IEA Says Ghana's Reliance On International Financial Market Not Sustainable

IEA Says Ghana's Reliance On International Financial Market Not Sustainable

  • The Institute of Economic Affairs says the country's reliance on Bretton Woods institutions to bolster the national currency is not sustainable
  • The IEA said the situation is contributing to the high debt levels in the country and could lead to an economic collapse if left unchecked
  • It has urged the government to live within its means to avoid going to the international market to raise funds

The Institute of Economic Affairs (IEA) has described Ghana’s reliance on international markets and the Bretton Woods Institution to bolster its currency as a lazy man’s approach.

According to the Institution, that model is unsustainable and could lead Ghana into a worse economic crisis in the near future.

IEA Says Ghana's Reliance On International Financial Market Not Sustainable
The IEA has urged the government to live within its means
Source: Getty Images

Speaking at a press conference on Wednesday, April 3, the Director of Research at the IEA, Dr John Kwakye, said the country would have to untether itself from the World Bank and the International Monetary Fund and start looking inward to finding solutions to its fiscal challenges.

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He said the government can start by living within its means.

He said relying on funds from the international market in the form of Eurobonds and cocoa-syndicated loans would increase Ghana’s debt levels exponentially and lead to a rapid depreciation of the cedi.

Dr Kwakye said the government should reduce expenditure and halt profligate spending to shore up funds for developmental projects in the country.

He added that while the Governor of the Bank of Ghana, Dr Ernest Addisson, had earlier stated that the cedi was regaining its value after suffering a depreciation of 6.8 per cent against the dollar in the first quarter of this year, the cedi continues to depreciate almost reaching GH₵13 to the dollar.

He stressed that the unsustainability of relying on external donors and investor communities will be realised when it is time for the government to repay all the collected loans.

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Ghana subscribes to IMF programme

Ghana is currently subscribed to a three-year $3 billion IMF programme which will see the country receive $600 million in tranches across the three years.

This was after the country was hit by skyrocketing inflation and a free fall of the cedi against the dollar, which fuelled fears of an imminent economic collapse.

The situation was exacerbated by a shortage of dollars in the country, which affected trade, among other issues.

Akufo-Addo said IMF programme yielding positive results reports that President Akufo-Addo, following the IMF’s intervention, said Ghana’s decision to seek support from the International Monetary Fund is yielding positive results.

Akufo-Addo attributed the decline in inflation and relative forex stability to the IMF support programme.

The president believes the support programme has also contributed to an economic turnaround.

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