Press Statement: IMANI-GIZ Reform Dialogue on How Ghana’s 17th IMF Program Will Impact Investment in the Agricultural and Manufacturing Sector

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Press Statement: IMANI-GIZ Reform Dialogue on How Ghana’s 17th IMF Program Will Impact Investment in the Agricultural and Manufacturing Sector

Accra, 28 August 2022 — The IMANI Centre for Policy and Education (“IMANI CPE”) and the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (“GIZ”) on 24 August 2022 held this year’s third and final Reform Dialogue Series (RDS) on the theme “How Will Ghana’s 17th IMF Program Impact Investment in the Agricultural and Manufacturing Sector?”. The main objective of the dialogue was to explore hypothetically how Ghana’s impending IMF programme will impact investments in agriculture, agribusiness and manufacturing sectors which are considered crucial to strengthening the structure of the economy.

The panelists at the event were Prof. Godfred A. Bokpin, Economist and Professor of Finance at the University of Ghana & Senior Fellow of IMANI, Mr. Anthony Morrison, Chief Executive of Chamber of Agribusiness Ghana, Dr. Humphrey Ayim Darke, President of the Association of Ghana Industries, and Mr. Edward Kareweh, Executive Secretary of the General Agricultural Workers Union.

2 Years of National Dialogue on Critical Socio-Economic Themes

Mr. Franklin Cudjoe, President & CEO of IMANI CPE in his welcome remarks noted that the carefully selected themes for all the nine dialogues held over a two-year period covered every aspect of Ghana’s economy with recommendations reached after rich exchanges between government representatives, private sector actors and civil society. Mr. Cudjoe was sure that had some of the recommendations been applied to how Ghana was managed, the country could have avoided the path to the IMF. He expressed gratitude to the GIZ team for their support over the period of the project. Mr. Richard Huelsmann, Advisor at GIZ noted that the dialogues focused on critical national policy issues and provided solutions for duty bearers in Ghana. Mr. Huelsmann said even though GIZ Reform Partnership Project under which the RDS falls is ending, he hopes that there are other GIZ programmes that may provide the platform for continuous exchange of rare policy ideas.

Persistence of IMF Bailouts for Macroeconomic Stability

Panelists were unanimously concerned about the macroeconomic weaknesses in addition to profligate spending that always led us to seek IMF bailout. Professor Godfred A. Bokpin noted that although the average timespan for the country to go to the IMF has been four years, in recent times it has reduced to two years. He recalled an earlier IMANI dialogue on Ghana’s IMF relationship in November 2018 noting that if Ghana could implement the fiscal consolidation measures, the country might not have gone to the Fund again. He added that due to the low resilience of the economy, the country succumbs to shocks easily and the COVID and Ukraine war has just exposed the pre-existing vulnerabilities. He lamented the delay of the government to heed earlier advice for seeking the bailout as the delay is now costing the country. Speaking on the private sector, he indicated that they are concerned with macroeconomic stability and complained about the lack of consistent economic stability which is only attained between elections and the gains reversed after elections. He posited that election-related excesses do not go to the productive sectors which distort macroeconomic stability. Dr. Humphrey Ayim Darke raised a number of concerns about the robustness of the macroeconomic fundamentals, the role of parastatals, the structural reform programs and others. He also noted if we can rationalize our expenditures considering the position and structure of the Ghanaian economy that will be helpful. He also raised concerns about innumerable policy inconsistencies.

Agriculture Investment as a Catalyst for Reducing Inequality

The speakers also noted the relevant role of the agricultural and manufacturing sectors in enhancing economic development. Professor Godfred A. Bokpin noted that agriculture, agribusiness, and industrialization are growth-enhancing areas that the government have been ignoring. He noted that despite the country’s aim to set aside 10% of GDP for the agriculture sector, investments in this area are low and Ghana’s performance is one of the least among its peers. He noted that the Ghana Statistical Service’s social accounting metric shows that agriculture has the highest multiplier effect on employment and income. He noted that net food import of the country is increasing and the country is even importing tomatoes from neighbouring countries like Burkina Faso which is a dent in our quest for sustainable development. He noted that with the African Continental Free Trade Area (AfCFTA) the country can leverage this to drive internal growth in the agriculture sector.

