Delay in the alms of the IMF
The government's negotiations on debt and budgets with the IMF are politically contentious ahead of December's elections. The politically charged deadline for the government's latest agreement with the International Monetary Fund is to be delayed again, following the report of a mission to Accra from 29 August to 2 September.
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The IMF mission has to report back on whether the country has met the conditions for the release of the next US$115 million tranche of its three-year credit facility.
A review by the IMF team in April this year introduced a number of key actions which included the approval of the Public Financial Management Law by Parliament, amendment of the Bank of Ghana Act by Parliament and a clear strategy to address the debt and financial situation of State Owned Enterprises.
The IMF team said cautiously that the government's implementation of the programme was 'broadly satisfactory', apart from missing some targets on the wage bill and central bank management.
Outstanding priorities included finalising delayed reforms to public finance and the Bank of Ghana, and dealing with cash-strapped state companies in the energy sector.
In a bid to meet these requirements, which were structural in nature and to satisfy the conditions for the third review, the government moved to pass the Public Financial Management law and amended the Bank of Ghana Law to allow for zero financing of the government’s budget, which resulted in an extended sitting of Parliament.
But Parliament did not amend the Bank of Ghana Act to allow for zero financing of the government’s budget as requested by the IMF, but instead proposed for a limited cap of five per cent.
Again, in meeting the other IMF requirements, the government had restructured a substantial portion (GH¢2.2 billion) of VRA’s debt, government has started taking action to address the financial situation of the SOEs. The on-going restructuring of the energy sector SOE debt involves 12 major domestic banks.
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Mid September meeting
But after meeting the above request, the IMF indicated at the time that a new Board date could be scheduled for mid-September, 2016.
However, the Board would have to be apprised of current economic developments up to June, 2016. A follow-up Mission, therefore, took place from Monday, August 29 to Friday, September 2, 2016.
At the end of this follow-up mission, the team was provided with updated data, given an update of the SOE debt restructuring plan, informed of the validation of the legacy debt to be paid from the energy levies, informed that the Government would expand the scope of the energy sector audit validation programme to cover their future viability, based on a review of business plans.
It is important to note that, the Third Review considers economic performance up to end December 2015. During the period under review, Ghana broadly satisfied the fiscal quantitative performance criteria in spite of a challenging economic environment.
The IMF was satisfied with the developments made by Ghana. Notwithstanding this, the various laws that needed Presidential assent were ready on the final day of the Mission.
A set of laws
This requires the IMF to now study the entire set of laws, and potentially communicate a new target board date.
For this year, the government says that its budget includes GH¢825 million or roughly US$214 million about 0.5 per cent of gross domestic product, to organise the elections.
Cost was one reason why the government-appointed Electoral Commission failed to produce a new electoral register to eliminate what the opposition claims are tens of thousands of bogus voters, mostly from neighbouring countries. As the 2012 presidential election was decided by fewer than 50,000 votes, it's a legitimate concern.
In fact, state spending ballooned out of control before elections in both 2008, when the NPP was in power, and 2012, when the NDC was. This time, Ghana faces the toughest economic conditions for two decades and the government is dealing with strictures imposed by an IMF programme in exchange for a US$900 million loan.
For now, much depends on the Fund's verdict that its directors are due to discuss in Washington in a few weeks' time. An IMF imprimatur offers the government backing as it tries either to float another Eurobond or to raise a syndicated bank loan.