An International Monetary Fund (IMF) Report has exposed John Dramani Mahama’s handling of the economy during his tenure as president.
According to the Breton Wood institution, Mr Mahama supervised an ‘out-of-control government spending’. By 2015, under the erstwhile Mahama administration, Ghana’s economy was in trouble.
“Ghana has been hailed as one of sub-Saharan Africa’s success stories. It was the first to free itself from colonial rule in 1957. It built a stable democracy in the 1990s, overcoming decades of political upheaval. A thriving economy fuelled by exports of cocoa, gold, and—more recently—oil helped cut the poverty rate from 53% in 1991 to 21% in 2012,” the report stated.
“But by 2015, Ghana’s economy was in trouble, hobbled by widening current account and budget deficits, rampant inflation, and a depreciating currency,” it said.
“Credit dried up as interest rates rose and banks’ bad loans piled up. At the root of Ghana’s woes was out-of-control government spending largely to pay salaries of an overgrown civil service,” it added.
Due to the massive mismanagement of the economy, the incompetent Mahama government had to fall on the IMF for a bailout to help put Ghana back on track.
“In early 2015, Ghana turned to the IMF for a $918 million loan to help stabilize the economy,” adding that as a result, the IMF advisors, working with the Ghanaian government, developed a three-part programme.
It said the first was to “restore debt sustainability” where the Mahama government had to limit hiring and wage increases and eliminated subsidies for utilities and petroleum products.
Luxury Cars Tax
“To raise revenue, it cracked down on tax evasion and rationalized exemptions. New revenue sources included a tax on luxury cars and increased taxes on high earners. To put Ghana’s finances on a sounder footing, the new Public Financial Management Act called for improved accounting standards, procedures, and technology,” the report indicated.
It also asked the government to “strengthen monetary policy,” and according to the report, “The authorities agreed to gradually end Central Bank financing of the budget deficit—a major source of inflation—and to fortify the inflation-targeting regime.”
Furthermore, the IMF asked the Mahama government to “clean up the banking system,” saying “an asset quality review revealed significant under-capitalization.”
“Some banks were recapitalized, and the Bank of Ghana used its newly enhanced authority to wind down insolvent lenders. The Central Bank developed regulations to ensure that banks meet sound underwriting and credit evaluation standards. It also paid back insolvent microfinance institutions’ depositors,” the report said.
The report indicated that currently due to sound policies of the government, “Ghana’s economy is on the mend,” adding “the trade and budget deficits are narrowing.”
“The pace of economic growth is poised to rise to 8.8% in 2019 from 2.2% in 2015. The inflation rate is projected to fall to 8% from almost 19%.”
It said “cuts to wasteful spending made room for much needed social services, such as free secondary education.”
“For Ghana’s 28 million people, it all adds up to higher incomes, better job opportunities, and more purchasing power. Still, Ghana remains largely reliant on foreign financing, exposing it to swings in investor sentiment. Maintaining fiscal discipline will also be a challenge,” it added.
BY Melvin Tarlue|DGN Online