Mr. Anthony Morrison noted that over the years the government has failed to show obvious commitment in its inability to harmonise the policies, as some are not aligned with international developments, for instance the Comprehensive African Agricultural Development Programme (CAADP), ECOWAS Agricultural Policy (ECOWAP), the West African Common Industrial Policy (WACIP), the Medium Term Agriculture Sector Investment Plan (METASIP), and the Food and Agriculture Sector Development Policy (FASDEP II), among others.[1]

Mr. Anthony Morrison lamented the practice of importing cereals for the poultry sector. He was worried that no government in Ghana has been able to commit to the Maputo Declaration which required allocating at least 10% of annual budget to agriculture. He was not happy that irrigation penetration rate is below 12% in Ghana despite the dedicated irrigation policy at the national level and initiatives like the 1 Village 1 Dam.

Mr. Edward Kareweh noted that Ghana’s political leaders should learn how to walk their talk suggesting that the Planting for Food and Jobs programme is a good policy but the implementation has failed woefully. He complains that it is unwise for imported fertilizers to be subsidized, stolen and exported to neighbouring countries for resale.

Dr Michael Abu Sakara Foster, a specialist in Agriculture and Rural Development (Development Agronomist) commended the timeliness of the dialogue and the focus on the agriculture sector. Touching on the main question of the dialogue, he noted that the IMF bailout will have both indirect and direct impacts on investment. He indicated that the direct impact will come from the private sector but the indirect impact is what the Fund will like to achieve to enhance the business and investment climate. He believes that national duty bearers need to be critical in deciphering what benefits can be reaped from the new bailout request.

Complementary Role of IMF and the World Bank to Support Ghana

The participants affirmed the complementary role of the IMF and the World Bank Group in supporting sustainable development.

Mr. Edward Kareweh noted that peasant farmers are interested in the outcomes and not the high-level discussions per se. He believes the IMF does not have solutions to this and the Fund rather exacerbates the challenges of the economy. He however believes that the IMF bailout will help stabilize the country. Professor Godfred A. Bokpin noted that when Ghana announced its intention to seek a bailout the market spread narrowed but is now widening with the potential that the credibility deficit will increase with the delay in the processes to seek the facility. He noted that the IMF focus on general macroeconomic issues but the World Bank Group is the entity that focuses on specific sectors of the economy. He noted that some of the issues raised need to be addressed by the World Bank Group as the IMF cannot solve them within their mandate. He noted that in 2017 under IMF programs the agriculture sector growth in Ghana was 6% and there was increased funding for the sector which can be repeated. He noted that the country should keep its promise to pursue agriculture, agribusiness, manufacturing and industrialization-led programme.

Mr. Anthony Morrison noted that Ghana’s agriculture sector is about $15 to 20 billion but the growth expected is not being reaped. He questioned the quality of the publicly declared data reported on the agricultural sector and raised concerns about the lack of coded and structured data which negatively affect the quality of decisions. Dr Humphrey Ayim Darke stated it is important that the combination of stabilization and structural reforms go hand in hand. He noted that agriculture reform programs need to transcend a single government and be linked to the national strategic plan which every party needs to follow. He noted that they want value chain development that guarantees prices and creates relevant jobs, sufficient revenue and promotes the productive sectors of the economy. He also noted that aside engaging the IMF there is the need to also engage the World Bank for support in various sector-specific areas. He noted that the role of the IMF is not sufficient and we need structured reforms, concessionary facilities and policy consistencies.

Consensus Building and Inclusivity of IMF Programme

Given that Ghana is yet to present a national programme for approval by the IMF, the participants called for inclusivity in developing the IMF bailout programme citing the 2015 programme as an example. Mr. Edward Kareweh argued that the local CSOs, researchers and policy analysts per their pre-bailout request predictions have shown expertise that the government should leverage. He also called on the political leadership to give ears to the local experts as their insights are not different from what the IMF will proffer and, in most cases, local experts understand the local context more. Professor Godfred A. Bokpin noted that the IMF program needs perspectives from multiple actors and the discussions at the current dialogue should be inculcated and considered. He noted the new IMF is interested in inclusion, reducing inequality, and considering climate change issues which is paramount. He noted that despite some preliminary engagements, that is not enough as the country needs a stakeholder consensus building on the IMF project which is a must.

