Gov’t is now between a rock and hard place as it seeks to achieve fiscal consolidation – Kwakye

The government is now caught in a difficult situation as it seeks to achieve fiscal discipline in 2024, the Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye, has said.

He says in its quest to ensure fiscal consolidation, the government risks unfulfilling many of its pledges in the budget statement if it still commits to the programme with the International Monetary Fund (IMF). At the same time, he added, if it abandons the programme it will make worse the country’s economic crisis.

“Government is now between a rock and a hard place. If it sticks to the IMF program, it risks unfulfilling many of its expenditure pledges. If it abandons the program, it risks exacerbating the country’s economic crisis. Both may come with electoral costs,” he wrote on X.

Dr Kwakye was reacting to the comment by the Governor of the Bank of Ghana, Dr. Ernest Addison, who had stated that the government had no choice but to be financially disciplined in the upcoming 2024 elections.

The Governor shared these insights when he unpacked the country’s pre-COVID stability and post-COVID crisis.

“Ghana doesn’t have a choice but to do so, because we have all seen what an economic crisis can do. The lessons are fresh on everybody’s mind. And the need to keep the currency stable is paramount going into the election,” he said.

Meanwhile, Ghana has received a draft term sheet on debt relief from its official creditors that is sufficient for the International Monetary Fund to disburse $600 million to the West African nation, Finance Minister Ken Ofori-Atta said.

The term sheet from the Paris Club Group of creditors and new ones including China comes after months of negotiations to restructure as much as $5.4 billion of bilateral debt. The IMF Board is expected to meet in a week.

“We are reviewing the draft term sheet,” Ofori-Atta said in an interview.

“We need to scrutinize every clause but in terms of the broad framework, all parties are in agreement so it’s kind of a clearance to the fund. I’m hoping by tomorrow we would have finished so that whatever needs to be done will be sent to the fund,” he said.