Ghana has reached a $1 billion agreement with the International Monetary Fund (IMF) according to Reuters. The deal according to the report was reached on Wednesday, but the agreement is however subject to approval by the IMF Board. Ghana is hoping to restore the country’s economy within the 3 years of the IMF deal after a downward turn in 2014. In early February, Government said it had concluded most of the outstanding issues concerning the negotiations with the IMF. This was according to the Head of the Ghana’s negotiation team, Dr. Kwesi Botchway who said the programme should take off not later than April 2015 when the IMF Executive Board meets.
The Head of the International Monetary Fund Christine Lagarde has downplayed assertions that a bailout programme from them could see Ghana go through another phase of hardship while the country tries to meet its strict conditionality in order to restore fiscal discipline and macroeconomic stability.
“Structural adjustments ? That was before my time. I have no idea what it is. We do not do that anymore. No, seriously, you have to realize that we have changed the way in which we offer our financial support. It is really on the basis of a partnership”.
What the IMF wants
The IMF after its first round of discussions on a possible programme for Ghana announced some key areas to bring the country’s economy back on track. The IMF said a “front loaded adjustment should be realized through reductions in Ghana’s comparatively high public sector wage costs.” This means there will be a drastic review of the Single Spine Salary Structure (SSSS) which according to government drains more than 50% of its revenue. The IMF also identified the costly and untargeted subsidies for energy and petroleum products and said they must be eliminated, with a better prioritization of capital spending. Revenue generation The IMF will seek to reduce tax exemptions and strengthened revenue administration “through a better targeting of large taxpayers.”