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Budget Funding To Delay As IMF Deal Prolongs   
 
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12-Feb-2015  
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Ghana's budget execution is set to delay as major sources of funding are held up, awaiting finalisation of a programme with the International Monetary Fund (IMF) which is now slated for the end of March this year.

All development projects to be executed this year were captured in the 2015 Budget which was presented in November last year, meaning that implementation of the budget should take off from January this year however funds are not available for key projects to begin.

Ghana’s budget is largely financed by tax revenue and donor funding. However, with the current economic hardships businesses are facing, tax revenue to be accrued this year will certainly be affected and government unlikely to meet its revenue targets.

Donor funding including the infamous £135 million European Union (EU) fund to support Ghana’s 2015 budget has been withheld due to alleged payroll scandal, one of the fiscal evils the IMF has been working to uproot since Ghana began discussing a bailout programme with it in September last year.

As a result, donors and development partners such as the EU, which are expecting the IMF to come on board and provide the much needed injection of credibility and confidence prior to the extension of any form of support, are sitting on the fence.

Expected export revenues for 2015 are also set to be revised later this year as a result of falling commodity prices on the international market. For oil alone, Ghana is expected to lose about US$700 million. Ordinarily, the country makes US$1.2 billion averagely per annum.

It stands to reason that the execution of programmes contained in the budget will delay which will affect the execution of government programmes and projects.

The IMF deal is expected to rack in about US$1 billion. An IMF deal is expected to enhance fiscal discipline and restore conditions for strong economic growth. It will also ensure some amount of transparency with the country’s donors.

Dr Raziel Obeng-Okon, a Lecturer of Public Accounting at the Ghana Institute of Management and Public Administration (GIMPA) and Chief Executive Officer (CEO) of Cidan Investments Limited is worried that the delay to secure a deal with the IMF is affecting the country’s economy.

“A deal with IMF is key not only to maintain foreign investor confidence but to also to add credibility to the prudent management of our fiscal position as well as support for external financing requirements for 2015,” he maintains.

He however debunks speculations by financial analysts that the delay to secure an IMF deal is an indication that Ghana is not  meeting the expectations of the Bretton Woods Institution, a situation they have argued could result in government not being able to secure a programme as expected. 

Some economists have been of the view that the negotiations with the IMF had stalled because of concerns with Ghana’s bloated payroll and declining price of crude oil with its impact on government revenue.

Dr Obeng-Okon notes that the delays may be genuine because the IMF programme involves a multiplicity of procedures before the final deal is signed.

“These involve meetings with specific government agencies such as the Ministry of Finance, Bank of Ghana, Ghana Revenue Authority, Controller and Accountant General Dept and other stakeholders. These take time because the IMF team needs to be convinced before endorsing the country’s blue print,” Dr Obeng-Okon explains.

He however maintains that the delays might stagnate the country’s progress because its debt-trap has become a vicious cycle, pointing out that 2015 would be a very difficult year.

“The major factors include: the financial burden resulting from the high total debt to GDP ratio; high recurrent expenditure especially personnel emoluments and administration; corruption within the public sector; negative impact of crude prices on oil revenue; huge cost required to fix the energy crisis; etc,” he outlines.

Another economic expert and a senior lecturer at the University of Cape Coast (UCC), Dr John Gatsi also agrees that the delay in securing the bailout package will impact negatively on the economy.

“Even though we expect to receive the assistance by end of the first quarter, the timing of that package is crucial because the signing of the IMF deal will mean a revision of the budget which would affect the execution of development projects,” he maintains.

Dr Gatsi also refutes claims from some quarters that the prolonged negotiations with the IMF were early signs of Ghana’s failure to secure the much publicised package adding that the IMF is too credible an institution to dabble in fruitless negotiations.

“Every financial institution has a credibility to protect. The IMF doesn’t operate like a political party and so it cannot engage a country in a discussion with hope and all of a sudden withdraw it,” he observes.

The UCC economist said the fact that the IMF had recently hailed government’s efforts at cleaning the payroll was indicative of progress in reaching an agreement.

Director of the Communications Department at the IMF, Mr Gerry Rice last Thursday said progress had been made in cleaning the country’s payroll which was fraught with ghost names.

“Good progress has been achieved in recent weeks on the plan to clean up the payroll, finalise the remaining details of the government’s medium-term reforms, as well as firm up financing assurances for the possible programme,” Mr Rice stated in Washington D.C.

There have been conflicting views on exactly when Ghana can commence the long awaited austere programme from the Bretton Woods Institution.

Although it is official that government is now looking at a programme with the Fund by the end of March this year, the leader of the Ghanaian team negotiating with the IMF, Professor Kwesi Botchwey, is on record to have given February ending of this year as the period when a deal with the Fund will be finalised.

Early January this year, Deputy Finance Minister, Mr Cassel Ato Forson revealed that proposals for an agreement would reach the Fund’s Executive Board in February.

“I can confirm to you today that we’ve reached an agreement as long as the policy objective is concerned; we’ve reached agreement as long as memorandum of economic and financial policy is concerned. The IMF is only working with us to finalise it and go to the board next month (February),” said Mr Forson.

The Deputy Minister was apparently responding to concerns by former Deputy Finance Minister, Dr Anthony Akoto Osei that the IMF programme had kept long in coming.

Meanwhile, Head of the Finance Department of the University of Ghana Business School, Dr Godfred Bokpin, has warned that any delay in finalising a bailout programme with the International Monetary Fund (IMF) could result in the further depreciation of the cedi.

According to him, the financial assistance the programme comes with can help close existing gaps in the 2015 budget to stabilise the cedi.

“The decision to go to the IMF paid off even in the foreign exchange market and with the issuance of the Eurobond. Now we have to work to ensure that the deal is agreed and that implementation starts, otherwise we will see some level of pressure being brought on our currency,” he stressed.
 
 
Source: The Finder
 
 

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