A former Finance Minister, Seth Terkper has stated that Ghana’s staff level agreement with the International Monetary Fund (IMF) will empower the Fund to commence a series of measures that will compel government to take critical fiscal decisions.
From his experience dealing with the Fund as a finance minister, he juxtaposed that the IMF Board may ask the Bank of Ghana to stop government funding, while government is forced to implement some strict measures as part of conditionalities.
Speaking to Journalists through a zoom presentation, Mr. Terkper stated that it will be important to undergo the necessary roadmaps that will be imposed by the Board of the IMF for a final approval of the deal. Indicating that, the board will deliberate over the staff agreement deal and make some recommendations to government.
“When the document eventually goes to the IMF Board and is released, you will see the extent to which the Bank of Ghana measures in financing government expenditure will be stopped”, he said.
Mr. Terkper stated that Board will carefully review Ghana’s fiscal stance and prescribe measures to avoid slippages.
This, he said will include the current situation where the Bank of Ghana is providing support for the government by over 5 percent of the previous year’s revenue.
“Today, the Bank of Ghana is spending about ₵40 billion or so to support the budget. This will have to go down to zero. This is the path we are threading. We just started the journey.”
Also, a financial economist, Mr Emmanuel Amoah Darkwa, has explained that the IMF’s staff-level agreement with the government of Ghana is not tantamount to a done deal for the US$3-billion extended credit facility from the Fund.
He said some other countries have signed such agreements with the IMF but were unable to clinch a final deal.
The SLA, he noted, is subject to management- and board-level approval by the IMF.
“If these agreements are approved, it means that the money will hit the accounts of the country,” he explained.
The financial economist gave this explanation to the agreement signed by Finance Minister Ken Ofori-Atta and the IMF Mission Chief Stephan Roudet in Accra on Tuesday, 13 December 2022.
Mr Darkwa in an interview last week said “even before we finally get approval for a deal from the IMF, Ghana has to restructure its GHS137 billion debt.”
“It is these debts that have suffocated the country to the level it finds itself”, the Sikap Global partner added.
He noted that until Ghana finds ways to pay its debts, it may not get a deal from the IMF.
Mr Darkwa said Ghana must demonstrate it can pay its debts to get the final approval.
On the same programme, a former Member of Parliament (MP) for the Bantama Constituency in the Ashanti Region, Mr Daniel Ochem Aboagye, said the agreement was good news for the country.
According to the former Chairman of the Finance Committee of Parliament, the SLA means something is coming to transform Ghana’s economy.
He said the announcement of the deal will play in Ghana’s favour on the currency market.
In his announcement of the debt exchange programme on Sunday, 4 December 2022, Mr Ofori-Atta said: “Under the programme, domestic bondholders will be asked to exchange their instruments for new ones”, adding: “Existing domestic bonds as of 1st December 2022 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037”.
Also, “the annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. Coupon payments will be semi-annual”.
Mr Ofori-Atta noted, however, that Treasury Bills and individual bondholders are exempted from the haircuts.
