Government Defies IMF

Government is going contrary to the IMF ?s conditionality of full cost recovery by planning to spend about 392 billion cedis on utility subsidies.

The move has brought jitters over the likely consequences of government?s action, considering the already dwindling budgetary support by the International Monetary Fund and the World Bank, and has also brought into question government?s commitment to the policy of full cost recovery, which has been very inconsistent with increasing budgetary allocations yearly.

Utility price subsidies is budgeted to increase from 2003 level of about 2.1 per cent of discretionary spending to about 2.6 per cent this year, notwithstanding the fact that last year?s gain made with respect to salutary payments were whittled away by the higher than programmed levels of subsidies on utility price, which analysts believe was responsible for the level of fiscal instability.

The IMF release of 38.5 million dollars to government to fund the country?s poverty reduction and growth facility project had as one of its conditions the continued price adjustment to achieve full recovery for petroleum, electricity and water.

However, the interpretation being given by most observers is that the anticipation by government to increase utility price subsidies is an election one and not necessarily to support the vulnerable groups as is being bandied about.

Government has been urged to keep its spending levels and achieve full cost recovery for the energy sector.