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Friday, March 27, 2015

IMF-Ghana bailout: What to like and what needs improvement


Mr. Joseph Winful is the Executive Chairman of the Financial Accountability & Transparency-Africa and the Chairman of the CSO Platform on IMF. He is a Chartered Management Accountant by profession and recently retired as Senior Partner/CEO of the Ghana Office and an Exco Member and also Board Member of KPMG Africa. Joe was elected Senior Partner of the Ghana firm in 2000 and has oversight responsibilities for Sierra Leone and Liberia. Photo: Kwami Ahiabenu II/International Institute for ICT Journalism.

Will the final agreement address civil society demands for accountability to Ghana's poorest citizens?


Omar Ortez is Oxfam America's senior policy advisor on active citizenship.

Negotiating teams of the International Monetary Fund (IMF) and the Government of Ghana reached an agreement for a loan program during the last week of February in Accra. The agreement is still subject to approval by IMF Management and the Executive Board, which is likely to discuss it in early April.

Ghanaian civil society has seen the IMF negotiations as a unique opportunity to address some of the root causes of Ghana's financial crisis – by boosting much needed fiscal discipline, transparency, and accountability in public finances.

How Ghana's loan program is handled will also be a real-life test case to the IMF's new discourse on inequality: Will the bailout protect or further erode pro-poor and pro-development public spending? It could as well be a watershed moment for the IMF to win back some trust by pro-poor advocates the world over by walking its 'new talk' on inequality.

Of late many African countries have preferred going to international bond markets and to China, rather than international finance institutions, for borrowing.For example, Cote d'Ivoire issued a $1bn eurobond in February. But Ghana's financial crisis is a warning sign for countries that have overextended borrowing during the years they enjoyed high prices for their exports. More countries that find deep holes in their pockets when prices plummet are likely to come knocking at the IMF's door.

In its press release on the Ghana agreement, the IMF says it has the dual purpose to "restore debt sustainability through a sustained fiscal consolidation, and to support growth with adequate capital spending and a reduction in financing costs." Falling gold and cocoa prices, rising debt and growing trade, and fiscal deficits have shocked Ghana's economy in recent years.

"Ghanaian citizens should exercise their right to provide inputs and feedback to the current version of the agreement. At the end, the agreement will be shouldered by all Ghanaians," said Joseph Winful, chairman of the Civil Society Platform on the IMF Bailout.

"After all, most of the money to be borrowed is literally ours. Those close to a billion dollars represent 180% of Ghana's reserves in the IMF. Put simply, $505 million of that total is Ghanaian tax payer money we've placed at the IMF. The other $435 million we are borrowing from what taxpayers from around the world have placed."

Last November Oxfam fully endorsed the principles, measures and benchmarks that the Civil Society Platform on the IMF Bailout asked negotiators on both sides to adopt. As the agreement approaches the end zone, now is a good moment to take stock on how those principles have fared.

The jury is still out to see if the final agreement will also deliver the transparency and accountability measures that Ghanaian civil society organizations (CSOs) so urgently have been asking for. Below we explore four of the key questions for the IMF agreement:

1. To what extent has broad consultation with Ghanaian citizens been an integral part of the package negotiation process?

Things to like:

  • The creation of the Civil Society Platform has been an outstanding achievement in itself. The initiative has brought together a broad set of groups with diverse interests – including civil society organizations, trade unions, faith-based groups, academia, media and Parliament – to agree on common priorities to advance accountable fiscal governance for their country.
  • Although regular consultation with civil society throughout the entire process was never formalized into the negotiation design, negotiators on both sides have met with CSO leaders and have welcomed civil society's assessments of the challenges and their proposed priority solutions on fiscal discipline, accountability, and transparency.

Things to improve:

  • CSOs would welcome the opportunity to provide feedback on the current draft agreement before it goes to the IMF board. Although Oxfam and the Civil Society Platform have asked to see the full draft agreement, so far it has not been made public.
  • CSOs have also stated their interest to continue engaging the Government of Ghana and IMF so that citizens play an active role in monitoring the agreement implementation. A truly independent oversight scheme that includes civil society should be created with the resources the agreement will set aside for monitoring and evaluation of implementation.

