Ghana’s IMF Programme Implementation: Businesses & households to feel heat

June 20, 2023 / Comments (0)

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Businesses and households would bear the brunt when the government begins full implementation of the conditionalities of the International Monetary Fund (IMF) Extended Credit Facility (ECF), an economic expert has cautioned.

He said even though the adjustments and policy initiatives were good and would help the country to return to growth path, the austerity measures in the programme would hurt individuals and businesses.

Disclosing this to the Graphic Business in an exclusive interview, a Professor of Economics and Finance at the University of Ghana, Prof. Godfred A. Bokpin, said the targeting implementation of the government’s programme was poorly done.

“If we cut capital expenditure it will affect growth because for instance we wouldn’t be able to build roads, and looking at the bad nature of our roads, that would be a disincentive. Contractors would also not have money to pay their employees and suppliers so it would have an impact,” he explained.

Again, he said the government’s plan to reduce transfers to statutory funds under the ECF would also contribute to the impending economic hardship on individuals and households as well as businesses.

Given that such transfers, especially those made to the District Assembly Common Fund, are targeted at improving decentralisation and equipping the assemblies to take on capital projects, reducing such allocations would directly impact the incomes of households, Prof. Bokpin said.

He said while expenditure cuts were favoured by many watchers of the economy, it was prudent to be well targeted.

Prof. Bokpin was of the view that unlike other IMF programmes, the current one had a deeper level of adjustment that would not only affect how the government implements its policies and programmes but also impact private sector businesses and individuals.

“We would not be able to recruit into the public sector as much as we could when we were on our own and one key adjustment would be wage freeze and when that happens it means the increments in wages would not happen significantly because the government wants to make savings.”

“If inflation grows above wage increment, it will affect workers’ disposable income and bring hardship,” Prof. Bokpin said.

To Prof. Bokpin, while the conditions would create unemployment in the public sector, the private sector was likely to experience an employment freeze during the period due to the government’s resolve to increase taxes to shore up domestic revenue.

“There were tax bills that were passed last year, they were all part of it. So for instance the Growth and Sustainability Levy will squeeze cash flow for businesses and the few paying taxes would be further burdened,” he said.

Cut waste

The government, he said, could rather reduce the number of ministers and ministries to achieve its savings target.

“The government must reduce the number of ministries because some of them do not add any value.”

“We have about four different ministries in the transportation sector that could be reduced but because the government wants to satisfy its interest, it is looking elsewhere to make savings,” he said.

Prof. Bokpin added that, “if we collapse six ministries we will be able to make significant savings because we have more ministries than a country such as Germany, and next door, Côte d’Ivoire has 31 ministers while we have about 88”.

Aside from the number of ministers that must be reduced, the Professor of Finance said the government had too many development authorities that were doing the same jobs as the regional coordinating councils.

That, he said, contributed to wasteful expenditure that must be addressed. “We spend more on the presidency than any country in West Africa,” he said.

Social protection

In an attempt to limit the negative social impact of the frontloaded adjustment, the government under the programme intends to deploy policies to protect vulnerable households through an immediate strengthening of key targeted social protection programs—and to create room for higher social and development spending in the medium-term.

The programme intends to strengthen social spending to protect the most vulnerable from the impact of the economic crisis and to invest in Ghana’s human capital. 

To mitigate the impact of increasing cost of living, the 2023 Budget has already doubled the amount of the Livelihood Empowerment Against Poverty (LEAP) grant. 

The budgetary allocation for the Ghana School Feeding Program has also been increased to compensate for higher meal cost. 

In the medium term, the government envisages that domestic revenue mobilisation efforts would enable it increase the overall social spending envelope for social protection, health, and education.


In mid-May this year, the IMF approved a US$3 billion 36-month arrangement with the government and immediately disbursed the first tranche of US$600 million.

As part of the deal, the government is expected to restructure its domestic and foreign debt to sustainable level, freeze public sector employment and wages to save 0.5 per cent of gross domestic product (GDP), reduce allocations to statutory funds and cut capital expenditure to make savings of 0.9 per cent of GDP. 

The government would also cut spending on goods and services in a bid to make savings of 0.3 per cent of GDP.

Prof. Bokpin added that while the conditions were not punishment, they would significantly affect the economic conditions of the individual Ghanaian especially the poor and marginalised.

He was speaking to the Graphic Business ahead of the Graphic Business/Stanbic Bank breakfast meeting slated for Tuesday in Accra.

The forum, which discusses pressing economic and social issues affecting society and proffering viable solutions, will be on the theme: ‘The Current Economic Situation And You:  What to expect’.

The conditions, which are specific and measurable, are attached to IMF lending and relate to macroeconomic variables under the control of the government.

At a press conference last Sunday, Finance Minister Ken Ofori-Atta said the approval of the International Monetary Fund (IMF) programme has started yielding positive outcomes.

These positive outcomes, he said, included decreases in the rate of inflation and treasury bills, improvements in foreign reserve and current account positions, but stressed that “the real work of adjustments, r-alignments and the return to a path of steady economic growth has just begun”.

“Let us brace ourselves for the needed reforms,especially in expenditure control, non-arrears accumulation, revenue growth, ECG collections and Energy Sector reforms, in order to rebuild the walls of the republic with urgency, ”Mr Ofori-Atta added.

The Finance Minister said the reform programme, the Post COVID-19 Programme for Economic Growth (PC-PEG), now supported by the three-year Extended Credit Facility (ECF) arrangement with the IMF, was built on clear targets, strong policy and structural measures.

He pointed out that the programme was to promote a credible fiscal consolidation programme, anchored by strong domestic revenue mobilisation and high spending efficiency.

Mr Ofori-Atta said securing the IMF programme was not an end to the current challenges, though it had significantly paved the way for the implementation of an ambitious and a well-thought-out programme of reform for the economy and country.


Targets of the programme through to 2028 include taming inflation expectations firmly and preserving financial stability; restoring public debt to sustainable levels by 2028 by observing the two binding constraints of Public Debt (in present value terms) to Gross Domestic Product (GDP) ratio of 55 per cent or less; and an External Debt Service to Revenue ratio of 18 per cent or less.

The programme also aims to enhance economic competitiveness, with exports surpassing 37 per cent of GDP in the medium term, while safeguarding social protection and enhancing targeting to ensure effectiveness of key interventions.

Over the medium term, he said the PC-PEG-backed IMF programme sought to promote a credible fiscal consolidation programme, anchored by strong domestic revenue mobilisation and high spending efficiency.

He said the government was targeting a primary surplus on a commitment basis — the critical fiscal anchor under the programme— of 1.5 per cent of GDP by 2025 through to 2028.

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