‘Prepare for harsher economic conditions’ – Akoto Osei warns

General News of Wednesday, 4 March 2015

Source: The chronicle

Anthony Akoto Osei

Former Minister of Finance and Economic Planning in the erstwhile New Patriotic Party (NPP) administration, Dr. Anthony Akoto Osei has warned Ghanaians to ready themselves for harsher economic conditions in the coming months, as the country enters into agreement with the International Monetary Fund (IMF).

Dr. Akoto Osei says apart from the already deplorable living conditions, encapsulated by the deplorable power crisis, Ghanaians would be hit harder, now that Ghana is caught in the web of the IMF conditionalities.

He said though the decision to go to the IMF appears to be the only viable option left for government, a situation which he said was as a result of the excessive financial indiscipline by the President Mahama-led administration, what the government has refused to tell Ghanaians is the overgrowing financial and economic implications that the move will have on the ordinary citizen.

According to him, Ghanaians would have to bear the biggest consequences, as a result of the avoidable mistakes that the government, under President Mahama, had over the years committed.

The former Finance Minister, who was speaking in an interview with a local radio station, ANGEL FM in Kumasi yesterday, pointed out that aside the fact that government will be compelled under the IMF agreement to remove subsidies on all taxes and commodities, government will be additionally required to introduce new regimes to shore up for losses in revenues.

According to him, there is no way out for government, apart from pushing costs to Ghanaians as the International Monetary Fund is not likely to entertain any move by government to absorb any cost without any tangible justification.

He said even at a time that there is global downturn in oil prices, which under normal circumstances should inure to the benefit of the people in the form of automatic reduction in prices; government will not be able to do so because of the conditionalities.

“It is a lie if government says it has the option to either absorb any increases in prices of fuel or push it to the final consumer because the IMF will require clear proof of how you are going to fund them. This will leave government with only one option and that is to allow consumers to pay,” he stressed.

Dr. Akoto Osei noted that government cannot introduce subsidies without telling IMF how it intends to fund it, adding that the problem is already complicated by the 20% shortfall in revenue which was announced by the Minister of Finance in Parliament last year.

“Once there is 20% shortfall in revenue, government should ideally cut down expenditure by 1.2% of the Gross Domestic Product (GDP); already statutory payments like GET-FUND, NHIS, DACF and others are in arrears because the government will have to economise.

“So the big question is how can government offset these arrears and go ahead to pay that of this year,” the former Minister observed. He noted that what is even worrying is the fact that in the face of all these difficulties, President Mahama during his State of the Nation Address made more promises to undertake road projects when it is abundantly clear that there is no fund for it.

“This is our worry because if you don’t have money to pay GETFund, NHIA, DACF and others, where is he going to get money to fund these several road projects he mentioned in his address,” he lamented.

IMF BAIL OUT LONG OVERDUE The former Finance Minister, who is also the MP for the Old Tafo Constituency in Kumasi, noted that the situation government finds itself currently was as a result of its failure to heed the call of the Minority to opt for the IMF bailout earlier.

“If government had listened to us and gone for the bailout last year February, we wouldn’t have found ourselves in such critical situation because right from the onset we realized government had already muddied the waters as a result of the reckless spending, so ideally we should have opted for this IMF agreement earlier,” Dr. Akoto noted.

According to him, since 2011, the government claimed it managed to grow the economy by some 11 percent, Ghana has seen consistent decline in growth of the economy to as low as 4.7 percent and this is likely to reduce further to 3.7 percent this year.

The former Finance Minister further noted that though he believes that the arrival of the IMF will help strengthen transparency and ensure financial discipline in government’s spending, he is wary of government’s ability to fulfill all the conditionalities that will ensure that we reap the necessary benefit in the agreement.

He said between now and next year, the IMF will embark on seven different evaluation studies on government spending to ensure that we are truly on track before we can benefit from the $940 million loan deal.

“The IMF does not trust this administration at all because the NDC have bad records as far as international financial agreement is concerned, they are not disciplined at all and this can affect the agreement is care is not taking,” he cautioned.

Dr. Akoto further pointed out that government’s internal and external debts have hit all time high under the current administration to the extent interest on these debts are higher than the total debt the NDC inherited from ex-President Kufuor in 2008.

“In 2008, Ghana’s debt was nine billion but now interest alone on current debt, which is over 76 billion, hovers around 12 billion Ghana cedis, this figure is higher than the total debt the NDC inherited from the NPP. So you ask yourself how a government can run a country like that, totally unacceptable,” he emphasized.