We are out of the IMF now. It has not been an easy journey. Ghanaians, of no fault of their own, have had to sacrifice and endure austerity for four solid years all because the Govt then (under President John Mahama), poorly and recklessly managed the economy.
Before we forget this is how it all started. Ghana had just started producing oil in 2011. The whole world was praising us as the AFRICA RISING poster nation.
However, by July 2012, President Mahama (who is now asking to be voted back in 2020) had been sworn in. By the close of that year, the oil-rich economy he inherited was in serious crisis. Within that short period GHS4bn of cash that had not been programmed for was spent (most of it wasted) and much of that on contracts yet to be delivered – yes rlg laptops, guinea fowls etc. He was determined to stay in power at literally all cost.
The economy never recovered from what remains the biggest budget deficit ever since 1990 (PNDC era). But, Mahama, smooth as ever, kept telling us that his “homegrown” policies were working. That, he did not need the IMF to help him out and show him how to run his country’s economy.
But, the cedi had other plans; it raced to become the worst currency in the world; dumsor was biting, with lights going off every other 12 hours for 12 and sometimes 24 hours; prices of goods and services were skyrocketing. Companies were closing down. Statutory payments were not made. Arrears for contractors were piling up. We had borrowed more than we could afford to pay and largely for contract sums that were inflated – ie too much money chasing after fewer projects. But the appetite to tax, borrow and spend was still there because the creativity needed to get us out of the mess was missing, with businesses underperforming and not growing as the cost of borrowing and producer prices kept rising.
By February 2014, the IMF was asking the NDC Govt to be bold and come for a bailout. But Mahama could not handle the ignominy. Should he be the President to take newly oil-rich Ghana back to the IMF? He’ll no! You May wish to sympathies with him a bit because he had absolutely no excuse. Before his ascension, John Mahama was the Vice President was also head of the Economic Management team for 4yrs before Mills died.
The reality was that he had lost total control of the economy. The Govt could not even dare go to the capital market because investors had no interest in our sovereign bonds. Govt tried it about three times with road shows and all but no show. No takers.
Mahama finally met his economic advisors at Peduase Lodge on August 1, 2014, where they, under the cover of the Aburi darkness, threw their hands in the air and persuaded the President to swallow what was left of his pride and run as fast as he could to the IMF. The next day, August 2, 2014, Ghana applied for an IMF bailout. Just that announcement alone was enough to calm the market a bit – that those who had failed to manage the economy had finally agreed to cede that sovereignty to the Breton Wood institution. This is the story.