By: Sarah Baafi
A Senior Lecturer in Economics and Finance and Head of the Department of Finance at NIBS University, Dr Senanu Kwasi Klutse, in a recent interview on GTV’s Breakfast Show, recently shared insights on the implications of the International Monetary Fund’s (IMF) fourth review for Ghana’s economy and public finances.
Dr Klutse began by explaining the significance of a staff-level agreement with the IMF, emphasizing that it represents a key milestone in Ghana’s ongoing engagement with the Fund.
“When you say a staff-level agreement, you mean the government actually having an agreement with the IMF staff about certain preconditions that have been set already in the programme” he said.
He said this agreement is a key step before the IMF board’s formal approval, signalling to investors whether the country is on the right track financially.
“It’s almost like giving them a signal if they could further give you the support that they’ve already been giving you or they should hold on and see certain things play,” he added.
Clarifying the importance of the staff-level agreement despite it not being the final approval for disbursement, Dr Klutse noted, “If there’s a staff-level agreement, a board approval is almost like guaranteed approval.”
He explained that IMF staff conduct thorough evaluations in-country, reconciling figures with government reports to determine if conditions have been met for the release of funds.
The interview also revisited the Finance Minister’s description of this fourth review as the most difficult. Dr Klutse concurred, attributing the challenges to Ghana’s election year dynamics. He said, “Typical of election years, we seem to let down our guts and we want what we like to call conditionality.”
He highlighted the delayed implementation of critical price adjustments for electricity and water, which were originally scheduled for January but only occurred in March due to governmental transitions.
“I’m not surprised at least,” he remarked, noting that the adjustment formula was designed to temper increases by factoring in inefficiencies.
Turning to Ghana’s economic growth, Dr Klutse observed that the 2024 growth figures exceeded expectations, largely driven by mining and construction sectors. However, he cautioned that growth must be inclusive to be sustainable. “If this growth is not derived from the sectors that employ the most, then the growth is not inclusive enough,” he said.
He emphasised the need to channel benefits from mining, oil, and industry into agriculture, which employs the majority, to ensure broad-based development.
On the IMF’s evolving stance, Dr Klutse explained, “In the past, the IMF used to be very strict when it comes to implementing fiscal adjustments. They usually do not care what happens at the growth side.”
However, he noted a shift towards a more liberal approach that allows some growth alongside fiscal discipline, provided governments are vigilant about managing economic variables.
As Ghana awaits the disbursement of the next $370 million tranche, Dr Klutse’s insights underline the delicate balancing act required to meet IMF conditions while fostering inclusive growth that benefits all sectors of the economy.
