A few months after taking office, the new Ghanaian government of President Nana Dankwa Akufo-Addo wants to review its aid program estimated at 918 million dollars with the International Monetary Fund (IMF). This, according to the new government, will help have a maneuver to keep the election promises.
The three-year aid program between Ghana and the IMF is due to end in April 2018 and however, is expected to be reviewed in order to finance its various programs. Therefore, Yaw Osafo-Maafo, the new Minister of Economy and Finance, began discussions with an IMF delegation on a visit to the Ghanaian capital in February 2017.
A program to be reviewed
“The IMF’s aid program needs to be reviewed, it will certainly be reviewed, it will reduce budgetary space, and from the point of view of the New Patriotic Party (NPP, the ruling party), this program needs to be reviewed, said Yaw Osafo-Maafo a few weeks after taking office.
Reviewing the program will allow the country to have a budgetary margin to finance all programs developed during the election campaign at the end of 2016. The current tenant of the Flagstaff House, the presidential palace, promised to allocate one million dollars each year to each subdivision to finance the program referred to as “one district one plant.” He also committed to boost economy through public investment in all sectors.
Already in last January, the IMF approved a third payment of its aid estimated at $ 114.6 million, bringing the IMF’s total payment to $ 343.7 million. But the government believes that the thee-year agreement should be reviewed to boost economy.
IMF’s commitments to be protracted with Ghana
To support the country, IMF is looking forward to discuss the terms of agreement with Ghana. However, the institution requires the new government to consolidate public finance. In a statement, the IMF emphasizes that “the authorities should continue their budgetary efforts. In this respect, the government must embark on a rigorous policy of controlling expenditure by maintaining the wage bill within the limits of the state budget, reducing discretionary spending and safeguarding Priority expenditure.”
The International Monetary Fund is already ready to review the expiry date of its plan with the previous government on April 3, 2015, beyond April 2018. “The proposal was made during an IMF assessment mission. As this issue was raised then there will be another meeting to officially present this request. The government discussed this potential presentation with the IMF. However, nothing has been signed yet. Initially, the aid program was due to end in April 2018. But I know discussions are going on to extend it until December 2018,” said Dr. Anthony Akoto Osei, Minister of Evaluation and Control.
Contain the tax deficit at 5.2%
The government believes that by reviewing the current External Facility Credit, the country will contain its tax deficit at 5.2% by 2018. But some constraints will be imposed by the IMF. As a reminder, the new leaders have inherited a budget deficit of nearly 10% and left by the previous government.
This situation was pointed out by the current Minister of Finance when he took office in January 2017. “The country contracted a lot of debts with its partners and should now move towards innovative financing while keeping in mind the country’s needs,” he said. “Given its huge debt, the current government will not be able to lower some taxes, as promised…” said Martin Tamakloé, economist.
The country’s economy has been sluggish since 2013 due to a sharp deterioration in the public accounts with a debt-to-GDP ratio of about 70%. However, in 2016, it experienced an economic growth estimated at 3.6% exceeding the IMF’s estimate of 3.3%.
Author: Blamé Ekoué // Photo: Yaw Osafo-Maafo, Minister of Economy of Ghana © Blamé Ekoué – Radioxyzonline