IMF Bailout: Macro-economic stability is guaranteed - Economist

Economist and Lecturer at the University of Ghana, Dr. Adu Owusu Sarkodie, has explained that Ghana’s return to the International Monetary Fund (IMF) would earn the country what he termed macroeconomic stability and a solution to reduce the expenditure rate of the country.

He indicated that IMF programmes are mostly short-term causes for rejuvenating a country’s economic flaws. However, after economic stability has been achieved what lies ahead is the country’s ability to sustain and improve fiscal growth.

In an interview on eTV Ghana’s “Fact Sheet” Dr Adu reiterated that the country’s numerous attempts for the IMF bailout have been crucial and needful but without the IMF, the country’s economic crisis would have been dire and probably impossible to rescue.

“For all the 16th time we’ve been to the IMF, there was a need for the program and without the program, things would have been worse. This 17th we’ve gone to the IMF there’s still the need to go. The IMF program is not a long-term development program but a stability program, a balance of payment and support program. What they come to do is to give you stability and what you do with the stability is up to you. The program is usually for a period and let’s say for 1-2 years and a maximum of three years. Our last time was for three years and when it was done, they left the country. The IMF is not there to build roads, create jobs, reduce your poverty and other long-term development for you. They only mean stability and what you do with that matters most as a country,” he noted.

Dr Adu Owusu Sarkodie disclosed that the IMF team would also target marginalizing Ghana’s exchange rate as well as develop strategies to dissolve burdensome taxation and over expenditure in the country’s system.

“First of all, they give you some funds to increase the international reserves and to give us some inflow and in simple terms the availability of dollars so that the BOG can supply the dollars to whoever needs it and with that supply of dollars it stabilizes the Cedi and because there is always a pass-through effect of the exchange rate to inflation and interest rate once the Cedi is stabilized, it tames inflation and interest rate. That is what we call the macro-economic stability.”

So the IMF gives you that stability from exchange rate to inflation to interest rate and sometimes embark on the fiscal consolidation path which means bridging the gap between revenue and expenditure which is the budget debt deficit and also slowing down borrowing, reducing the public debt.

So they encourage you to raise more revenue without necessarily overburdening Ghanaians with more taxes. Probably find a way to increase revenue and reduce expenditure so anything they think it’s prudent for the government to narrow the gap between revenue and expenditure they would do it. So that macroeconomic stability plus fiscal consolidation is what they would leave you with and policy credibility,” he stressed.

A group from the International Monetary Fund (IMF) is due in Ghana in the interim to start negotiations on a potential bailout programme. The visit will last until July 13, according to a statement from the IMF on Tuesday.

One of the biggest economies in West Africa, Ghana, announced on Friday that it would hold official meetings with the IMF after citizens there demonstrated against rising prices and other economic problems.