The Chair and Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, says her outfit is willing to assist Ghana to put the country’s economy on a better footing.
The Bulgarian economist made this known in a tweet on Friday, August 26, 2022.
According to her, the IMF’s decision to support Ghana stems from a ‘constructive meeting’ she had with Finance Minister, Ken Ofori-Atta and his team.
The meeting, she disclosed bordered on the challenges of Ghana’s economy and how to address them.
“Constructive meeting with [Ghana’s] Finance Minister Ofori-Atta & his team on Ghana’s economic challenges and the way forward.
We are ready to do our part to help the authorities stabilize the economy, lay the ground for stronger growth & help the most vulnerable”, the tweet said.
The assurances from the IMF Chair comes at a time when the country’s economic outlook appears to be in distress.
Currently, Ghana’s currency, the Ghana Cedi, is consistently depreciating against the US dollar at a fast rate which many citizens are lamenting about.
Inflation is also on the rise with the cost of living also on the high.
These factors, were amongst a list of considerations which compelled Ghana to seek assistance from the IMF on July 1, 2022.
In a statement by the Information Minister, Kojo Oppong Nkrumah, the move to go to the IMF is to help the global lender assist government in implementing some economic recovery prorgammes.
Meanwhile, the opposition National Democratic Congress (NDC), and other civil society organisations have criticised Ghana’s request for an IMF bailout, describing it as an imprudent measure.
According to the critics, the country’s economic woes are based on the failure of government to deal with its internal mismanagement and corruption, and thus support from the IMF will amount to nothing.
Investors get jittery over investments in government treasuries and GoG Eurobonds – Part 1
Alex Mould, a former CEO of GNPC and National Petroleum Authority (NPA) in a Facebook message said: “There are many rumours going around the financial markets that the government of Ghana is contemplating giving all investors in Treasuries and Euro Bonds a haircut – that means that investors will get some pesewas to each Cedi (for GoG Treasury Investors) or cents to each dollar (for Eurobond Investors) of the principal invested ie they will receive only a fraction of their investments
Any attempt by government to give investors a haircut on their investment principle will result in government not being able to go to the Capital markets for many many years to come;
This also could be resisted by many investors and there could be lawsuits by investor blocks which could drag Ghana’s current credit crunch; this option is like a road to perdition and only reserved for the non salvageable economies in the world.”
So what options does the NPP Govt have??
In the discussions with the IMF, Government of Ghana (GoG) will be required to bring a performance improvement plan (PIP) which should focus on government reducing its expenditure and increase its revenue in the short term for the next two years to stabilize the fiscals, while IMF holds the NPP Govts hand to seek some reprieve from Creditors (local and International) on its debt service
The first part, reducing expenditure could take the form of the rationalization of employment in the public and civil service (ie reducing staffing and staff costs) and most likely freezing any increases in salaries and freezing employment in non-critical and non-core sectors for a few years, as well as not embarking on any projects or capital expenditure that can wait a few years
Another area that the NPP Govt will be asked to focus on is in curtailing most of the politically-lead programs/projects which will not lead to any substantial increase the GDP in the short term
The question the NPP Govt needs to address is if the challenge is a structural one, or if it’s pure mismanagement – where drivers of fundamentals remain strong – as the antidotes to curing both differ;
I see the problem akin to what we had in Blackstars a few months ago
– Do you change the coach or all the players ???
Part 2 will deal with the Challenges Govt faces with Creditors and the debacle Creditors holding GoG securities have…
However impeccable sources revealed that, any assistance from the IMF to Ghana will come in 2023.
