Mahama went to IMF for a loan, not policy credibility – UPSA Professor

The dean of the faculty of accounting and finance at the University for Professional Studies, (UPSA) Professor Isaac Boadi, has averred that the Mahama administration, in 2014, did not go to the International Monetary Fund (IMF) for policy credibility as was reported.

Rather, the government used that as a ruse to seek a loan from the International Monetary Fund. The lecturer in a one-on-one interview on Atinka television, on Thursday, 4 July 2024, said that contrary to the statement issued by the finance minister at the time, the policy credibility topic was just a smokescreen.

“You remember the past government told us they were going for policy credibility from the IMF after the economic forum in Senchi, it wasn’t actually the case. The government was going for a loan and not necessarily policy credibility from the IMF” he stated.

“Our reserves at the central bank were depleting at an alarming rate, our balance of payment was always in a deficit, and that called for a trip to the IMF, which we were a member of, for support. We sought funding rather than policy credibility” he emphasised.

Growth decelerated markedly in 2014, to an estimated 4.2 percent, driven by a sharp contraction in the industrial and service sectors. This was due to the negative impact of the currency depreciation on input costs, declining domestic demand, and increasing power outages, he indicated.

Inflationary pressures rose on the back of a large depreciation of the cedi and the financing of the fiscal deficit by the Bank of Ghana (BoG). Despite several hikes in the policy interest rate in 2014 to 21 percent, headline CPI inflation reached 17.0 percent at end-2014, well above the 8 +/-2 percent target range of the BoG.

The fiscal deficit remained high in 2014 despite gradual fiscal consolidation efforts undertaken since mid-2013. In addition, the government started facing increasing financing difficulties.

Delays in implementing some adjustment measures and unbudgeted wage allowances resulted in a higher-than-budgeted cash fiscal deficit of 9.5 percent of GDP. Additional domestic arrears were accumulated and the overall fiscal deficit on a commitment basis remained close to 10 percent of GDP.

The government, Professor Boadi said, had to resort increasingly to short-term domestic debt, which then carried interest rates at around 25-26 percent and significant monetary financing. A US$1 billion Eurobond was successfully issued in September 2014, but at a significantly higher interest rate than other issuers in the south of Saharan Africa.

The external position weakened through mid-2014, with net international reserves reaching low levels in the third quarter and the exchange rate depreciating sharply. The exchange rate dropped sharply in the first 8 months of the year before recovering on the back of inflows from the September Eurobond and the US$1.8 billion short-term loan contracted by the Cocoa Board.

The currency depreciation and the economic slowdown led to a substantial contraction of imports and a narrowing in the current account deficit, which nonetheless ended at 9.2 percent of GDP. For the year as a whole, the balance of payments was broadly balanced, leading to a fragile stabilization in international reserves, with gross reserves partly supported by large BoG’s short-term liabilities.

The UPSA guru reiterated the fact that the main aim of the then government to go to the IMF was not really about seeking policy credibility, but to use the program to get financial support for the activities of the government at the time.

Asaase Broadcasting Company airs on Asaase 99.5 Accra, Asaase 98.5 Kumasi, Asaase 99.7 Tamale, Asaase 100.3 Cape Coast, AsaasePa 107.3 (Accra).
Affiliates: Azay FM 89.1 (Takoradi), Bawku FM 101.5, Bead FM 99.9 (Bimbilla), Mining City Radio 89.5 (Tarkwa), Nyatefe Radio 94.5 (Dzodze), Somuaa FM 89.9 (Gushegu), Stone City 90.7 (Ho) and Wale FM 106.9 (Walewale).
Listen online: asaaseradio.com, Sound Garden and TuneIn.
Follow us:
X: @asaaseradio995, @Asaase985ksi, @Asaase997tamale, @asaase1003, asaasepa1073
Instagram: asaaseradio99.5, asaase985ksi, asaase100.3, asaase99.7tamale, asaasepa107.3
LinkedIn: company/asaaseradio995. TikTok: @asaaseradio99.5, Facebook: asaase99.5, asaase985ksi, Asaase100.3, asaase99.7, AsaasePa107.3.
YouTube: AsaaseXtra.
Join the conversation. Accra: call 020 000 9951/054 888 8995, WhatsApp 020 000 0995. Kumasi: call 059 415 7985 or call/WhatsApp 020 631 5260. Tamale: call/WhatsApp/SMS 053 554 6468. Cape Coast: call/WhatsApp 059 388 2652.
#AsaaseRadio
#AsaasePa
#TheVoiceofOurLand

The post Mahama went to IMF for a loan, not policy credibility – UPSA Professor appeared first on Asaase Radio.