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July 17, 2018

Communiqué: Fifth CSO forum on Ghana’s 16th Stabilization Program with the IMF

On Thursday June 28, 2018, the Economic Governance Platform (previously the Civil Society Platform on Ghana’s IMF Programme) with support from Oxfam organized the Fifth National Civil Society Forum on the Ghana-IMF Programme, on the theme “Review of Three Years of Implementing Ghana’s 16th Stabilization Programme with the IMF: How Does Ghana Avert another Stabilization Programme with the Fund?” at the Mensvic hotel, Accra.

The speakers and forum delegates shared research, analysis, on-the ground experience, viewpoints and ideas for policy consideration to enhance the country’s economic governance and avoid another stabilization with the IMF. The forum brought together 100 participants from Civil Society, Professional Associations, Government Agencies, Academia, Media, and other identifiable groups in Ghana.

Ambassador Francis Tsegah, Senior Research Fellow at CDD Ghana, chaired the forum while Hon. Albert Kan-Dapaah, Minister for National Security was Guest Speaker. Ms. Natalia Koliadina, IMF Resident Representative delivered the keynote address. Prof. Godfred Bokpin, Head of Finance Department, University of Ghana Business School, Dr. John Kwakye, Director of Research at the Institute for Fiscal Studies and Mr. Franklin Cudjoe, President of Imani Africa led the discussions at the forum. Mr. Senanu Klutse, Economist at the Centre for Policy Analysis (CEPA) presented the forum paper that reviewed Ghana’s 16th stabilization program with the IMF.

The Coordinator of the Economic Governance Platform, Mr. Godson Aloryito in his welcome address noted that good governance and democracy for that matter goes beyond human rights, and voting during elections to include prudent economic management, accountability and transparency. He called on citizens at all levels and the political leadership to do the right things to turn the country’s fortunes around. Noting that Ghanaians should not stay aloof but speak out, share ideas and engage government. Below is the forum communiqué:

Forum Communiqué

Preamble

Having participated fully in the Fifth National Civil Society Forum on the IMF Programme held at the Mensvic Hotel in Accra: on the theme “Review of Three Years of Implementing Ghana’s 16th Stabilization Programme with the IMF: How Does Ghana Avert another Stabilization Programme with the Fund?”, hereby adopt and approve as a “Civil Society Position,” the following Communiqué on the way forward for Ghana’s economic governance.

Acknowledging:

  1. The relevance of civil society inputs and contributions in the discourse of development dialogue;
  2. The commitment of the Government and the IMF to provide space and opportunity for the involvement and participation of civil society through focused dialogue and discussions;
  3. The need to forge stronger ties, cooperation and relationship between Citizens, Government and IMF towards quality assurances for efficient and effective quality decisions on behalf of the people of the country.

Hereby agree to

  1. Continue to promote bridging the governance gap by providing spaces for dialogue between our Government, CSOs and development partners on broader public financial management issues.
  2. Objectively look at the trade-offs, the ups and downs of government policies, to provide useful feedback in promoting the national good.

And recommend

The following overarching themes, as “Citizens’ Positions” to be considered and adopted by the Government of Ghana to enhance effective management of the country’s resources in order to grow the economy:

A. Review of IMF programme performance (2015-2018)

We acknowledge the following positive developments

  1. Macroeconomic stabilization is ongoing and government is committed to successfully completing the programme.
  2. Government debt has begun to decline, responding to fiscal consolidation.
  3. The government has stopped borrowing from the Bank of Ghana.
  4. Ghana’s access to capital markets has improved.
  5. The government’s tight monetary policy has helped to bring inflation down.
  6. Lending rates have also been gradually declining.

However, there are also a number of areas where progress has been slower than programme

  1. The implementation of the structural reform agenda has been slower than expected in some areas, including the roll-out of Ghana Integrated Financial Management Information System (GIFMIS), the Treasury Single Account (TSA) and operationalizing the Tax Information Revenue Processing System (TRIPS).
  2. The process of developing and getting Parliament to approve the Regulations of the PFMA, 2016 (Act 921) to fully operationalize it have been very slow.
  3. The problem with ‘ghost’/illegal workers on the government payroll has been longstanding. The government has been unable to contain the public-sector wage bill (more generally compensation to government employees) even under the IMF-backed stabilization programme. We are worried about what happens when there is no IMF programme?
  4. The proposed Fiscal Council (if properly implemented) can be an effective agent of fiscal restraint in a future without an IMF-backed stabilization programme.
  5. The clearance of arrears has lagged behind in spite of the government’s promise to eliminate them. The potential adverse impact on the balance sheets of banks, stock of non-performing loans (NPLs) and bank lending rates and private sector investment and economic growth are matters of concern.
  6. The Auditor-General’s report on the MDAs for year-end 2016 revealed lapses with the PFM system and GIFMIS. The government’s response to – improving record keeping in the MDAs, imposing punitive actions on businesses and public officers who submitted false claims of GHC 4 billion and the overpayments of GHC 53 million to forestall recurrence – remains to be seen.

