As the mid-year budget review approaches, a consensus among experts from various sectors is that while it will adhere to the framework of the International Monetary Fund (IMF) program, the government must not overlook a crucial opportunity to address persistent economic issues.
These experts voiced their opinions during a roundtable discussion hosted by the Economic Governance Platform. The session centered on the theme ‘The 17th IMF bailout: What did Ghana sign up for? Considerations for the 2023 mid-year budget review.’
They strongly emphasized that neglecting domestic concerns will only worsen negative sentiments and prolong the economic recovery process.
External debt restructuring in the footsteps of Zambia
Dr. Theo Acheampong, a petroleum economist and political risk analyst, emphasized that Ghana can draw valuable lessons from Zambia’s recent success in negotiating external debt as discussions with bilateral and private creditors continue.
Although Zambia’s debt-to-Gross Domestic Product (GDP) ratio did not decrease significantly in nominal terms as a result of the deal, the country secured a three-year grace period for principal repayment and successfully negotiated reduced interest rates ranging from 1% to 2.5%, compared to an average of 9%. These favorable rates will remain in effect until 2037.
Furthermore, Dr. Acheampong highlighted a novel conditional clause in Zambia’s debt deal, wherein interest rates can increase to 4% if the economy exceeds projections and demonstrates improved debt-carrying capacity. This innovative approach is something that Ghana should seriously consider.
Dr. Acheampong urged local authorities to promptly initiate negotiations with bilateral and private creditors and strive to conclude such arrangements before the presentation of the 2024 budget.
“The substance of the deal that Zambia has negotiated is what Ghana can look to emulate. I think we should do the same, and in the next 6 months it is possible for us to put forward and conclude some of these things ahead of the budget for 2024,” he noted.
Energy sector challenges and the delayed energy sector recovery programme
Benjamin Boakye, an energy governance expert and Executive Director at the Africa Centre for Energy Policy (ACEP), expressed concerns over the seeming lack of urgency in presenting the Energy Sector Recovery Programme (ESRP II) second phase, which should have been delivered by the end of June – describing it as “alarming”.
This comes as the potential revenue contributions from energy exports, estimated at approximately US$1.4 billion which could have alleviated the budget deficit, seem unlikely due to the falling prices of oil globally.
“It baffles me that we have not been aggressive in putting out the programme to improve under-recoveries. Even though government has pledged to address the challenges, there have been no engagements with local stakeholders… Our initial estimate of generating US$1.4billion from energy exports might not be met due to the expected price of US$88/barrel not materialising. As a result, we may face a deficit of approximately US$500million considering our half-year revenue receipts amount to around US$500million,” he elaborated.
Furthermore, imposition of the 1 percent Growth and Sustainability Levy on the gross production of companies in the extractives industry has caused consternation, as government failed to engage in good faith negotiations with the companies who have stability agreements in place, he added.
“It would have been expected that there’d be some good faith negotiations to establish a reasonable timeframe for their support in the recovery effort. Unfortunately, the power-play involved seems to have hindered progress,” he said, stating that he expects positive developments in this regard.
He also expects much-needed clarity on the ‘gold for oil’ programme. Previously, revenues were generated through the purchase of gold with a 1.5 percent tax applied.
However, this tax has been waived since the Bank of Ghana (BoG) started purchasing gold from the Precious Minerals Marketing Company (PMMC). This move has resulted in a loss of much-needed revenue, Mr. Boakye noted.
“If we are not careful, we risk institutionalising a process that makes it difficult for us to accurately track the quantity of gold produced. In the past, disparities have been observed between our export data and the import data from other countries involved in gold-buying. It is crucial to address this issue in order to ensure transparency and effective revenue management,” he added.
Food security and inflation concerns
Dr. Charles Kwowe Nyaaba, Executive Director-Peasant Farmers Association of Ghana (PFAG), for his part, called for a strong message in the interim budget to address food insecurity.
He said this is pertinent with as much as 5.2 percent of the population facing severe food insecurity, and 6.5 percent experiencing moderate food insecurity.
This comes as consumer inflation rose to 42.50 percent in June 2023 from 42.2 percent the previous month, driven primarily by food inflation which accounted for 54.2 percent of the headline inflation figure – further increasing from 51.8 percent in May.
Education disbursement regime, provision of desks and textbooks
Kofi Asare, Executive Director of Education Watch (Eduwatch), stressed the need for clarity in the disbursement regime for education grants; saying stakeholders need assurance of a clear disbursement roadmap to address accountability issues. Additionally, accumulated arrears in the education sector need urgent attention as many school administrators face financial challenges due to unpaid loans.
Mr. Asare emphasized the critical shortage of desks in the basic education sector, which is negatively impacting over two million children.
The lack of desks presents one of the most significant challenges in the basic education sector, with more than 2 million children affected. To address this pressing issue adequately, an urgent requirement for approximately 1 million dual desks has been identified.
However, Mr. Asare explained that the approved budget allocated by parliament for desks is only GH¢15 million, which falls short of the funding needed to procure the required number of desks. With this funding, a maximum of 35,000 desks can be purchased, leaving a substantial gap in meeting the students’ needs.
Furthermore, Mr. Asare highlighted that even after four years into the current basic school curriculum, textbooks are available for only 3 out of 10 subjects, and they are still limited in quantity. This exacerbates the challenges faced in providing quality education to the students.
“However, a more pressing concern arises at the junior high school level. As we enter year 3, students who are currently in JHS 2 and moving to JHS 3 at the end of this year began their education 2 years ago, yet they have not been provided with any textbooks. It is crucial to address this situation promptly as they will be writing their BECE next year,” he said, adding that the budget must address the “unrealistic” school feeding allocation.
Campaign funding
Director of Advocacy and Policy Engagement-Ghana Centre for Democratic Development (CDD-Ghana), Dr. Kojo Asante, stressed the significance of addressing the issue of campaign financing; particularly with the impending elections next year, saying leaving the space unregulated continues to breed corruption and impede economic growth. However, it is not directly within the IMF programme’s purview and is likely not to be mentioned in the upcoming interim budget presentation.