Ghana’s extended credit facility programme with IMF raises extension possibility – Prof. Bokpin

Renowned economist and finance professor, Professor Godfred Bokpin, has highlighted the potential for an extension of Ghana’s Extended Credit Facility (ECF) Program with the International Monetary Fund (IMF).

Professor Bokpin, who holds expertise in finance and serves as a professor at the University of Ghana, asserts that achieving macroeconomic stability by 2026, given the current conditionalities, would necessitate prolonging the program.

During a recent discussion at the Graphic-Stanbic Breakfast meeting on the topic of “The current economic situation and you,” Prof. Bokpin further commented that the existing program failed to address the fundamental restructuring required for Ghana to avoid future participation in an IMF program.

“If we examine the objectives and adjustments in the program, along with the timeline for restoring debt sustainability, taking into account the way we have managed our affairs, especially during an election year, it is highly likely that an extension of the program will be necessary,” Professor Bokpin remarked.

The professor highlighted that the program suggested reducing capital expenditure to revive the economy, despite Ghana grappling with a substantial infrastructure deficit.

He emphasized that neglecting to improve capital expenditure over time would hinder the maintenance and expansion of infrastructure, ultimately imposing limitations on the economy’s growth prospects in the medium to long term.

“The average Ghanaian’s daily commute and the unproductive hours spent in traffic significantly affect productivity. Therefore, it is imperative that we take fundamental measures to address this issue, or it would be unrealistic to expect significant progress in our country,” he expressed.

To achieve a sustainable debt level within the next five years, Ghana would need the majority of fiscal adjustments to stem from debt restructuring, aiming to maintain a primary surplus of no less than 10 percent.

Professor Bokpin noted that Ghana had restructured less than 50 percent of its domestic debt, with a total eligible domestic debt of 259 billion cedis for restructuring by the end of 2022.

So far, only 85 percent of GHS98 billion had been restructured, leaving more than GHS123 billion in debt to be addressed, including cocoa bills, a Bank of Ghana overdraft extension to the government, and pension funds.

Regarding external debt, Ghana faced a financing gap of approximately $15 billion in terms of balance of payment, with the IMF providing $3 billion.

This situation leaves Ghana with no alternative but to rely on external debt restructuring. Professor Bokpin questioned whether it was reasonable to expect more than $10 billion in debt relief and fresh funding from external bilateral and commercial partners, emphasizing the importance of careful consideration before making such demands.

Additionally, he called for prudent measures to manage generated revenue rather than resorting to additional taxes, as corruption and wastage often result in the loss of tax revenue.

Mr. Benjamin Boakye, the Executive Director for Energy Think Tank at the Africa Centre for Energy Policy, echoed these sentiments and urged the government to implement strategic reforms, including downsizing the government, improving procurement monitoring, and reducing waste in the energy sector.

Highlighting the flaws in the procurement system, Mr. Boakye revealed that a recent analysis of government contracts awarded to his organization indicated that many contracts above one million dollars did not undergo competitive tendering.

He stressed the importance of citizen engagement to hold the government accountable, as the negative consequences of poor decisions affect everyone.

Mr. Timothy Mugodi, the Head of Corporate and Investment Banking at Stanbic Ghana, advised individuals and entities to build reserves at both micro and macro-economic levels to enhance resilience against economic downturns.

He emphasized the significance of saving a percentage of earnings during prosperous times to alleviate difficulties during challenging periods.

SOURCE: Coverghana.com.gh