IMF Review Inconclusive

    /    Sep 6, 2016   /     NewsBreak  /    20 Comments  /    30626 Views

A team from the International Monetary Fund (IMF) has left the country after a marathon of discussions with government on the country’s fiscal policies and parliament’s recent actions ended inconclusively.

The IMF team led by Joël Toujas-Bernaté completed its latest mission to Ghana on Friday amid concerns that a number of outstanding issues still need to be ironed out before a decision on the Fund’s next action could be taken.

The team, which held discussions with high profile government officials including the president and the finance minister admitted that despite progress made in the ongoing US$918 million Extended Credit Facility programme, concerns regarding certain provisions in some legislations passed by parliament recently has not been addressed.

“Following recent progress in implementing the IMF-supported program, including the passing by Parliament of several important legislations, we had constructive discussions with the authorities during this week on a few outstanding issues.

“Understandings were reached on many of these issues. Outstanding questions remain with regards to certain elements of the legislations recently passed by Parliament and discussions will continue,” the IMF mission chief said in a statement released on Friday last week.

The delay in seeing the government reached a consensus with the Bretton Woods institution is feared could hurt the three-year US$918 million bail-out programme as the IMF already lags behind schedule in its plans to undertake a fourth review of the programme signed in April last year.

Mr. Toujas-Bernaté said the outcome of the discussions will not result in a decision by the Fund’s Board, which will have to sanction the next review; a precondition necessary for the release of an expected US$116 million tranche and to also trigger the release of several millions of dollars in locked donor-funds.

The IMF has hoped that the adoption of key legislations including an amendment to the Bank of Ghana (BoG) Act, Deposit Protection Act and Public Financial Management Act could be passed in time by Parliament to streamline and tighten public purse and also eliminate lending from the central bank to finance government.

However, the expectations of the Fund was missed when Parliament passed the amended Bank of Ghana amended bill, allowing government to borrow from the central bank up to five percent of the previous year’s government revenue to support the budget.

That singular action contradicts with a key provision of the Washington-based lender’s conditionalities which had preached a zero deficit financing by the central bank as a way of ensuring a discipline fiscal regime needed to reduce the country’s fiscal deficit; which reduced from about 10 percent in 2014 to 3.7 percent next year.

Additionally, the IMF has demanded government’s answers on how it will deal with a chain of debts of State-Owned firms in the energy sector without compromising the central budget.

According to Mr. Toujas-Bernaté, its latest mission though inconclusive has resulted in some agreements even as key issues remain to be solved.

The discussions focused mainly on updating the macroeconomic projections, firming up the fiscal outlook for 2016, and ascertaining that financial pressures faced by the main State Owned Enterprises (SOEs) in the energy sector will not pose additional risks to the central government budget.

Talks on a third review is long overdue and the Fund is hopeful that a quick and positive conclusion of some actions it wants the government to pursue will lead to the third programme review to be considered by the IMF Executive Board around mid-September.

The board will decide whether government’s progress in the ongoing programme is enough to warrant a further disbursement of the next tranche of US$116 million.



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