IMF Compels Government To Sign A ‘Zero-Financing’ Agreement With BoG As A Necessary Condition For Its US$3 Billion Loan

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Jan 27, 2023 6:06 PM

IMF Compels Government To Sign A ‘Zero-Financing’ Agreement With BoG As A Necessary Condition For Its US$3 Billion Loan — Katrina Georgieva, IMF Managing Director

The International Monetary Fund (IMF) has compelled the Nana Akuffo-Addo government to sign an agreement of ‘zero-financing’ with the BoG so not to forfeit its requested loan of US$3 billion.

This direction from the IMF follows the central bank’s loaned amount of GH¢ 40 billion to the Nana Akufo-Addo administration.

As a result, Ghana’s quest for an IMF bailout of $3 billion has been placed under serious threat as the Bretton Woods Institute cautioned the government against borrowing excessively from the Bank of Ghana.

4e4005ab5797181327c5003fc958e7 2269e — Bretton Woods Institute

According to Bloomberg’s reportage, published on January 27, 2023, the IMF has asked the two parties to sign an accord on zero-financing aimed at ending the government’s excessive borrowing from the central bank.

According to business news powerhouse, Bloomberg, the agreement has become one of the necessary conditions for the success of Ghana’s desperate request for $3 billion to keep the economy in good health.

“The decision would bring a halt to central bank loans to the government…”Confidential Source reveals

The agreement it is believed will also stop State-Owned Enterprises (SOEs)like the Ghana Cocoa Board, which owes about GH¢7 billion, from using more central bank financing.

An incident which occurred in the previous week, involving the withdrawal of maturities from the accounts of cocoa bill investors has been attributed to the warning on excessive borrowing by the IMF.

1429580189 24 bank of ghana head office — Bank of Ghana Head Office

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Meanwhile, Alex Annan Abakah has urged the government to be transparent to the Ghanaian populace about its dealings with the IMF.

Think Progress Ghana, a civil society organization, states that it is crucial to clarify the terms of the fund to prevent the government from implementing policies such as the Domestic Debt Exchange Programme (DDEP).

Alex Annan Abakah, the Deputy Executive Secretary of the organization, in an interview with the Daily Graphic, called for full disclosure and transparency in the negotiations between the government and the IMF.

“Citizens deserve to know what led us into this economic crisis. The government must be truthful and tell us how we got here.”Mr. Abakah

The Deputy Executive Secretary stated that the nation’s inability to fulfill its debt obligations was not solely caused by external factors, but also by excessive borrowing and mismanagement of resources.

“It is unfortunate the government has announced that it is going to include individual bondholders in the domestic exchange programme.

“The financial impact of this decision on the people will be too much to bear.”Mr. Abakah

Moreover, Mr. Abakah urged the government to increase its consultations with all stakeholders on the debt restructuring program.

Government officials living luxuriously is not an effective solution to the economic crisis

Mr. Abakah argued that punishing individual bondholders, particularly pensioners who rely on the interest from their investments, while government officials live luxuriously using taxpayers’ money, is not an effective solution to the economic crisis.

“We can also make a lot of savings from eliminating wasteful government expenditure by reducing the size of the government, fighting corruption and retrieving stolen public funds from corrupt officials.”Mr. Abakah

Additionally, the government was urged to prioritize key projects and not to continue investing in initiatives that he claims do not bring significant development to the country.

Regarding the Representation of the People’s (Amendment) Law (ROPAL), Mr. Abakah called on the government to suspend any plans of implementing the program as it would add more financial burden on the nation.

Instead, He suggested that the government should instead focus on addressing electoral challenges to ensure free and fair elections in 2024.

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The Representation of the People’s (Amendment) Law (ROPAL), which is yet to be implemented, enables Ghanaians living abroad to participate in the electoral process in the country.