC.

The Finance Minister and his team together with officials of the NPP are doing their best to convince Ghanaians to accept the 1.75% E-Levy on electronic transactions. This new levy is projected to rope in about 6.9 billion to create some fiscal space and reduce our budget deficit. As it stands now the country’s budget deficit is about 30 billion and so 6.9 billion may not be able to do much considering our history of fiscal indiscipline. Government can decide to withdraw the E-Levy Bill from Parliament to enable them to undertake a broader stakeholder consultation to calm nerves before they reintroduce it sometime later. The IMF sensing that the Ghanaian economy is in distress has offered a helping hand.

But as to whether the government will go for a financial bailout, we are not certain about that. When a country goes to the IMF for a bailout they are saying “you know what, we are stuck, we have tried our best but nothing seems to be working. Give us some loan we are ready to stick to your conditionality to help us bounce back”. While some Ghanaians and Economic Experts think it is high time we swallowed our pride and went back to the IMF for some relief, others think it the not the best decision to take at this point.

In 1966 Dr. Kwame Nkrumah went to the IMF for a bailout after our international reserve dwindled. This caused a drastic reduction in imports because the international markets did not want to export to Ghana with the fear that we would not be able to pay for the goods. Inflation rate and public debt had also increased at the time but after the deal was approved, Dr Nkrumah pulled out because he didn’t like the conditionality that were outlined by the Bretton Wood Institution. The first time Ghana successfully went for IMF bailout was in 1983 under the Provisional National Defense Council (PNDC).

Since then Ghana has gone back to them 16 times. It does not look like our economic problems have been solved after all these IMF programs. If we go there again as some people are contemplating, it would be our 17th time. The first reason why I think this government will not go to the IMF is the position they took in 2015 when the NDC government applied for the Structural Adjustment Program (SAP) of the IMF.

The second reason is that the IMF has just one bitter medicine they use to “cure” macroeconomics instability in the short to medium term which is their austerity measures. These two reasons will not favour the current govern should they decide to go for a bailout. Most of these IMF loans are paid out in installments or trenches and it is intended to track or monitor the country’s progress in implementing certain measures. These measures are most of the time a bitter pill to swallow and looking at how government intends to handle the economy, its decision to go for a bailout should have to be one justifiable beyond a reasonable doubt. Otherwise, any other reason will be a mystery to be demystified.