Election 2016 could decide gov't, IMF bailout talks

A source close to Ghana’s discussions with the International Monetary Fund (IMF) on a possible bailout programme has raised concerns about the country’s willingness to go under the Fund’s full-blown programme that spans an election year.

The official with the Washington-based lender who declined to go on record confirmed to the B&FT that the 2016 general elections is a huge stumbling block to Ghana’s chance of securing a Fund programme. Missing out on budget deficit targets by successive government is not a new phenomenon having occurred in the two (2008, 2012) previous elections – a possible IMF programme will require this occurrence be averted.

According to the official, the IMF is aware of government’s inability to control its spending in an election year adding that government’s commitment to contain budget overruns particularly in an election year will be severely tested should it land a Fund programme.

An IMF programme to achieve financial consolidation will require containing the public wage bill, which has largely been a cause of several budget overruns. Despite government tightening its grip on the wage bill this year –only allowing a 10% increase via Cost of Living Allowance—the Fund’s position has always been a further reduction.

A further reduction in the wage bill is a possible conditionality for an IMF programme, and the source hinted that, government will have to decide whether to opt for the cut that could hurt voters’ apathy particularly in 2016 or choose a path that will restore the economy on its growth path.

Although Dr. Kwesi Botchwey who led Ghana into the first round discussion with the Fund over a possible programme indicating the country is applying for a full blown programme –Technical and Financial assistance, the source maintains that more discussion is needed to determine what remedies the country actually needs.

A high-powered government delegation is currently locked in negotiations with the Fund in Washington DC. The discussions, the source said, could outlast the IMF and World Bank Annual Meetings taking place October 10-12 in Washington DC.