Ghana’s Finance Ministry has been on a roll lately. Hardly a day goes by without them releasing another feel-good story about the country’s protracted debt restructuring effort or its three-year IMF program, now in its eighth month.
The latest is this big Davos splash by Bloomberg:
At home, people seem to have tuned off. The trending Finance Ministry story is a ruling party grandee expressing the age-old hope in his circles that the Finance Minister will resign soon to lift the party’s image among the public, and, obviously, his party’s chances in the upcoming general elections (December 7th, 2024).
Ghana’s international goodwill is still understandably strong
It is not too difficult understanding this gap in sentiments between home and abroad. Ghanaian governments, especially the current one, tend to worry more about national image overseas than at home. Most international stakeholders share the government’s compulsive need for a good story.
The IMF is desperate to hoist Ghana as evidence of the effectiveness of its treatments. The “international system” needs some success stories for development multilateralism, to vindicate programs like the Common Framework, which Ghana initially rejected (just as it earlier, flatly, refused to enter another IMF program) before jumping on board; Western powers, whose favour Ghana has curried more aggressively of late, need Ghana to preserve its “West African oasis” narrative; and global investors exposed to Ghana, such as Eurobond holders, are keen to see the value of their assets recover.
Citizens are bored stiff of the talk
At home, on the other hand, the citizenry demand more than a “turnaround” story. Those abreast with the technical details are much too aware of the spin. Whilst the ordinary masses simply can’t square these jamborees about “moratoriums” and “IMF Board reviews” with their daily reality of a high cost of living, corruption scandals, and a clear turn for the worse on the basic infrastructure front.
Just about the time the Finance Ministry’s spin was winding through Davos, operators of Ghana’s under-pressure “public” transport system, composed (like much of Africa) by private mini-buses and saloons, announced an imminent rise in fares by 30%. The electricity utility in the populous urban south of the country (ECG) is about to add Value Added Tax (VAT) to bills, effectively hiking tariffs by up to 22%, depending on how the increasingly complicated VAT computation works out for a consumer (a small segment of the urban population consuming less than about $4 per month are exempted). Whilst inflation is falling, prices are still rising by more than 23% per annum. A sluggish rebound in growth has not fed through into the incomes of the vast majority of citizens, who ply various trades in the large informal economy.
Then, there are the scandals.
Just before 2023 closed out, word came that the government is dramatically expanding an opaque contract signed with a mushroom firm set up by a timber merchant in 2019 to audit tax compliance among distributors and marketers of refined fuel products, like gasoline and diesel. The company, SML, was entitled to receive 0.05 local currency units (5 GHP) on every liter of fuel sold. In 2019, that amounted to about $4 million a month.
The expansion of the contract in 2023 to cover the upstream petroleum and minerals sector now meant it would be entitled to 0.75% of all the country’s mineral proceeds and $0.75 for each barrel of oil exported by Ghana. The mind-boggling arrangement implies earnings for the company of nearly a billion dollars over the contract term under various reasonable scenarios. Not only was this contract awarded non-competitively to a company with zero track record in such a highly sensitive and technically complex domain as revenue assurance, it has now come to light that the company’s interventions duplicate other revenue assurance programs set up at considerable cost to the country. Worse, the evidence shows that no tax evasion whatsoever is being blocked by this upstart entity.
Growing disappointment
Taking all these together, the coolness at home towards the Finance Ministry’s efforts to ramp up enthusiasm becomes self-explanatory, but there is a need to return to the earlier point about why those technically abreast with the IMF and debt restructuring processes are also increasingly disinterested. Doing that requires a bit of a recap.
Repeating an earlier point, the Ghanaian government was totally opposed to an IMF program just two years ago. The political opposition and some elites strongly championed a return to the IMF. Within that group were some who felt that an IMF program will massively rein in certain conduct long blamed for the country’s economic woes. Some of us felt obliged to counsel caution by pointing to persistent governance lapses despite successive IMF programs (this being Ghana’s 17th program).
Eight months since the IMF program commenced, disappointment is growing. Much of ennui stems from the arcaneness, opaqueness and seeming arbitrariness in the whole setup of IMF crisis resolution, as well as its accompanying macroeconomic reforms and debt management framework.
At the domestic level, it is not just that schemes like the SML deal continue to proliferate under the the ostensible supervision of the Fund, it is also that spin often overtakes any serious reckoning with the facts of reform, seemingly with the IMF’s blessings.
Take the recent announcements about a major deal with bilateral creditors, for instance.
The recent announcement is the foundation of an upcoming meeting of the IMF’s board in two days during which Ghana’s performance so far will be reviewed, and the next $600 million tranche released.
Yet, everyone knows that the supposed “progress” is illusory and the facts of progress in relation to the broader program do not relate seriously to the benchmarks in Ghana’s IMF program in terms of actual macroeconomic impact. Let us dive into the weeds.
When one compares the above Ghanaian announcement with the Zambian version issued in the middle of last year, some subtle differences emerge.
In simple terms, by the time the Zambian announcement was made, an actual “agreement in principle” was in place with bilateral creditors. So, Zambia could explain clearly what exactly was on offer. The resulting IMF “endorsing statement” echoed these details by mentioning the baseline and contingent elements agreed upon.
Source: Bright Simons