IMF Exposes More Landmines In Ofori-Atta’s Economic Management

-Shows Ghana’s Foreign Reserves Dangerously Depleted.

The International Monetary Fund (IMF) has once more issued a damning verdict on the economic management strategy of the ruling government, by exposing a dangerously depleted foreign exchange reserve level of the country.

“Gross international reserves stood at 2.7 months of imports in 2018, lower than the three-month rule-of-thumb benchmark and the norm of 3.6 months estimated by the model for resource-rich LICs (Lower-Income Countries) with a flexible exchange rate,” the IMF said in a report.

Amidst allegations of cooking figures, the Bank of Ghana’s released a report claiming the country’s gross international reserves at the end of December 2018 was US$1.67 billion, but increased to US$8.093 billion in October 2019 from a stock position of US$7.02 billion.

However, the IMF’s independent calculations show otherwise. Its figures indicates that Ghana’s gross international reserves for 2019 was US$5.1 billion which translates to about 2.4 months of imports cover and forecasted to reduce to US$5.01 billion in 2020 but increase slightly to US$5.06 billion next year. This is equivalent to an average 2.3 months of import cover.

“Reserves are projected to remain below both benchmarks over the medium term. This low level of reserves would seem to point to an overvaluation of the exchange rate given the central bank’s FX intervention policy”, it reiterated.

This is an extremely worrying situation particularly in the face of an imminent war between the United States and Iran. This faceoff could send the Middle East into an uncontrollable spin that might drastically impact oil prices.

Already, crude oil prices have started climbing following the American assassination of Iranian General Qasem Soleimani.

According to the Bretton Woods institution Ghana Assessment report, the nature of Ghana’s economy and the persistent pressure on the exchange rate and international reserves, however, point to a weaker external position than the one predicted by the EBA-lite mode. EBA-lite is External Balance Assessment model that emphasises the need to identify and discuss the contribution of policies to external imbalances.

However, generally, the IMF and the Bretton Woods Institutions have had had cause to complain about the New Patriotic Party’s (NPP)’s economic management style. Whatsup New is in possession of a declassified 2009 report of the IMF to the then yet-to-be-sworn-in John Evans Atta Mills of the National Democratic Congress (NDC).

“As you will be aware, the macro-economic situation that your government is inheriting [from the then John Kufour-led NPP) is unfortunately extremely worrisome. Both the fiscal deficit and the balance of payment deficit are high and are at unsustainable levels. Given the current state of the international financial market…,” the World Bank said in a January 3, 2009 letter.

The IMF and the World bank have repeat these same warning to the Akufo Addo administration, as it points out the government’s unbridled appetite for debt and its high budget deficit-particularly run-up to the 2020 election year.

Meanwhile, the IMF projects that net international reserves are projected to remain stable at about US$3.9 billion thanks in part to the US$3 billion Eurobond issued in March 2019 and other commercial and multilateral borrowing.

“International reserves would remain at about two months of imports but would strengthen in later years as oil and gas exports pick up. This relatively stable outcome is predicated on continued access to markets and refinancing of the large domestic and foreign public debt,” the report read.