Professor Godfred Bopkins says the political will by any government not to approach the International Monetary Fund (IMF) may not be realised due to the structural bottlenecks that exist in Ghana’s economic system.
The Economist and Professor of Finance explained that the country since independence had had successive governments with different ideologies and governance approaches that relied on the IMF for assistance to address economic challenges that had remained unchanged since 1965 when Ghana first approached the institution.
He attributed the recurring nature of economic challenges to unaddressed structural bottlenecks that manifested in debt unsustainability causing ballooning public debt, revenue underperformance, price development challenges leading to inflation, balance of payment problems, high government expenditure, among others.
“I agree going to the IMF is a political decision. But it is driven by economic fundamentals, so it gets to a point where you realise that your political pride may not be able to generate the much-needed confidence in your economy.
“The economic fundamentals will eventually prove stronger than the political will to go or not to go. So, we can delay it for a while,” he said.
He made the remarks at a roundtable discussion organised by the Institute of Economic Affairs (IEA) on the topic, “Ghana’s Current Economic Crisis: Is it Time to go to the IMF or is there an Alternative Way Out?”
Ghana officially joined the International Monetary Fund (IMF) on September 20, 1957. It first approached the IMF in 1965 for a fund supported programme which the government eventually turned down.
It has since then approached the IMF on 17 occasions with the last happening in April 2020 when Ghana signed for a Rapid Credit Facility (RCF).
With 16 programmes under the IMF, the country, becomes the fifth highest in sub-Saharan to seek assistance of the Fund through programmes.
This comes after Liberia with 21 programmes, Kenya with 19 and Sierra Leone and Mali with 17 programmes respectively.
He said, the country since independence had averaged a period of 3 to 4 years that it approached the IMF for assistance adding that “Ghana has spent much quality time under the care of the IMF than on our own since independence.”
“Logically, the time is ripe for another Fund supported Programme given our last programme support that ended in December 2018 even though review ended in March 2019,” he said.
The Professor also noted that the practice of politicking with governments going to the IMF was serving as an incentive for the incumbent government not to enter a programme with the IMF as it would appear to be a political suicide.
Prof. Bopkins said unfortunately, the recent austere measures adopted by government, which included the 50 per cent slash in fuel coupon allotment for some public officials, 30 per cent of salary cut for some government appointees and ministers, among other measures, may not guarantee the fiscal discipline needed to address the structural bottlenecks.
He said the passage of the Electronic Levy bill by Parliament for government to tax 1.5 per cent on electronic transactions, was also not likely to meet its revenue target of US$6.9 billion considering the reduction in margin and the late roll out of the tax initiative.
“In fact, the government has taken us back to exactly where they took the country from in December 2016 as inflation then was 15.4 per cent and inflation now is 15.7 per cent and Ghana is just moving in circles.
“My predisposition is that, in one way or the other, we will go to the IMF even though we might delay it for a while,” Prof. Bopkins said.