‘IMF bailout will hurt in the short term’
The government must brace itself for short-term risks associated with its decision to fall on the International Monetary Fund (IMF) to address its economic challenges.
A lecturer at the Finance Department of the University of Ghana Business School (UGBS), Dr Lord Mensah, said although it would be beneficial to the economy in the long run, it had its own painful repercussions in the short term.
He told the GRAPHIC BUSINESS on September 26 after a forum to discuss the implications of the IMF bailout for Ghana that although he was in favour of the decision, it came with its own conditionalities which would be difficult to deal with.
“They are going to make sure that you cut spending, and spending cuts will affect Ghanaians. Possibly, you work in an industry where you can employ more, but you have to reduce your staff,” he explained.
He said, for instance, removing subsidies on utilities would create discomfort for people; something the country will have no option than to abide by in order to access the bailout.
According to him, the country had no option than go to the IMF because it provided some incentives for managers of economies that they could always fall on and looking at the long-term prospects.
An Associate Professor at the Department, Professor Anthony Aboagye, who also spoke with the GRAPHIC BUSINESS, said the bailout this time would not bring any new measures aside what already pertained.
“I don’t see what is new this time around. IMF is short term. When you get into trouble they will try and get you out of it; discipline is key. We keep calling them when we are in trouble and that is not helping us,” he said.
He added that, “If we as a people led by our government are not ready to make it work, at the end of the day we won’t go far. We can’t keep doing short term. We have to look beyond.”
He said what was imperative was to change the structure of the local economy and reduce dependency on imports.
Structural transformation
The Chief Executive Officer of Dalex Financial Services, Mr Kenneth Thompson, speaking at the meeting, said the current economic problem was a result of a structure of the economy and the over-valuation of the cedi.
He said because the cedi was not valued correctly, it undermined the economy and business decisions. GB
Mr Thompson also pointed out that for the country to benefit from the IMF programme, it needed to embark on structural reforms and aim at stabilising the cedi after it had depreciated to its real value.
He also called for the independence of the Central Bank and a fiscal responsibility law that would ensure that government spends within the budget.