[ 2016-12-05 ]

Change of gov’t in Ghana won’t affect bailout deal – IMF
The International Monetary Fund (IMF) has watered
down arguments that conditionalities under its
Extended Credit Facility (ECF) agreement with
Ghana would be renegotiated should there be a
change of government.

Asked by the B&FT whether it is possible, as the
opposition NPP has hinted, for some of the terms
to be renegotiated, Resident Representative of the
Fund, Natalia Koliadina, said it would come at a
“cost.”

Her outfit, she said, does not expect any such
thing to happen considering the success of the
programme.

“It comes at a cost to economic growth if the
programme is discontinued. So, who will be
interested in undoing what has already been
achieved? So, I believe that the government,
whoever it is, will continue building on the
achievement that has been made in the past two
years,” she said.

Some of the IMF conditionalities have come under
severe criticism from financial analysts,
including the one that instructs zero financing of
government by the Bank of Ghana.

Executive Director of the Institute of Fiscal
Studies (IFS), Professor Newman Kusi, has called
the move premature and asked for to be removed.

“When we say it’s premature, we mean that the
drastic cut is not in the interest of the country.
Because whether BoG finances government or not, if
the government intends running a deficit, it will
do it via the issuance of treasury bills to pay
for the deficit. When government does that,
interest on the T-bills goes up, undermining the
inflation targeting mechanism.

You cannot say that the central bank should not
support government. It doesn’t make sense. You
can’t compare Ghana to UK, or US where their
central banks do not finance deficit; those are
strong and tried and tested institutions. How can
you say that central bank should not finance
government? We oppose that,” Prof. Kusi said.

Head of the Economics Department of the University
of Ghana, Professor Peter Quartey, also suspects
that particular conditionality is the reason
government has been so keen on the Eurobond.

“There is a big revenue gap that government
needs to fill. Since the IMF programme does not
allow the Bank of Ghana to finance government any
longer, it has become necessary that government
must find alternatives to raise revenue,” he
said,

"So, I think this influenced the decision of
government to attempt issuing a fifth Eurobond so
it can raise money to close the revenue gap,” he
said.

Source - Starrfm

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