2.  Is the agreement setting up transparency and accountability measures that address underlying causes of undisciplined public spending?

Things to like:

  • IMF declarations that "key elements of the reforms include improving transparency in the budget process to prioritize spending, enhancing revenue mobilization and strengthen fiscal institutions, including through the review of possible fiscal rules" in last week's press release are encouraging. Journalists, community based groups, or trade associations willing to oversee public expenditures need assurance that the information they require will not be denied by Ghanaian authorities, and that institutions like the auditor general, the accountant general, and Parliament will not shy away from applying sanctions if citizen oversight uncovers irregularities.
  • Similarly, the reference to "additional public and financial management (PFM) reforms that should contribute to improve predictability and control in budget execution" in the press release is also in line with what CSOs are demanding. Off-budget and over-budget spending, such as political patronage during election times, corruption, and lack of transparency in the management of public finances are at the heart of Ghana's current economic woes.

Things to improve:

  • In CSOs' dialogue with the Government of Ghana and the IMF, they have requested specific measures to be set in place such as: access to information and fiscal responsibility laws, enhanced independent parliamentary oversight on public finances, auditing funds and operations of all government agencies in the oil/gas sector, and substantial improvements to the public accounting system (i.e. complete implementation of the Ghana Integrated Financial Management Information System across the whole of government). Without access to the draft agreement, CSOs cannot assess the extent to which their recommendations have been incorporated beyond rhetoric.
  • The timing of both transparency and public and financial management reforms is also very critical. CSOs have asked for these reforms to be frontloaded as much as possible in the first year of the program. Because with 2016 being an election year, the temptation to indulge in undisciplined government spending will increase. Fitch, a rating agency, seems to share that same concern.
  • The Government of Ghana had actually already committed to deliver several of these measures espoused in its so-called homegrown policies and through Ghana's first Open Government Partnership (OGP) Action Plan. But OGP's Independent Reporting Mechanism has revealed little advancement on right to information, fiscal transparency and fiscal responsibility. As Ghana prepares its next OGP Action Plan, President John Dramani Mahama should seize the opportunity to re-launch these commitments – this time dedicating appropriate levels of resources and leadership. Similarly, in the context of this year's post-2015 discussions, President Mahama could make early commitments to accountable public spending towards a set of Sustainable Development Goals (SDGs) that Ghana wants to push hard in the next fifteen years.

3. Is strategic pro-poor and pro-development spending being protected?

Things to like:

  • The IMF program will explicitly accommodate for "the expansion and the safeguard of priority spending, in particular social protection programs such as the Livelihood Empowerment Against Poverty (LEAP)." Civil Society Platform members agree that the burden of a fiscal adjustment should not be placed over the shoulders of the most vulnerable, and already underserved; nor should it be done at the cost of strategic investments on long term development.

Things to improve:

  • CSOs want to know more details about what the agreement considers priority spending to be expanded and social spending to be protected –and what will those expansions/protections contribute to the mid-term country development agenda. CSOs are very interested in engaging on this medium-term agenda and in discussing the levels of public investments it will require.
  • Beyond protecting the LEAP program, public spending cuts should avoid:
  • Protecting pro-poor/pro-development funds allocated in the budget is an important step but CSOs are also interested in seeing them being appropriately spent and their impact assessed. CSOs recommend that existing and planned economic and social projects become subjects of regular "Value for Money" reviews to identify potential waste or little impact of public funds.

4. Is revenue collection being improved, especially from large economic actors?

Things to like:

  • Tax administration reforms underway are steps in the right direction, particularly if they improve the effectiveness of the Large Taxpayer Office of the Ghana Revenue Authority. The same can be said about a review of existing tax exemptions with a view to reducing them.

Things to improve:

The highest threats eroding Ghana's otherwise exemplary democracy are lack of inclusiveness and lack of accountability. This bailout program presents itself as a considerable opportunity for President Mahama's government and the IMF to tackle those threats.

The question remains: Will they rise to the occasion?

Connect with Omar Ortez on Twitter @omarortez1


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Kwami Ahiabenu,II
International Institute for ICT Journalism
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