Ghana breaches IMF bailout terms, causes delays in release of funds

Dr Assibey-Yeboah [L] says Ghana has breached the IMF bailout terms.
Ghana has begun bearing the brunt of violating the terms of its three-year bailout programme with the International Monetary Fund [IMF] that seeks to stabilise and sustain the country’s macro economy.

According to economist Dr Mark Assibey-Yebeoah, Ghana has failed to comply with some key structural measures under the IMF Extended Credit Facility programme that the country entered into with the Fund last year.

This, he revealed, has forced the IMF to holdback the release of the fourth tranche of about 118 million dollars to the country. Ghana is to receive eight disbursements of 118 million dollars each within three years.

Speaking exclusively to TV3’s Evelyn Tengmaa on government’s attitude towards the implementation of the programme, Mr.Assibey-Yeboah said the IMF Board is not happy about the development.

“The [IMF] Board is holding back until such time they’ve seen firm compliance from government,” Dr Assibey-Yeboah who is also the Member of Parliament for New Juabeng South told our correspondent.

The breaches & consequences

A slump in Ghana’s economic growth as a result of drop in commodity prices, including gold and oil, and a non performing Cedi among other factors forced the government to turn to the IMF last year.

Ghana was required under the three-year programme to among other conditions, submit to parliament, a new public financial management bill that seeks to strengthen financial management and check government’s fiscal operations.

It was also to submit a Bank of Ghana amendment bill, which aims at giving the Central Bank independence and prevent it from financing government’s deficits.

Again, Ghana per the terms of the programme is to limit its non-concessional borrowing from the international capital market.

But the government, Dr Assibey-Yeboah claimed, is violating these terms.

He noted that the two bills were supposed to have been laid before Parliament by December 2015 but the government failed to do so, saying, “To date, it has not come to Parliament”.

“It is in the agreement that the BoG should not finance the government deficit. I have picked up indications that government is forcing the Bank of Ghana to do some financing of its deficit, which will be in contrast to the agreement set out in the ECF programme and that will be why government is dragging its feet in bringing the BoG amendment bill to parliament,” he claimed.

Notwithstanding the limit of Ghana’s non-concessional borrowing from the international capital market, he said the government is bent on borrowing one billion dollars again.

“The World Bank is not in favour; the IMF is not in favour. So whereas last year the World Bank gave the government a partial risk guarantee of up to 400 million dollars to shore up the issue, this year, there’s no partial risk guarantee from the World Bank,” he said

The IMF, he said, has advised government against issuing the one billion-dollar Eurobond because it would send a bad signal to the investor community but “government is bent on issuing the Eurobond.”

“On the public financial management bill front, on the Bank of Ghana amendment front, the financing of the deficit by the Central Bank, the issue of the euro bond; on all four fronts government is not complying with the IMF directives and that’s why the IMF has not disbursed the fourth tranche,” he argued.

Dr Assibey-Yeboah said the IMF makes disbursements only after a country has shown compliance and after their reviews, noting after the last country review, it emerged that “the Board is not happy with the government and so last week, they met on some countries they’ve made disbursement but they’re holding back with government”.

He argued the consequence of government’s failure to comply with the fund would soon impact negatively on the economy, as the Cedi will soon start depreciating faster than experienced in the past months

By Stephen Kwabena Effah||Ghana

Twitter @steviekgh

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