Ken Ofori Atta – Finance Minister
The International Monetary Fund (IMF) says its bailout program has helped restored Ghana to a rising star in Africa.
In its latest analysis of the Ghanaian economy, IMF seriously indicted Mr. Mahama during whose tenure Ghana opted for the bailout for grossly mismanaging the Ghanaian economy.
According to the IMF, “Ghana has been hailed as one of sub-Saharan Africa’s success stories.”
It added that “it (Ghana) was the first to free itself from colonial rule, in 1957. It built a stable democracy in the 1990s, overcoming decades of political upheaval. A thriving economy fueled by exports of cocoa, gold, and—more recently—oil helped cut the poverty rate from 53 percent in 1991 to 21 percent in 2012.”
But by 2015, IMF bemoaned, Ghana’s economy was in trouble, hobbled by widening current account and budget deficits, rampant inflation, and a depreciating currency.
It recounted that “credit dried up as interest rates rose and banks’ bad loans piled up. At the root of Ghana’s woes was out-of-control government spending, largely to pay salaries of an overgrown civil service.”
“An asset quality review revealed significant under-capitalization. Some banks were recapitalized, and the Bank of Ghana used its newly enhanced authority to wind down insolvent lenders. The central bank developed regulations to ensure that banks meet sound underwriting and credit evaluation standards. It also paid back insolvent microfinance institutions’ depositors.”
In early 2015, Ghana turned to the IMF for a $918 million loan to help stabilize the economy.
IMF advisors, working with the Ghanaian government, developed a three-part program which included: restore debt sustainability, strengthen monetary policy, clean up the banking system.
Under the program as part of restoring debt sustainability, the Government of Ghana was forced to limit hiring and wage increases and eliminated subsidies for utilities and petroleum products.
To raise revenue, it cracked down on tax evasion and rationalized exemptions.
New revenue sources included a tax on luxury cars and increased taxes on high earners. To put Ghana’s finances on a sounder footing, the new Public Financial Management Act called for improved accounting standards, procedures, and technology.
The Ghanaian authorities agreed to gradually end central bank financing of the budget deficit — a major source of inflation —and to fortify the inflation-targeting regime.
According to IMF, “Ghana’s economy is on the mend. The trade and budget deficits are narrowing.”
It said the pace of economic growth is poised to rise to 8.8 percent in 2019 from 2.2 percent in 2015.
Again, IMF has stated that the inflation rate is projected to fall to 8 percent from almost 19 percent.
“Cuts to wasteful spending made room for much needed social services, such as free secondary education.”
It added that “for Ghana’s 28 million people, it all adds up to higher incomes, better job opportunities, and more purchasing power. Still, Ghana remains largely reliant on foreign financing, exposing it to swings in investor sentiment. Maintaining fiscal discipline will also be a challenge.”
BY Melvin Tarlue