IMF loan could be the relief Ghana needs
The International Monetary Fund (IMF) has approved a second disbursement of an economic loan to Ghana. Ghana was at the forefront of emerging economies in Africa, but its growth began to decline in 2013 because of an enduring budget deficit, high inflationary rate and a 70% percent debt-to-GDP ratio. With the aid of the Fund, Ghana hopes to revitalize its ailing economy, which will foster high growth and enhanced employment opportunities.
Through the Extended Credit Facility (ECF) by the instrumentality of the Fund’s board, Ghana negotiated a three-year loan of US$918 million to galvanize the country’s medium term economic reforms. The first US$116.6 million installment was disbursed to Ghana after a successful review of its economic performance in June.
The loan aims to capture the actualization of the economic reforms that are underway in Ghana. The basic pillars of the program are: a size-able and front-loaded fiscal adjustment to restore debt sustainability, structural reforms to make public finances firmer while improving transparency in budgeting, and preserving financial sector stability.
It is estimated that the program will further dampen Ghana’s economy at the initial phase, but growth will set in the following years and probably reach a 5.5% increase by 2017. The IMF carried out a survey to explain this:
The Fund foresees a pick-up in economic growth in 2016 supported by expected increases in hydrocarbon, lowered inflationary and interest rates, stable exchange, improved domestic gas production and surpluses on the financial and capital accounts.
These projections of the Fund should be workable, but vis-a-vis the economic aspirations of Ghana, it may not be attainable in the long run. This is because the conditions that surround IMF loans are often questionable. Global Exchange (a human rights non-governmental organization that promotes social, economic and environmental justice around the world) released a report- Top Ten Reasons to Oppose the IMF. According to the report, the organisation was portrayed as a neocolonialist framework serving wealthy countries and Wall Street. Also, that the Fund hurts workers, women and the environment, and rather than solving economic crisis— it deepens it.
Some of the most important conditions of the Fund include liberalization of the economy and elimination of subsidies. It is no coincidence that an IMF Press Release showed that the Ghanaian “government decided to liberalize the prices of fuel products…and eliminating the need for fuel subsidies […].” These moves represent a core of the Fund’s conditions for granting loans.
It is also important to note that ranking first in the aim of the loan, as stated in all agreements reached, is the sustainability of the debt burden of Ghana. One would expect that an organization seeking to rescue a country out of economic crises will impart more by abolishing debt rather than providing means of servicing it. What is quite fascinating is that Eurodad’s analysis shows that the average number of conditions per loan has actually risen since the last conditionality review. Eurodad is an NGO aimed at addressing issues that concern Third World Countries.
If this is true, what is the hope for Ghana, considering the nation is heavily banking on this loan for economic resuscitation?