Use Home Grown Policies For Discussions With IMF — Economist

Kwesi-BotchweyThe government has been urged to use its home grown policies as benchmarks as it opens discussion with the International Monetary Fund (IMF) today.

Speaking in an interview with Times Business in Accra yesterday Dr. John Gatsi, Senior Lecturer, University of Cape Coast Business School said in addition to the proposals that the IMF team would make, it was important that the government’s home grown policies were considered.

“The home grown policies by the government are very prudent and must be given due consideration as the country begins discussion with the IMF,” he said.

Ghana’s home grown policies among others focus on raising government revenue, improving public financial management, restructuring statutory funds to reduce budget rigidities and ending the energy crisis.

Dr. Gatsi said the country’s discussion with the IMF team must be tailored to tackle the medium to longer term approach to solving the economic problem rather than to overcome the current economic challenges confronting the country.

For the first eight months of the year, the cedi depreciated against the US dollar by about 40 per cent, pushing the country to a point where it needed the IMF’s help to stabilise the currency, boost confidence in government’s policies and accelerate the journey to restore economic stability.

A team from the IMF is scheduled to begin the anticipated bailout talks with government  following the oversubscription of Ghana’s third Eurobond auction and the Cocobod syndicated loan, which bring a combined value of almost US$3billion into the economy.

Professor Kwesi Botchway, Chairman of the National Development Planning Commission, has been nominated by President John Mahama to lead government’s discussion.

Dr. Gatsi said the meeting with the IMF would present the opportunity for the government to catalogue its strength of improved prospects of more revenue, governance, management of natural resources and better economic management approaches.

He described the government’s decision to apply for a bailout from the IMF as a move that would re-position Ghana’s economy for growth and macro-economic stability.

He said the decision to go back to the IMF only suggests the country was faced with a structural problem that had not been addressed.

On the oversubscription of Ghana’s Eurobond, he said it could be attributed to the conducive investment environment or the high yield that investors would get on their investment.

Last week Thursday, government’s attempt to raise US$1billion from the international capital market was oversubscribed with orders of up to US$3billion.

The Eurobond, due in January 2026, was sold at a coupon rate of 8.125 per cent which was lower than analysts had expected given the fiscal difficulties faced by the economy, which is expected to boost the country’s position as it engages officials of the IMF.

Dr. Gatsi said it was important for the government to use proceeds from the Eurobond for projects prescribed in the Eurobond prospectus.

The Finance Minister Seth Tekper, at the end of pricing in New York, expressed his satisfaction with the bond issue and the processes that led to its success, saying “investors saw fundamental long-term value in the Ghanaian economy”.

“We have always emphasised that the mid-term prospects for Ghana were bright, and with the coming on board of the IMF, we hope to come out of our short-term challenges pretty soon,” he said.

Mr. Terkper further explained that US$750 million of the Eurobond money will be used for capital expenditures, refinancing and counterpart funding requirements, while an additional amount of about US$250 million will provide seed capital for the Ghana Infrastructure Investment Fund that is scheduled for launch in January 2015.

“We want to assure our investors that we are committed to the IMF programme and we appreciate their vote of confidence in our economic management measures,” he added.

By David Adadevoh


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