The Minister for Finance, Mr Seth Terkper, has said the progress so far made regarding the third review of the International Monetary Fund’s (IMF’s) extended credit facility (ECF) is satisfactory and indicative of the government’s commitment to the programme.
The latest discussions were a follow-up to the IMF’s Mission in April/May this year, after which a number of ‘prior actions’ (some of which were entirely new) were introduced by the IMF, including the approval of the Public Financial Management Law by Parliament and the amended Bank of Ghana Act by Parliament and a strategy to address the debt and financial situation of SOEs.
The rest are the completion of exercise on the reclassification of government accounts for the production of consistent and reconciled fiscal accounts for 2015, the completion of work on the strategy for banks’ recapitalisation and the approval of the Banks and Specialised Deposit-Taking Institutions Law by Parliament.
The review of IMF programmes is based on performance criteria (PCs).
In contrast, prior actions are required by the IMF after the review mission as an additional condition for taking the report to the board before the latter approves the review.
Implementation of prior actions
Speaking to radioxyzonline after the discussions with the IMF team, Mr Terkper expressed confidence over further positive outcomes as a result of a comprehensive and expedited approach to the implementation of certain initiatives.
He explained that “to expedite action towards the ultimate completion of the third review by satisfying these new prior actions, several of which are structural in nature, government gave the completion of these activities its top priority. This resulted in the extension of the last sitting of Parliament and the passage of all the bills, notably the PFM and the BoG Amendment bills, as required by the IMF”.
“As clearly demonstrated by the government’s own initiative to impose levies to restructure or refinance the energy sector debt, beginning with the restructuring of a substantial portion (GH¢2.2 billion) of VRA’s debt, Ghana has started taking action to address the financial situation of the SOEs.
“In the view of the government, this is key to removing the danger that the debt poses to our banks which did the lending and preparing the energy SOEs for the gas era. Hence the ongoing restructuring of the energy sector SOE debt, which involves 12 major domestic banks, substantially addresses the concerns of the IMF,” he added.
Mr Terkper said given the time that had elapsed since the third review mission was conducted, the IMF team was provided with updated data and an update of fiscal and monetary data, as well as progress in implementing the SOE debt restructuring plan.
He said the team was informed of the validation of the legacy debt to be paid from the energy levies.
He said as requested by the recent IMF mission, the government would expand the scope of the energy sector audit validation programme to cover the future viability of the power sector SOEs, based on a review of business plans.
“It is important to note that the third review considers economic performance up to the end of December 2015. During the period under review, Ghana met three out of the four fiscal quantitative performance criteria, in spite of a challenging economic environment.
The quantitative performance that was not met related to the wages and salaries payment over-run. The over-run was as a result of higher-than-anticipated payments for category 2, 3 and 4 allowances.
“The recent concerns raised by the IMF relate to certain elements of the laws recently passed by Parliament. While this reflects the sovereign and independent view of the Parliament of Ghana, the mission has been assured by the government of its willingness and commitment to bring any of these to the attention of the Cabinet and Parliament and, in general, ensure the success of the programme,” Mr Terkper said.