- July 25, 2022
- Posted by: Amos Ekow Coffie
- Category: Economics
A Professor of Applied Economics at the Johns Hopkins University Steve Hanke has has fired at the Akufo-Addo administration for going to the International Monetary Fund (IMF).
He questioned when the government will learn.
In series of tweets, Prof Hanke said the IMF programme the government is seeking will fail.
“Yet again, Pres. Akufo-Addo passes the begging bowl to the IMF. When will the govt. learn? SPOILER ALERT: A new IMF programme won’t work—just like GHA’s past 23 IMF programmes. They all failed. Today, I measure Ghana’s inflation at a stunning 51%/yr,” he tweeted on Sunday July 25.
Yet again, Pres. Akufo-Addo passes the begging bowl to the IMF. When will the govt. learn? SPOILER ALERT: A new IMF program won't work—just like GHA's past 23 IMF programs. They all failed. Today, I measure Ghana's inflation at a stunning 51%/yr. pic.twitter.com/nJYo0dniHK
— Steve Hanke (@steve_hanke) July 24, 2022
He added “After slamming Ghanaians with more taxes to ‘save the economy,’ Pres. Akufo-Addo runs to the IMF. When he learn? SPOILER ALERT: Like GHA’s past 17 IMF bailout programmes, a new programme won’t work. Today, I measure Ghana’s inflation at 51%/yr.”
After slamming Ghanaians with more taxes to "save the economy," Pres. Akufo-Addo runs to the IMF. When he learn? SPOILER ALERT: Like GHA's past 17 IMF bailout programs, a new program won't work. Today, I measure Ghana's inflation at 51%/yr.https://t.co/hnzInDMrWT
— Steve Hanke (@steve_hanke) July 24, 2022
The Finance Minister Ken Ofori-Atta will be presenting the mid year budget review today, Monday July 25.
The budget review is expected to centre on the move to go to the IMF and other issues.
Ahead of the budget review, analysts including the Vice President of Imani Africa, Bright Simons has said Mr Ken Ofori-Atta must be candid in his presentation and admit that domestic revenue handles such as the Value Added Tax (VAT), the e-levy and Corporate Tax, are not working as they should.
He said the Finance Minister should admit that these revenue handles are underperforming.
Speaking in an interview with TV3 ahead of the budget review, on Thursday July 21, Mr Simons said investors will be looking at whether government makes these recognitions or they just engage in posturing.
“[Ken Ofori-Atta] must also be a bit more humble and admit that the domestic programmes are not going well as they said it would. Some of that will be acknowledgement of revenue handles that they are talking about and their performance. Where I will be most interested in whether or not it is sufficiently candid is admitting that some of these policy restrictions that were fiercely resisted are also having negative effect, not just they are underperforming.
“I think that e-levy has a cross effect on other revenue mentions because of its impacts on sentiments. We are going to start seeing that in Consumption Taxes. So some of us will be looking very closely at VAT and its performance, we will be looking very closely at Corporate Taxes and its out turn.
“We will be looking to see whether the government recognizes at this stage that it is beginning to lose credibility as being capable of taking these decisions in good faith or simply posturing.
“I think that is the biggest issue facing the government now. If investors get the view that they are just posturing, they don’t tend to do things fundamentally different, they will not be able to achieve their most important policy objectives right now which is to reduce the cost of our debt. If they don’t bring down the international rate it will affect everything else. This 20 per cent yield, 22 per cent yield moving to 25 per cent yield is moving the country aggressively towards a duration where we have a default,” he said.
A Financial Analyst and Chief Operations Officer at the Dalex Finance, Mr Joe Jackson also asked the government to cut spending on some programmes especially the feeding component of the free Senior High School (SHS) programme.
In his view, times are hard, the country is broke therefore, critical decisions ought to be taken by managers of the economy to look at ways to cut expenditure.
“It is time for us to look at all the expenditure cuts, it is time for us to look and wonder, do wo we want to spend this much on feeding and boarding in the SHS regime?
“Is this what we want to spend our money in the such difficult times on? These are hard times, there are hard decisions to be taken and one of the things we must realize is that Ghana is broke.”
Ghana’s economy is currently saddled with severe challenges.
This has led to the country heading to go to the International Monetary Fund for support.
Accordingly, a staff team led by Carlo Sdralevich arrived in Ghana on July 6 to engage the government of Ghana. The team concluded its initial work on Wednesday July 13.
The IMF team met with Vice President Dr Mahamudu Bawumia, Finance Minister Ken Ofori-Atta, and Governor Ernest Addison of the Bank of Ghana.
They also met with the Parliament’s Finance Committee, civil society organizations, and development partners, including UNICEF and the World Bank to engage on social spending.
At the conclusion of the mission, Mr. Sdralevich issued the following statement said Ghana is facing a challenging economic and social situation amid an increasingly difficult global environment.
The fiscal and debt situation has severely worsened following the COVID-19 pandemic. At the same time, investors’ concerns have triggered credit rating downgrades, capital outflows, loss of external market access, and rising domestic borrowing costs.
“In addition, the global economic shock caused by the war in Ukraine is hitting Ghana at a time when the country is still recovering from the Covid-19 pandemic shock and with limited room for maneuver. These adverse developments have contributed to slowing economic growth, accumulation of unpaid bills, a large exchange rate depreciation, and a surge in inflation.
“The IMF team held initial discussions on a comprehensive reform package to restore macroeconomic stability and anchor debt sustainability. The team made progress in assessing the economic situation and identifying policy priorities in the near term,” the IMF said.
It added “The discussions focused on improving fiscal balances in a sustainable way while protecting the vulnerable and poor; ensuring credibility of the monetary policy and exchange rate regimes; preserving financial sector stability; and designing reforms to enhance growth, create jobs, and strengthen governance.
“IMF staff will continue to monitor the economic and social situation closely and engage in the coming weeks with the authorities on the formulation of their Enhanced Domestic Program that could be supported by an IMF arrangement and with broad stakeholders’ consultation
“We reaffirm our commitment to support Ghana at this difficult time, consistent with the IMF’s policies.
“Staff express their gratitude to the authorities, civil society, and development partners for their constructive engagement and support during the mission.”
The Government of Ghana on Friday July 1 announced that it was seeking support from the IMF.
This followed a telephone conversation between the President and the IMF Managing Director, Miss Kristalina Georgieva, conveying Ghana’s decision to engage with the Fund, a statement by the Ministry of Information said.