Commentary on Government’s Performance under the IMF Program (End of April)
The Civil Society Platform on IMF Bailout lauds the efforts of government in executing the Fund supported Extended Credit Facility (ECF) arrangement. Nonetheless, there are some issues arising from the programme roll-out thus far i.e. the missed programme performance criteria for April 2015 and structural benchmarks that were met with delays:
Quantitative Performance Criteria
Government recorded a primary fiscal surplus (excess of revenue over expenditure excluding interest payment) of GH¢ 46 million as against a projected deficit of GHS ¢544 million at the end of April. Also efforts to contain the wage bill seem to be yielding results as the outlays over the same period was GH¢ 72 million lower than the projected figure of GH¢ 3413 million. The Central Bank’s net international reserves went up by GH¢ 144 million at the end of April and this holds positives for stability of the Cedi provided the trend continues in the medium term.
However, the ceiling on net change in stock of arrears for end of April stood at GH¢ -565 million, GH¢141 million above the target of GH¢ -424 million. Government has not assigned reasons for missing this criterion and neither has the Fund mentioned it in its report after the first review.
Continuous Performance Criteria
The Bank of Ghana (BoG’s) gross financing to government (continuous ceiling for 2015) totalled GH¢14,873 million, GH¢ 259 million more than the target of GH¢14,614 million.
- Government’s explanation that GH¢6,120 million in overdrafts or negative balances that was mistakenly not included in the estimate of 2014’s initial stock of BoG’s financing to government (GH¢13,603 million), now reflected in the revised stock of credit to government last year amount to GH¢19,723 million. This revision suggests that BoG’s credit to government between December 2014 and April 2015 declined by GH¢4,850 million but does not adequately explain why the ceiling target for April was missed by GH¢ 259 million.The Performance Criterion has since been revised upwards to GH¢15,814 million for the rest of the year.
- The omission alluded to above (GH¢ 6,120 million) gives cause for concern and necessary steps ought to be taken to prevent recurrence.
The indicative target rate on inflation for April was missed by 1.4 percentage points (target rate of 15.4 percent compared with the actual rate of 16.8 percent). Similarly, social protection spending for the period fell short of the minimum GH¢ 388 million expected from government to GH¢ 252 million for April (difference of GH¢136 million). Government should ensure timely releases to beneficiaries to cushion them against the rising cost of living. Data on how pro-poor funds are disbursed and their beneficiaries should be published as well.
Structural Reform benchmarks for end of April
Generally, although the structural benchmarks were met, some were with delays according to the government and the IMF:
- In order to improve the security of the payroll system, government committed to audit the payroll database and security system by mid-May 2015, but a preliminary draft of the assessment was provided mid-June 2015 with the final draft completed in mid-July 2015.
- Government also committed to cleaning the payroll database by June 2015. The public audit is delayed as the Internal Audit Agency has conducted a partial audit in the Accra region. The revised plan is to use the HR audit by the Public Services Commission with private sector support to update the payroll which will be completed by end-year.
- Per paragraph 57 of the Memorandum of Economic and Financial Policies (government’s policies and programmes submitted to the IMF) and contained in the structural benchmark tables, the public audit of the payroll management should have been completed and published online before June 2015 with proper follow up on its recommendations before the end of 2015.
- Clearly, government has not met this benchmark but rather put forward a revised plan to use the HR audit by the Public Services Commission to update the payroll which will be completed by end of year as a cost saving measure in government’s own words. Why then did government not foresee this earlier to save the country the amounts (unknown) expended on the limited audit carried out already.
- The government and the IMF in the first program review were mute on when next citizens should expect online publication of the payroll management audit and follow up. But we can deduce that it should be end of 2015 from government’s revised plan. Essentially, the payroll audit is to provide evidence to assist in identifying those responsible for irregularities and seek recovery of any funds unduly paid and government should show a lot more commitment in this regard.
Monetary policy & financial sector
- The government committed to support market-based determination of the exchange rate as well as deepen the forex market. A first draft plan to eliminate the compulsory surrender requirements of foreign exchange was completed before the end-April 2015 target. But a revision of the plan addressing comments from the IMF was completed and adopted by the BoG Board in end-July.
- Does the IMF has a mechanism in place to verify the financial and statistical data presented by government? Or the Fund simply works with unverified data.
- What happens if performance criteria in the agreement and benchmark targets are not met? From the first review all government does in such instances is to justify and submit revisions to Fund staff and that’s it. This once again highlights the largely administrative nature of the ECF facility and reinforces the need for fiscal rules as well as its enforcement to keep government in check particularly beyond 2017 to ensure that gains made are not reversed after the programme.
- Early passage of the Right to Information bill will greatly enhance timely access to information to aid effective programme monitoring. We urge Parliament to fast track passage of the RTI bill and also call on the media in particular to bring pressure to bear on our Parliamentarians in this regard.
Economist-Civil Society Platform on IMF Bailout