Ghanaian trader Mohammed Biney was already struggling when the government enacted a new tax on e-money transactions this year to try to revitalize the economy.
With Ghana now collapsing below nearly 30 percent inflation, the Accra shoe seller was shocked when the government announced in July that it would have to turn to the IMF for help.
President Nana Akufo-Addo once pledged “Ghana Beyond Aid” to keep his West African country off dependency on foreign aid.
But a sudden reversal over an IMF loan has sparked heated debate over its economic management as Ghana grapples with its highest cost of living in two decades.
“You can’t tax us under the guise of bailing out the economy and then come in overnight and tell us you’re going to the IMF,” trader Biney told AFP.
“I think they ran out of ideas.”
Battered by the global pandemic and the aftermath of Russia’s war in Ukraine over fuel and food prices, Ghana is in talks with the International Monetary Fund to help stabilize its public finances.
But the decision prompted fears that IMF-imposed austerity measures will force the end of Akufo-Addo’s social programs and hurt Ghanaians, who are already grappling with rising costs.
A new opposition-led protest movement and unions threatening to strike over the hardship have increased pressure on the government even as an IMF team begins talks.
Burdened with high debt, limited access to fresh funds and few sources of income, the government says the IMF is offering short-term help.
Ghana’s Deputy Finance Minister Abena Osei-Asare said after the pandemic eroded economic gains, the IMF deal would improve the balance of payments and open the door to new financing while protecting social programs.
“People don’t understand the kind of engagement that we’re going to have with the IMF, so they’re a little concerned,” she told AFP.
– Rising inflation –
Ghana’s economic data are not rosy. Growth slowed this year, while inflation broke two-decade highs at 29.8 percent in June, driven by transport and food costs.
Ghana’s debt-to-GDP ratio — a measure of what it owes relative to its output — rose from 65 percent to 80 percent during the pandemic, the IMF says.
Credit agency Moody’s lowered its outlook for Ghana’s bonds in February, citing the government’s liquidity and debt problems.
“Ghana’s fiscal and debt-related vulnerabilities are deteriorating rapidly amid an increasingly difficult external environment,” the IMF said after the team’s visit this month.
“An IMF-backed program aims to give Ghana space to implement policies.”
This deal marks the 18th time that Ghana has gone to the IMF after completing a three-year deal in 2019 that provided $918 million in assistance.
As recently as May, Treasury Secretary Ken Ofori-Atta said an IMF deal was not an option as the government preferred “homemade” solutions.
One of these, Ghana’s new electronic transaction tax, or e-levy, should help generate $900 million in much-needed revenue along with spending cuts.
But the tax was widely criticized, and as people restricted electronic payments, the e-toll also fell far short of estimated revenues.
Gabby Otchere-Darko, a leading member of the ruling party, tweeted in June that the tax generated only 10 percent of estimated revenue.
“Given the situation we’re in, … we have no choice,” John Kwakye, research director at the IEA think tank in Accra, said of the IMF deal.
“Going to the IMF was to build on our credibility.”
– election campaign? –
But even with the election two years away, an IMF deal is likely to have political ramifications.
Teachers’ unions went on strike earlier this month pending government approval of living allowances. Other public sector workers are threatening action.
Another group, “Arise Ghana”, has joined a “Fix the Country” movement that regularly organizes small protests. Last month his rally led to clashes with police over economic difficulties.
“The solution to Ghana’s problems does not lie in Washington,” said Yaw Baah, secretary-general of the Trades Union Congress (TUC). “This is a tragic mistake by the government.”
Eurasia Group Africa chief Amaka Anku told clients the IMF program will make it harder for Akufo-Addo’s New Patriotic Party to argue that they are better business managers.
That could weaken the position of likely NPP nominee for 2024 Vice President Mahamudu Bawumia, although his likely opponent, the National Democratic Congress or NDC leader and ex-President John Mahama, also faces challenges.
“The bottom line is a very close election in 2024,” Anku said.
The opposition has already struck.
“President Akufo-Addo and Dr. Mahamudu Bawumia should take full responsibility for the incompetent leadership of the economy,” NDC MP Haruna Iddrisu said.
“The government needs to come out and tell us what the people of Ghana should expect instead of blaming Ukraine and Russia.”
#Ghana #IMF #loan #outcry #puts #pressure #government #economy