B. In order to avoid another need for a bailout from the IMF, the CSO Platform recommends the  following measures:

  1. There is an urgent need for fiscal discipline, making it irreversible, and strengthening the financial sector. The proposed Fiscal Council needs to be fully discussed to make it an effective institution for fiscal discipline.
  2. A stricter enforcement of the PFMA, 2016 (Act 921) and the strengthening of the GIFMIS are required to underpin budgetary discipline and to provide assurance on government liabilities.
  3. The implementation of the United Nations’ Sustainable Development Goals (SDGs), elimination of infrastructure gaps and developing of a skilled labour force require time and significant resources. There is, therefore, the need for the GRA to improve tax revenue administration and collection as well as a review of the tax incentives regime and the vigorous pursuit of property taxation.
  4. Efficient government spending (including through the elimination of corruption) is essential for balancing fiscal discipline and economic growth. It is, therefore, necessary for the government to prioritize and tighten control over spending and strengthen procurement procedures. This would help achieve “more with less” – in other words, much-needed value for money.
  5. Taxpayers want to know and be assured that their tax money is being well spent (this could improve tax compliance and willingness to accept new taxes or increases in rates). This could only be achieved through increased government transparency and accountability to the people.
  6. Private sector development requires affordable financing. Average bank lending rates have been gradually declining. Nonetheless, borrowing costs are still expensive in real terms and access to credit remains limited. High ratios of non-performing loans (NPLs) relative to total outstanding stock of loans, could be one of the reasons for the apparent unwillingness/inability of banks to lend. This issue needs to be decisively addressed.
  7. We support the Bank of Ghana’s efforts at addressing the remaining financial sector weaknesses and implementing the institutional framework which would ensure the soundness of the financial sector.

There are still some challenges for long-lasting macroeconomic stability

  1. The inability to permanently raise revenue could undermine the implementation of development programmes, undermine fiscal discipline, pose risks in the financial sector, and maintain unsustainable debt build-up.
  2. The continued weaknesses in the state-owned enterprises (SOEs) especially in the energy sector could result in direct or contingent liabilities of the government and pose financial sector risks.
  3. The lack of data, transparency and implementation weaknesses of fiscal and financial reforms could undermine government’s policies and the reforms themselves.

Stalled Projects

  1. A study by ISODEC across the country suggests that for every 100 projects that have been initiated, 35 have been abandoned due to the change in government. The Auditor-General’s 2014 Report also drew attention to this wasteful occurrence. The current government is commissioning new projects with potentially adverse implications on pre-existing projects.
  2. There is no doubt that challenges arise with projects hurriedly commissioned by previous administrations especially when this may have been for electoral purposes. Nonetheless, there is need for government to give due consideration/attention to these projects, and certainly not to simply quietly abandon them. Otherwise, the public funds invested in these projects would go to unaffordable waste. The CSO Platform is committed to keeping a close watch on this problem.

Office of Government Machinery

  1. The Office of Government Machinery (OGM) must lead by example and put a stop to the persistent overrun of its budget. The lopsidedness of allocations to the OGM relative to other critical sectors is a worrying phenomenon which needs to be carefully examined and redressed.

Energy Sector

  1. Transparency in the energy sector is critical for the economy. This is particularly so, given that one contract can commit the country to several millions of Ghana Cedis stretching over several years.
  2. The big deals in the sector do not appear to go through the competitive bidding process; this must be checked and rectified by government.
  3. The Sinking Fund is currently being used to subsidize electricity tariffs and hence the tariffs are no longer on full-cost recovery basis (implying subsidies and contingent government liabilities). There can be good reasons to provide subsidies for critical goods and services. Their implications for provision of other public services and their sustainability, however, need to be made public knowledge and understood.

C. The Way Forward

  1. The ruling NPP won a mandate to pursue macroeconomic stability and ‘create prosperity and opportunity for all Ghanaians’. The implementation of the election promises will need to be carefully sequenced and the policies clearly and consistently communicated with the view to minimizing partisanship and getting the buy-in of the citizenry. This should help anchor expectations and better lay the seeds for lasting success of the new policy initiatives.
  2. The government must be guided by past repeated episodes of large fiscal slippages that have transmitted significant volatility to the economy. This has often contributed to sizeable depreciation, high inflation, widening domestic and external imbalances, and rising public debt burden. Attempts to correct such imbalances have been short-lived as good intentions have floundered against the challenge of budget rigidities, economic inefficiencies, vested interests and corrupt practices. Hence, the call for a sustained effort at maintaining fiscal discipline.
  3. Primacy must be given to the pursuit of credible and sustained fiscal consolidation to reverse the debt dynamics and reduce financing needs. Government must not only accept the constraints on spending of the weak economy it had inherited but must also communicate the reality of the situation to its support base and society at large.
  4. The government must demonstrate a serious commitment to ensure value for money in all its outlays and to the punishment of corrupt acts of public office holders.

D. Role of CSOs

  1. The role of civil society in holding government responsible for improved data transparency and accountability in order to ensure good economic governance and thus “effectively play the head-teacher role” is paramount with the current arrangement with the Fund ending in March 2019.
  2. CSOs must contribute to making good policies and structural reforms irreversible. To achieve this, CSOs need to engage in dialogue with the government on policies and reforms and their effective implementation.
  3. CSOs should strive to become a trusted advisor of the government and an accurate source of information for their constituencies.
  4. CSOs must strongly support the institution of an effective Fiscal Council.
  5. CSOs must also commit to work in close collaboration with the Auditor-General in the quest for increased fiscal discipline.
  6. CSOs must collaborate more among themselves, be more active in their advocacy and ask ‘right’ and relevant questions in order to elicit appropriate responses from duty bearers.

 

ADOPTED THIS 28TH DAY OF JUNE 2018, MENSVIC HOTEL, ACCRA

 

 

 

 

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