$3bn IMF deal: No Freeze On Employment

The just-secured 3-year financing support from the International Monetary Fund (IMF) did not have an employment freeze as a condition, according to sources close to the deal.

The Chronicle’s verifiable checks with the IMF and the Ministry of Finance and Economic Planning revealed that there were a couple of conditions that guaranteed approval of the deal, but a freeze on public sector employment was not one of them.

However, the government, in the 2023 budget, as part of measures to regulate expenditures, put “a hiring freeze for civil and public servants.”

In 2015, the three-year IMF loan agreement contained agreements to freeze employment in government departments. However, former President Mahama is reported to have argued that what was contained in the agreement was a net freeze, where employment was made anytime there was vacancy.

Finance Minister Ken Ofori-Atta and Ms Kristalina Georgieva, IMF Managing Director

The Chronicle has sighted some documents covering the new deal, which got the approval of the IMF Executive Board on Wednesday.

In these documents, the government’s Post-COVID-19 Economic Growth (PC-PEG) program is seen as the blueprint to solving the economic crisis.

The Chronicle also discovered that the current IMF program has a zero percent interest rate, a grace period of five and a half years, and a final maturity of 10 years. It, however, has conditionalities such as prior actions, structural benchmarks, quantitative performance criteria, and indicative targets.

During the joint press conference in Washington yesterday, the IMF Mission Chief for Ghana, Stéphane Roudet, indicated that the program has mechanisms to be monitored and reviewed. He mentioned the quantitative performance criteria.

The Chronicle is aware that the review, which will be done semi-annually, will also be done through the indicative targets and the structural benchmarks.

This IMF program, The Chronicle understands, has a front-loaded fiscal adjustment of 5.1 percent of GDP over the next three years, with some primary balance and fiscal adjustment.

For instance, Ghana’s nominal GDP is GH₡800 billion, translating into about GH₡40 billion of revenue within the program period to meet the 5.1 percent front-loaded fiscal adjustment.

The government is looking to record primary surpluses for 2024 instead of primary deficits as part of the measures to return the country to debt sustainability.

 Prior Action

The government, through the 2023 budget, introduced three revenue measures which later became key to the Fund, considering Ghana’s program and giving its support.

In April, this year, Parliament approved the three revenue bills under a certificate of urgency. The bills were targeted at bolstering the sustainable generation of domestic revenue for the country.

The government had aimed at raising some GH₡4 billion annually and the three bills were projected to complement that effort.

The bills are the Excise Duty and Excise Tax Stamp (Amendment) Bill, 2022; the Income Tax (Amendment) (No. 2) Bill, 2022; and the Growth and Sustainability Levy Bill, 2022.

The Chronicle is also told that the government presented to the IMF that some of the earmarked funds, like the GETFund and Road Fund, would operate their budget through the GIFMIS system for accountability.

The Bank of Ghana is also not financing the Central Government, as the Governor of the BoG, Dr. Ernest Addison, mentioned during the press conference yesterday.

Information available to The Chronicle indicates that all prior actions, which were five in number, have been completed, including the Domestic Debt Exchange (DDEP) and publishing the Auditor General’s report on the audit of COVID-19 spending.

The $3 billion interest-free loan from the IMF would be released in seven tranches, possibly beginning today and lasting until April 16, 2026.

It is the expectation of the government that the financing support from the IMF will encourage external creditors to see Ghana as very viable.

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