Town Topics:  Dear Organised Labour, the IMF is not the vampire

Like sticks of dynamite tapped together with a short fuse, our times in Ghana these days are really threatening. “Volatile” may be is a more apt description.

Drivers are wearing their tempers on their sleeves against prices of fuel, their attention often divided between the fuel gauge and the road. Market women have sharpened their tongues in defence of sharp rise in the prices of goods. The entire country seems brimming with pent-up anger ready to explode.

The pain being felt across the country is evident in the recent Afrobarometer report in which 89% of Ghanaians said the country was heading in the wrong direction.

The government can’t even afford to feed students. But for parents and philanthropists, students in some public senior high schools in the country would sleep on empty stomachs. Their counterparts in public basic schools, who are benefitting from the school feeding programme, are barely surviving on 97 pesewas. This amount can’t buy three sachets of water.

The crisis has been long in coming. The government has been living beyond its means because of its reckless borrowing and an even more reckless spending, including COVID-19 funds that the government is struggling to account for.

No matter how hard the government tries to massage them, the economic figures don’t look good. President Nana Akufo-Addo and his appointees have been in denial for long. This month, inflation hit almost 30%–the highest rise in the prices of goods and services since 2003. Coincidentally, Ghana was in the throes of the Highly Indebted Poor Country (HIPC) programme at the time when the inflationary mess last hit the ceiling.

To many Ghanaians, the current inflation figures is what is on paper. The true inflation is far higher than the official figures. Fuel prices have doubled from GH₵6 in January to almost GH₵ 12 in July, with a cascading effect on almost everything money can buy.

How much has the government borrowed?

The economy is choking on debt. The government has borrowed more than GH₵280 billion since 2017. Credit rating agencies—Moody’s and Fitch—have downgraded the country’s credit ratings, citing a heightened vulnerability to defaulting on paying our lenders and inability to access the capital market.

The government claims that salaries and wages of the public sector munched the greatest chunk of its revenue but what happens when party faithful are packed into state agencies when they have no role to play? Today, interest payment on our debt is almost competing with public sector wages and salaries but many Ghanaians are asking what the money has been used for.

But how did we get here?

The government says it is COVID-19 and the Russia-Ukraine war. On Thursday, Dr Bawumia, an erudite lecturer on economic mismanagement in the past, widened the scope to include the Mahama government’s excess electricity charges and a banking sector clean-up, which critics say was laden with more politics than economics.

At a presentation in which he ducked behind his digitization drive, Dr Bawumia didn’t take credit for his government’s actions or inaction in the whole mess.

Neither did he tell Ghanaians why Ghana’s economy is an outlier of high inflation, debt distress in the West African region and an outrageous currency depreciation.

Admittedly, the twin troubles of external shocks—COVID-19 from 2020 and Russia-Ukraine war from February 2022— have a hand in our crisis that experts warn could morph into a national security threat.

But it hasn’t been all doom for government. There are also developments that favoured the state kitty.

When he presented the 2022 budget to Parliament last year, the finance minister pegged the benchmark crude oil price for 2022 at $61.23 per barrel. But Putin’s adventure in Ukraine has pushed global crude oil prices to more than $100 per barrel. This means the government is receiving a 40% increment in its expected oil revenue.

Since the country has deregulated its oil sector, the government cannot claim to be burdened with subsidies. It even added more taxes, the COVID-19 levy and the sanitation levy.

The rot

In this period of economic crisis and shrinking of public expenditure, it is important to put the spotlight on some of the frivolous public spending in the recent past.

Billions have been wasted in many scandalous enterprises under this administration. While the government has consistently used COVID-19 as an excuse for the economic kaput, how can it justify the GH₵500 million two ministries spent on fumigation and the graveyard of failed projects including One Village, One Dam and the almost GH₵30 billion worth of irregulaties in the last two Auditor-General’s reports?

All these and other reckless expenditures sent us back into the arms of the IMF. Ghana’s romance with the IMF dates back to May 1966, three months after Nkrumah’s overthrow. Since then, we’ve made overtures at the Bretton Wood institution 18 times. The last one was in 2015 when Mahama’s government turned to the IMF for economic salvation.

Each time we go to the IMF, we promise ourselves; it’ll be the last. When Ghana exited the last one in 2019, Mahama got his bout of insults, Akufo-Addo, Bawumia and Ofori-Atta received praises for keeping the economic ship assail. Bawumia even bragged about having arrested the depreciating cedi.

But five years later, we’re back to square one.

Managers of the economy, particularly, Mr Ofori-Atta had been emphatic on numerous occasions that Ghana would not join the IMF because of the repercussions.

Less than two months afterwards, we’re begging for $1.5 billion in a three-year programme to given ourselves some credence before our lenders who at the moment don’t see us as responsible to trust us with their money.

Effectively, Akufo-Addo’s two-term government will spend more time in IMF programmes than it managed the economy independently.  From 2017 to 2019, the economy was on an IMF life support.

Whatever happened to our long-term vision, the finance minister had been proclaiming, only Gabby Otchere Darko, the government’s chief agenda setter, is better placed to explain.

It has become obvious that the hesitation to go back to the IMF was political— the uncompromising stance and the wave of criticism then candidate Akufo-Addo and his running mate Bawumia heaped on Mahama.

Ever since the government announced its decision, organized labour escalated its deep-rooted suspicion against the IMF.

Who wouldn’t? This is particularly because the IMF has a history of having no sympathetic ears for Organised labour’s fears. Organised Labour had always suffered the austere measures that accompany IMF bailouts. These range from salary stagnations to a freeze in unemployment and sometimes layoffs in the name of workforce rationalization and downsizing.

Keen on justifying why the IMF has saved our sinking ship, government spokespersons including Gabby Otchere Gabby and the Minister of information, Kojo Oppong Nkrumah, have sought to suggest that opposition lawmakers should be blamed for the failure of the e-levy to yield the required returns.

The irony is lost on them.

In 1995, Nana Akufo-Addo led the Kumi Preko demonstration, one of biggest anti-tax protests in the history of Ghana against the introduction of value added tax (VAT). The Rawlings administration bowed to the public agitation. It took three years to roll out VAT in 1998.

In any case, Ghanaians voted the NDC lawmakers to be a voice of dissent when necessary. Had it not been the shoe-string majority it has in parliament, the NPP would have bulldozed their way, leaving the minority with only their say.

While labour’s concerns are valid, the IMF in reality is just like a doctor treating any health condition. If you decide to visit the consulting room, you must as well adhere to the medical advice on offer.

The IMF is clear on its conditionalities:

“When a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid. These policy adjustments are conditions for IMF loans and serve to ensure that the country will be able to repay the IMF. This system of conditionality is designed to promote national ownership of strong and effective policies.”

Our government, which lived recklessly after exiting an IMF in 2019, is the vampire siphoning the lifeblood of the economy. In the corporate world, the fate of the executive management is inextricably linked to the bottom line; there is a strong motivation for management not to embark on imprudent expenditure.

The last thing Ghana needs now is now austerity. It needs investment in infrastructure in health, education, communications and agriculture and well-motivated labour force.

But that expenditure can only be delivered by institutions which are not in the grip of corruption.

Unfortunately, the vanguards of the public purse, the Ministry of Finance, begs propriety. The Ministry has been on the grimmest page of the Auditor-General almost every year for every irregularity thinkable.

We can’t blame it on the IMF. It falls squarely on our ‘solid’ economic management team led by Dr Bawumia and driven by Ken Ofori-Atta.

So, dear Organised Labour, the IMF is not chewing your COLA.  The IMF is not the vampire that suck the lifeblood out of the economy.

It’s our government.