Mr. Kofi Bentil, Vice President of IMANI CPE noted that as analysts they requested the government to go to the Fund much earlier as that could have prevented the negative market reactions (like being shut out from the Eurobond market) which the country now faces. He also noted that the country’s local fundraising is also drying up and T-Bills are not getting easy for the government. He noted that if care is not taken, the government may not be able to pay civil servants in the near future owing to all kinds of political promises which induce profligate spending. Dr Humphrey Ayim Darke argued that value chain interventions should be thoroughly structured and a liberal structure well integrated with the private sector and the parastatals (like buffer stock) to enhance the provision of industrial raw materials. He posited that the lack of jobs is because of low productivity and policy reforms to fix the challenges should be well scoped.

Private Sector and Financing for the Agriculture and Manufacturing Operations

Professor Godfred A. Bokpin called on banks to provide credit to farmers for the medium to long term Morrison to aid agriculture development. He noted that credit facilities are available for an averagely 12 months which does not support the agriculture sector that requires at least two to three years. This he said, explains the focus on the importation of products and in some instances adding Made in Ghana logos to them. Mr. Anthony Morrison emphasized the strategic role of the private sector in the sustainable development of the agro-industry and exports of produce. He indicated that the finance facilities have to be developed in a way to support production in Ghana. In the production sector, he noted that the cost of food production and inputs like agrochemicals, fertilizers, seeds, feed, and ploughing continue to increase significantly. Government is also owing the local agriculture sector specifically the grains and cereals sector which affected the re-investment potential of farmers. He lamented that despite the potential of the agriculture sector for development, the excessive focus on the service sector is negatively affecting our growth.

A participant, Dr. Nanayaa Owusu-Prempeh (Rev.), a leader of the Yonkudo Farmers Association noted that women into farming are facing post-harvest losses and support in terms of funding, machinery and others. Dr Michael Abu Sakara Foster noted that transaction cost is critical for the country to enhance the business and investment climate – touching on the cost of capital, cost of fuel, change from fossil to renewable energy and others. He also noted that renewable energy should be transmitted at a lower cost in order to help farmers. He believes that trade policy is critical to agriculture and segmentation of agriculture is vital for addressing the problems comprehensively. He predicted that irrigation of the Ghanaian agriculture sector alone can add about 25% to the current GDP.

Mr. Anthony Morrison noted that Ghana imports over 40% of the high-skill in all aspects of the agriculture sector. He suggested that government should not be importing agricultural machinery but should engage the private sector to provide investments in this area. He noted that premix fuel and subsidies should be avoided because they have almost always been abused. Professor Godfred A. Bokpin noted that leakages to corruption and illegal activities are even more than the funding amount that the country will get from the IMF in three years, citing corruption alone cost about US$3 billion per year.

Mr. Kwesi Korboe, Chief Executive Officer of GIRSAL, noted that government has a role to play and the private sector also has a role to play. He believes that the regulatory policy should be the main area of focus to enhance agriculture and industrialization. He noted that efficiency within logistics is also crucial for enhancing the competitiveness of Ghanaian farmers. He believes that as a country we need to own the strategies and the implementation to be able to succeed. For him once the agriculture sector works and export works, import substitution will be an easy task to provide solutions for the exchange rate issues. He argued that we have to consider the issues from a value chain perspective as many people are moving into value addition. He contends that money is not the main issue but policy coherence and effectiveness are key. He explained that even where money is needed, the level to which it is targeted is key for national development.

A representative of Peasant Farmers Association wondered why governments keep promising tomato farmers ready market to feed the Northern Star tomato factory was to be revamped in 2008 but has since failed leading to losses for the farmers.

About the IMANI-GIZ Reform Dialogue Series (RDS)

The partnership between the two entities aims to carry out nine (9) policy dialogues, six (6) on business climate and three (3) on the investment climate. The first dialogue in November 2020 explored the “challenges and opportunities created by the COVID-19 pandemic for Ghanaian businesses”. The second dialogue took place in March 2021 under the theme of “what the African Continental Free Trade Area (AfCFTA) means for Ghanaian businesses”. The third dialogue in May 2021 focussed on “business taxation and the road to Ghana’s post-COVID economic recovery”. The third dialogue was also accompanied by a briefing paper. The fourth dialogue held in July 2021 focussed on “access to affordable energy to support economic growth and job creation in Ghana”. The fifth dialogue was held in September 2021 on the theme “business registration, regulation, property rights and their impact on Ghana’s business climate”. The sixth dialogue was on corruption and the business climate. The seventh which was the first under the investment climate series explored the macroeconomic environment. The penultimate dialogue focused on Ghana’s Digitalizing Agenda and the Fourth Industrial Revolution.