The current economic situation will sooner than later compel the government to return to the International Monetary Fund for bailout fund or programme, Economist and Associate Professor at Niagara University in Canada, Dr. Dennis Nsafoah has revealed.
Speaking at the Ghana’s Economic Outlook for 2022 organized by PFM Tax Africa, Dr. Nsafoah said government’s fiscal targets for this year is unrealistic and therefore it will have no option than to return to the IMF latest by the end of the year.
“Will the government of Ghana seek an IMF intervention? It will. It [government] may delay it, but eventually it [government] will go for it. Thinking about this situation and the most likely outcome may be at the end of the year, when it realize it can’t achieve the revenue target”.
Some economists and analysts have since last year predicted a return to the IMF by the government, based on the present situation of the economy.
“The target the government has set for itself is too high, and that is when they will start talking to the IMF. But over the weekend, I had the opportunity of interacting with Seth Terkper [former Finance Minister] and then he made a point that he thinks that it would even be shorter”, Dr. Nsafoah explained.
Furthermore, he alluded that “the most prudent thing for government to do is to actually start talking to the IMF because the target they have set for themselves, it’s quite unrealistic. And then it can’t achieve that 42% increase in revenue. You can’t talk about Budget 2022 without discussing the E-Levy.”
“The best outcome that we’ll see is that by the end of 2022, our debt-to-Gross Domestic Product ratio would actually increase from 83.9%, which is not good. But the most likely outcome by 2025, as inflation in the USA goes down and then the Federal Reserves decrease the pace at which it contract money, things would improve”. And then we would have a debt to GDP ratio of about 73.6%”, he stressed.
But before then, he said, the Federal Reserves will hike interest rates and that will have negative implications on interest rates and exchange.
“An increase in the USA interest rate would definitely have a negative impact on the Ghanaian economy, and that would also have a negative impact on our exchange rate. So this I’d say would be the most likely case. We’ll be hit with exchange rate and interest rates.”
Dr. Nsafoah also said the era for cheap money is no more because the COVID-19 pandemic has had devastating effects on countries and the global economy.
Joybusiness