IMF holds Ghana to ransom

Ghanaians must gear up for tougher times ahead. The 94 per cent increase in fuel prices is but one of four policies the Ghanaian government has pledged to the International Monetary Fund (IMF) and World Bank to implement this year.

Government as well as Bretton Woods institutions insist that the relationship between them is purely advisory. But the fact that Ghana currently does not have a programme with the IMF goes to confirm the contrary.

“Ghana failed to do as agreed with the IMF to freeze wages and get Ghanaians to pay for the full cost of utilities. There was a significant deviation, on the wage bill" said IMF resident representative in Ghana, Enrique De La Piedra.

It is precisely because the Government of Ghana failed to measure up to the benchmarks set up by the IMF that the country has not had a programme with the Fund since November 30, 2002.

Like a schoolboy, Ghana was asked to return to do its homework properly last week. Has Ghana a choice? The answer is no and that is why the government struck a deal with the Fund when an IMF mission was on a 10-day official visit to the country in late January 2003.

Inherent in the detail is keeping a tight lid on the national wage bill – in the face of worker’s agitation for salary increases, pushing the public to pay the full cost of electricity, water and other utilities, and sell off the Ghana Commercial Bank (GCB) and the debt-ridden Tema Oil Refinery (TOR).

The fine details of the agreement are petty sketchy but the IMF resident representative told the paper that the broad framework of the agreement is in line with the government’s drive to grow the faltering economy and eliminate waste.

The government concluded a preliminary deal with the IMF early last week on the country’s macro-economic framework culminating in the Fund’s pledge of $245m concessional loan for a three-year period.

The Assistant Director of the West Africa Division of the IMF led the Fund’s mission to Ghana to discuss the country’s macro-economic framework and to seal the Poverty Reduction and Growth Facility (PRGF) deal of $245 million for budgetary support. But the Fund’s resident representative said the IMF board has not approved the concessional loan yet.

The Board will approve it in Washington in April by which time the government of Ghana’s 2003 budget statement, which the Fund describes as “an appropriate budget”, would have been presented to the Ghanaian Parliament.

Truth is, the IMF Board will only approve the $245 million PGRF only if the budget reflects the stringent policies the Fund. These are; reduce poverty, strengthen the Balance of Payment (BoP) and maintain an acceptable national growth of about five per cent, De La Piedra said.

To be disbursed in seven tranches, each disbursement would depend on how well the government sticks to commitments made to the Fund. “That’s how we (the IMF) can be sure that the government of Ghana will implement the programme,” he added.

The government’s hands are tied. The money from the deal is for specific projects. In the new arrangement awaiting approval, the IMF is again pushing government for reforms in the financial sector, in order to transform the climate for financial sector applications.

One example is to encourage the setting up of private pension schemes to break the monopoly enjoyed by the Social Security and National Insurance Trust (SSNIT) to, presumably make money available for long-term investments. Another is the development of credit reference agencies.

Meanwhile, the Fund asked the government to organise a mini-Consultative Group to explain to other development partners what it intends to do. There was, notably, no IMF position on utility rates being charged to the giant American aluminium company (Volta Aluminium Company – VALCO), which is now under discussion.

Essentially, VALCO consumes the bulk of electricity from the Volta River Authority (VRA) for nearly free. The poorest Ghanaians pay many times more than the price the aluminium giant pays for a unit of electricity.

Simply put, VALCO is being charged substantially lower than market rates even after the expiration of the lower tariff arrangement with the government of Ghana following the construction of the Akosombo Dam.

It is intriguing that the IMF has strong positions on utility rates for individual customers, but not for multinational corporate ones. De La Piedra declined to comment on VALCO. The government is negotiating with the aluminium company, he explained away.

Meanwhile, the joint-IMF/World Bank boards have not approved the Ghana Poverty Reduction Strategy (GPRS). The Bank has demanded some changes to the GPRS before it takes the document to the joint boards. The approval at that level is important as it is that date which sets the timeline for meeting High Indebted Poor Countries (HIPC) conditionalities.