Next President’s major task: Extend IMF Programme for another 3 years — Prof. Bokpin

As the elections draw close this weekend, a professor of Economics and Finance, Prof. Godfred Alufar Bokpin, says the incoming administration must extend the IMF programme by another three years to 2029.

That, he said, would give the new economy the needed “policy anchor” for long-term funding after the programme ends.

The US 3 billion three-year extended credit facility signed by the government with the IMF in 2022 and which ends in 2025 has an  extension clause to 2026 and Prof. Bokpin says the government that comes to power on January 7 must of necessity extend that arrangement for another three years.

A major reason, according to the expert, is that going to the international market just after the programme ends in 2026 will not offer the country the needed space and credibility to access long-term capital on the international capital market.

“The headwinds facing the economy are still strong. We have also not built enough credibility after defaulting on our debts, so going back to the international market will be costly,” he explained.

Government of Ghana has indicated recently that it intends to hit the international market to raise additional funding three years after a debt restructuring exercise that has seen improving economic indicators.

The last time the government issued a bond was in September 2022, and right after that it launched the domestic debt exchange programme in January 2023. The programme, which was completed in September 2023, saw the government swap local bonds worth over GH₵83 billion for 12 new ones at reduced coupon rates and longer tenors.

Earlier this year, the government secured an agreement with its bilateral official Creditor Committee to restructure commercial debts of US$14 billion, out of which US$13 billion are in Eurobonds.

In Prof. Bokpin’s view there was the need to “signal long-term partnership with International Monetary Fund (IMF) that will provide the impetus for long-term funding for the economy and that an extended programme with the IMF will give the economy the needed policy credibility”. 

That, he said, came under an extended credit facility or policy support alluding to the fact that the country walked away too early from the 2016-2019 IMF programme, one he claims also compounded our current challenges.

He further added that any attempt to hit the international bond market has to be strategic and “timing is of great consequence to our peculiar economy”.

The Economics and Finance lecturer said, “A long-term partnership with the IMF that brings along stability will signal to investors that the country is ready for long-term investments and capital.”

This underscores his assertion that reports and data have shown that the long-term transformation of the economy will take 15 years to accomplish, hence there was the need for patient capital at an affordable rate for infrastructure development.

Prof. Bokpin was keen on the government embarking on infrastructure development in partnership with the private sector that delivered what he termed “economic infrastructure” that pays for itself rather than social infrastructure.

An economic infrastructure with public-private partnership will, according to him, also do away with ballooning cost of social infrastructure projects

December 7 Elections

Ghana heads into an election this weekend to elect a new government or to maintain the status quo. 

Prof Bokpin was worried that all the major political parties have outlined programmes and policies that have not been costed or have not taken into consideration Ghana’s current three-year extended facility under the IMF which comes with strict expenditure cuts and optimising revenues.

This non-alignment of party manifestoes will come at a cost as the winning government may be forced to take decisions that will trigger more expenditure and less revenue.

“Both the major political parties have signalled tax reduction and embarking on capital expenditure”, he stressed, adding that that would go against the IMF programme. However, this can be achieved through government efficiencies.

“A key point here”, he said, “is that both major parties have agreed to cut down the number of ministers drastically”, emphasising the point that the economy around ministerial appointments such as the establishment of agencies and departments were all expenditure on the public purse.

“If government can reduce its ministers, and cut down on bureaucracies in government machinery, the cost savings, no matter how marginal, will inure to the public good.”

On corruption, he said the government must make it a policy to ensure that any transaction above GH¢10,000 (ten thousand Ghana Cedis) must be through the banking system.

It was his belief that such a policy would ensure currency stability and curb money laundering in the financial sector of the economy.

That, he again said, would potentially make the banking sector thrive and spur investments in the economy.