In order to get a bailout in 2015, the former president John Dramani Mahama’s administration turned to the International Monetary Fund (IMF).
He claimed that throughout his administration, there had been macroeconomic instability brought on by both domestic and external sources.
In an interview with VOA’s Straight Talk Africa program earlier this week, Mahama went into further detail, noting that the external element was primarily attributable to disruptions in commodities prices.
Regarding the internal component, he stated that an increase in worker compensation was a cause, adding that it “swallowed” up 73% of revenue produced.
The ballooned wage bill was connected to the implementation of the Single Spine Salary Structure.
The Single Spine Salary Structure was a policy for all public sector workers, no matter their area of specialization and the public organization they belong, to be placed or linked to one common salary structure.
“We are all members of the IMF. It is a body we go to when you have some macroeconomic instability and so at the time I was president, yes we suffered macroeconomic instability due to two factors: Internal and external.
“External…you will get shocked from time to time. We had the commodity price shocks; the slowdown in China. But internally, we overshot our expenditures because we introduced a new wage policy that sought to make the remuneration in the public sector more uniform and it shot the wage bill far above what we had anticipated. Almost 73% of our revenues was going to pay wages and salaries alone and so that forced us to go into the IMF,” Mahama told Hayde Adam in the interview aired on October 12.
On the governing New Patriotic Party’s return to the IMF for a programme, the 2020 flagbearer of the National Democratic Congress attributed it to excessive borrowing on the part of the government and expenditure outweighing revenue.
Mahama intimated that issues such as the fight against corruption and the strengthening of state-owned institutions ought to be addressed in order for the economy to thrive.
This he said, the NDC will seek to achieve when given the opportunity to steer the affairs of the country.
He mentioned that the current return to the IMF to achieve debt sustainability and policy credibility should mark the start of governments prudently running the economy, stressing that it should be the last resort to the Bretton Woods institution.
“The economy is situated in an environment. It does not exist in isolation and so there are somethings that need to be done to create an environment for the economy to thrive. Some of them are governance issues, strengthening state-owned institutions, the fight against corruption and so many other things that create the environment for the economy to thrive.
“I think that when we go into this programme and we bring debts back to sustainable levels and we are able to get the bridging facility in other to achieve policy credibility so that investors again feel confident that they can bring back their money into Ghana, then we must start from there and maintain that prudence.
“This should be the last time we go to the IMF because going and coming, it creates a certain instability in the whole system and it also reduces the faith that people have in our democracy,” Mahama said.
Ghana initiated contact with the IMF in July after the economy experienced a downturn. The move was occasioned by downgrades of the economy by rating agencies such as Fitch, Standard and Poor and Moody’s which prevented the country from accessing the international capital market.
Ghana with its move is looking for a US$3 billion programme over a 3-year period. The government has expressed confidence that the programme will help return the country onto a path of growth.