Mahama, Seth Terkper Clash Over IMF Bail-Out
President John Mahama and Seth Terkper
There seems to be confusion in government over the aims and objectives of the ongoing National Economic Forum.
The misunderstanding emanates from the separate accounts being given by Finance and Economic Planning Minister and convener of the form – which is taking place at the plush Royal Senchi Hotel at Akosombo in the Eastern Region – Seth Terkper and President John Dramani Mahama.
While the Finance Minister told Accra-based Citi FM on Monday, a day before the event, that ‘we have already discussed with IMF what we want to do, so the people coming tomorrow are just coming to endorse what we have already agreed,’ President Mahama told the gathering during the opening ceremony yesterday that, ‘As President, I have not taken any decision to enter our country into an IMF programme.’
Mr. Terkper also told Joy FM Monday evening that the programme, even though in abridged form, had been approved by Parliament and therefore could not be changed except Cabinet so desired, contradicting President Mahama’s position that no decision had been taken on the document submitted to the IMF.
The President said, ‘What we are concentrating on is the preparation of a home-grown strategy of fiscal consolidation,’ and that ‘it is our expectation that both our domestic and our international partners will join us in the implementation of this strategy.’
Mr. Mahama further stated that ‘the briefs that were presented to Parliament and then later to the IMF under our Article IV Consultation represent work in progress and would be finalised through broad consultations, such as the forum we are holding today.’
This contradiction in the narrations of the President and his Finance Minister is what has kept many wondering who is telling Ghanaians the truth about the supposed deal with the Bretton Woods institution of a possible bailout.
It was part of reasons the main opposition New Patriotic Party (NPP) decided to boycott the National Economic Forum, believing that it would be used to push through a proposal submitted by the government to the IMF – highlighting mass retrenchment of public sector workers – beginning next year.
Aside that, the NPP believed the gathering would ostensibly be used to rubber-stamp the deal with the IMF for a bailout and present it as a consensus document.
But President Mahama said, ‘In early April therefore, we decided to aggregate all these measures and initiatives into a single document and presented it to the people of Ghana through the representatives of the people of Ghana in Parliament.’
According to him, ‘A more detailed version of the document that was read in Parliament was later presented to the IMF as part of our Article IV Consultations that it undertakes with all of its member states.’
He therefore decided to take a subtle swipe at his political opponents saying, ‘It is a tragedy of our very polluted and extremely partisan political environment that such a simple misunderstanding of the relevance of this innocuous document should become the basis for a major political player to stay away from this all-important national exercise.’
However, in a statement released yesterday under the headline, ‘IMF Executive Board concludes 2014 IV Consultations with Ghana,’ the executive directors expressed concern over the emergence of significant short-term vulnerabilities stemming from high fiscal and external current account deficits.
These imbalances, they said, ‘make the country vulnerable to a deterioration of external conditions and are creating pressure on interest rates and the exchange rate’ and that ‘if unaddressed, they risk weakening economic growth and public debt sustainability.’
The recent measures introduced to stabilize the Ghana cedi, according to the IMF, would not work unless the underlying issues like rising public spending and expenditure were addressed.
The IMF was particularly worried about the adverse effects of the Central Bank’s measures.
It however maintained that it welcomed Bank of Ghana’s decision to review these measures with the objective of mitigating any adverse implications and removing the associated exchange restriction.
While commending the Ghanaian authorities’ policy efforts and supporting the fiscal measures in the 2014 budget, the IMF noted with emphasis, that ‘achieving the 2014 fiscal deficit target will be challenging, in the light of high interest rates, a depreciating currency, and a possible growth slowdown.’
The IMF directors have therefore urged government to take additional short-term measures to reduce the fiscal and external imbalances.
In welcoming the Mahama administration’s recent policy documents outlining its home-grown medium-term reform and consolidation measures, IMF supported government’s intention to rationalize public spending, lower the wage bill through retrenchment, restructure the statutory funds, and enhance revenue mobilization and tax administration, asking government to ‘translate their policy commitments quickly into specific and time-bound action plans to achieve significant and durable consolidation.’
The IMF has also recommended a more ambitious medium-term consolidation path to stabilize public debt and debt service at sustainable levels in the face of the current imbalances.
‘While the risk of debt distress remains moderate, Directors expressed concerns about the high debt service-to-revenue ratio. A stronger medium-term adjustment could set off a virtuous cycle of lower fiscal deficits and falling interest rates, creating space for social and infrastructure spending and crowding-in of private sector activity,’ it said.
In spite of the financial strains Ghanaians were going through, the IMF has suggested further tightening of the country’s monetary policy to blend with fiscal consolidation, asking the Bank of Ghana to limit its net credit to the government, while strengthening liquidity management and the inflation forecasting framework, and continue to allow the exchange rate to adjust to prevent further erosion of the reserve buffer.
By Charles Takyi-Boadu
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