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28 September 2016

Further delay in IMF cash will push interest rates up – Economist

internet-rateAn Economist with the Institute of Statistical, Social and Economic Research, (ISSER), Professor Robert Darko Osei, is cautioning of a further increase in interest and inflation rates over a further delay in the release of the IMF bailout cash.

He argued that, government’s decision to borrow more to meet expenditure like wages in an election year will result in high interests rate debts.

“Of course once it is not coming in as well, if there is a funding gap, government will have to look for money and if it cannot go onto the capital market, it will resort to borrowing from the domestic economy,” he said.

“This often results in crowding out the private sector and pushes up interest rate which has repercussion for inflation and some other macro-economic indicators,” he added.

Ghana is yet to receive the third tranche of the financial assistance from the IMF; almost three months after the mission concluded its third review.

A Deputy Finance Minister Mona Quartey has told Citi Business News government has submitted data on restructuring the country’s energy sector which should prompt the release of the bailout cash.

Speaking to Citi Business News however, Professor Robert Darko Osei maintained the high interest would also have dire consequences if unchecked.

“Though there are difficulties, policy makers will want to create a picture where private investors do not flee…but the truth of the matter is we are in a really difficult situation and we need to rethink such decisions,” he stressed.

The IMF Board is expected to meet later this month and make a decision on the report by the fund’s review committee.

Ghana, has since the signing of the agreement, received an estimated US$233.1 million out of the 918 million dollars it agreed to on April 3, 2015.

In addition, Citi Business News is learning government is to update the Fund on progress made in passing some legislations in maintaining fiscal discipline.

These include the Bank of Ghana Amended Act which placed the cap of government’s deficit financing at 5 percent; contrary to the zero budget deficit financing suggestion by the IMF.

 

Source: citifmonline.com

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