The second day of ongoing negotiations with the International Monetary Fund (IMF) began on Thursday, with the debt and revenue conditions of the nation dominating the conversation.
The challenges preventing effective revenue collection and how to enable the Ghana Revenue Authority (GRA) to improve mobilization were the focus of discussions on the revenue, while those on the debt focused on its high levels and ways to reduce them.
Maxwell Akalaare Adombilla reports that according to sources at Graphic Online, the technical meetings included presentations by experts from the Ministry of Finance, the Bank of Ghana (BoG), and the GRA on the state of the debt as well as the general resource mobilization and allocation strategies of the government in recent years.
The meetings followed one with Dr. Mahamudu Bawumia, Vice President and Head of the Economic Management Team (EMT), in which Dr. Bawumia and his team provided the visiting IMF Mission with information on the economy, government policies and programs, the nature of challenges facing the economy, and the support sought.
$3 billion transaction
The formal negotiations between the IMF and the government to secure an economic support program to revive the economy and deal with debt difficulties began on Tuesday in Accra under the direction of the IMF's Mission Chief, Carlo Sdralevich, and continued through Thursday's talks.
The financing is being requested by the government in order to carry out a three-year program it has named the Enhanced Domestic Programme (EDP).
A successful purchase, according to sources who spoke to the newspaper, might bring in up to $3 billion for the economy.
Following a previous meeting between the IMF team and Dr. Mahamudu Bawumia, vice president and head of the Economic Management Team (EMT), the debt and revenue circumstances were discussed.
More specifics
Giving more specifics, the sources stated that during the technical discussions with the MoF and GRA, the IMF team's inquiries and clarifications were interspersed with presentations and data exchange from the government side.
The MoF's Treasury and Debt Management Division also took use of the occasion to outline the country's debt-raising strategy to the workers of the fund, with a focus on how current world events affect its involvement in the global capital market for borrowing.
According to the sources, on the revenue side, the IMF Mission sought more information regarding the Electronic Transfer Levy (E-Levy), among other taxes that were determined to be under-performing, as well as the performance of important tax handles.
Debt problem
Despite being a long-standing issue, the rate of debt accumulation slowed down in 2017 and 2018 as a result of a fiscal consolidation program that the IMF oversaw as part of the $918 million Extended Credit Facility (ECF) program.
But beginning in 2019, spending was carried out more quickly than anticipated while revenues were low, which at the time grabbed the attention of the BoG.
Dr. Ernest Addison, the governor of the central bank, stated in a news conference in July 2019 that the pace of fiscal consolidation had slowed down mostly due to gaps in the mobilization of revenue, while the pace of spending had grown.
If not addressed, "this could pose damage to macroeconomic stability," he continued.
The debt-to-GDP ratio decreased from 56.8% of GDP in 2016 to 55.5 % in 2017, and then it increased to a maximum of 76.1 % of GDP in 2020.
According to the IMF, it was 81.8% of GDP at the end of last year.
In its February 2022 Fiscal Monitor Report, the fund also predicted that the debt-to-GDP ratio will end this year at 84.6%, the highest level in recent memory.
minimal revenues
While debt buildup accelerated, revenues lagged because attempts to restructure collections and use new methods didn't produce the desired outcomes.
Despite new tax policies being enacted, purportedly to improve collecting, the government has not been able to meet any of its yearly revenue estimates since 2017.
Background
The Finance Minister, Mr. Ken Ofori-Atta, was given instructions by President Nana Addo Dankwa Akufo-Addo last Thursday to begin negotiations with the IMF in order to secure an economic support program.
It came after the COVID-19 pandemic and the Russia/Ukraine war, which exacerbated the nation's pre-existing economic problems and led to increased debt accumulation, rising inflation, a weakening cedi, and the depletion of foreign reserves.
At a time when domestic income mobilization was waning, a credit downgrade earlier this year also prevented the country from accessing the foreign capital market to borrow.
Following the order, an IMF Team headed by Carlo Sdralevich, the mission chief, arrived last Sunday and has been speaking with the government side in an effort to gather enough information to start negotiations.
The nation has requested assistance from the IMF 17 times since gaining independence, the most recent of which was a $918 million program that expired in 2019.
In order to hasten the economy's recovery from the COVID-19 pandemic, the fund also provided the government with a $1 billion free unconditional loan in 2020.
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