[stop-imf] Romania, Ghana move away from IMF

[robert weissman]

-------- Original Message --------
Subject: =09(50 Years) Romania, Ghana move away from IMF
Date: =09Fri, 19 May 2006 14:56:49 -0700
From: =0950 Years Is Enough Network <list@50years.org>
To: =0950 Years Email List <stop-wb-imf@50years.org>



http://www.daily-news.ro/article_detail.php?idarticle=3D26209

IMF: Romania will not maintain the stand-by agreement
Mihai Istrate

Romanian authorities admit the need to address
macroeconomic imbalances but have a different view on the
magnitude of needed adjustments, said Executive Director
for Romania Jeroen Kremers and Lucian Croitoru, a senior
adviser, in a report to the International Monetary Fund,
on April 26.

"Confident that the envisaged policy mix is adequate to
preserve macro-stability and sustain strong growth, the
authorities do not intend to resume discussions for
completing reviews of the stand-by agreement prior to its
expiration in July 2006," said Kremers in his report.

However, the authors of the report mentioned that
authorities thanked the IMF delegation for the
professional advice and look forward to continued
cooperation.

The agreement went off track at the end of October,
despite laborious negotiations, as the parties could not
reach an agreement regarding the budget deficit for 2006
and the measures to be adopted for the reduction of
macroeconomic imbalances.

The IMF experts warn that the increase of the budget
deficit target from 0.5 percent of the gross domestic
product to 0.9 percent would result in the increase of the
current account deficit to nine percent this year, over
8.7 percent in 2005.

Macroeconomic conditions continue to be strong, although
they were somewhat altered by recent developments, says
Kremers. After reaching 8.4 percent in 2004, growth slowed
down to 4.1 percent in 2005, due largely to a decline in
agriculture output caused by severe floods and a drop in
external demand.

With strong domestic demand and higher oil and
administered prices, disinflation continued at a slower
pace, reaching 8.6 percent in December 2005 and 8.4
percent in March this year. The current account deficit
has been roughly stable, measuring 8.5 percent of the GDP
in 2004 and 8.7 percent in 2005. In part, this reflects
booming consumption. It also reflects the pick-up in
foreign direct investments and Romania's high rate of
return to capital. European grants and FDI covered 90
percent of the current account, reflecting increased
confidence in Romania's prospects.

In view of Romania's low public debt, fiscal
sustainability is not a concern, say the IMF specialists.
However, prudent fiscal policy and a tight income policy
are needed to address excess demand pressure stemming from
continued large capital inflows.

***
http://www.ghanaweb.com/GhanaHomePage/economy/artikel.php?ID=3D104164

Ghana ?Freed? From IMF By October

AS =A241TR GAP IN FUNDING EXPOSES CONDITIONALITIES
CONSTRAINS

Information available to The Statesman indicates that
Ghana will be freed from the strict conditionalities
imposed by the International Monetary Fund through the
Structural Adjustment Programmes Ghana signed on to in the
1980s.

Thus, Ghana will no longer receive direct financial
support from the IMF. The good news is that the country
will now be free to go to the international money market
to fill in the deep craters in funding our nation?s
development.

The seriousness of the situation was highlighted by the
Finance Minister Thursday when he told the press that
Government needed =A280 trillion ($8.8 billion) to fund its
projects this year. But, in the end, the 2006 Budget could
only make provisions for =A239 trillion, leaving a much
bigger funding gap of =A241 trillion.

Kwadwo Baah-Wiredu said not even half of the sum total
needs and requests from the various Ministries could be
met by a government that seeks to accelerate growth and
attain middle income country status by 2015.

The breakdown of the figures are that =A226 trillion is
expected to be raised internally this year mainly from
taxes, with =A27 trillion being grants from Ghana?s
development partners and =A26 trillion as loans.

The Finance Minister, in an exclusive interview with The
Statesman, said some opportunities are beckoning to fill
up such a recurring funding gap (like the =A241 trillion).

Ghana?s IMF programme puts a serious check on the
country?s maneuverability in contracting credit beyond the
usual bilateral and multilateral arrangements. For
example, the Ghanaian government, until October, is unable
to enter a loan agreement not considered to be on
concessionary terms. Moreover, ability to contract
commercial loans is limited to $100 million.

The Minister has disclosed that the country will soon be
going to the capital market to raise self-amortising funds
for critical sectors like the railways, roads, and
housing.

He gave notice that government has no intention to allow
the country to fall back into the old irresponsible mode
of contracting credit without a repayment plan.

?When we borrow from the money market to construct toll
roads, for example, we can recover the money,? he said.

He added that another way of bridging the funding gap in
desired government expenditure is for government to
continue creating economic incentives to ?open up a lot of
economic activities.?

The June 5 consultative group meeting between government
officials and IMF staff will be putting the closing
touches to the country?s Poverty Reductions Strategy.
Ghana will then, after October, move into what is termed
as ?Policy Support Initiative?, which means the IMF
tentacles of conditionalities would be clawed back from
our shores.

?Even now government can borrow if it?s self-amortizing,?
said Yofi Grant of Databank. He gave the example of the
Cocoa Marketing Board which has been using projected
proceeds from cocoa exports to borrow from the
international market in recent years.

?For the railways, a similar thing can be done for the
company, even if state-owned, to go out there and borrow
on its own balance sheet. The sovereign will come to play
in pricing ? whether at a premium or a discount.?

Mr Grant predicts that Ghana is likely to attract an
annual interest rate of Libor plus 375 basis point (3.75
percent) up to about 450 basis on the international
market. A five-year Libor is approximately 5.5 percent.
?You look at your sovereign rating and other peer groups
and forecast how much it is likely to cost you to borrow
on the international market. Ghana?s B+ credit rating is
the same as Brazil.?

Considering the pressing financial needs of the country,
Mr Grant continued, ?My opinion is that I think we should
take the bold step and go to the open market. Our
sovereign bond can serve as a benchmark.?

In his view, ?the real important thing is discipline. We
need to be more disciplined in how we run our own economy.
It is critical we maintain that prudence.?

By the start of the twenty-first century, Africa was
poorer than during the 1960s, when the IMF and World Bank
arrived on the African scene. The Structural Adjustment
Programmes imposed on 36 African countries since 1980 have
been blamed for the socio-economic devastation that has
blighted the continent.

After 20 years of SAPs, 313 million Africans lived in
absolute poverty in 2001 (out of a total population of 682
million), a 63 percent increase over the 200 million
figure for 1994.

Life expectancy dropped by 15 percent since 1980, standing
at around 47 years today, the lowest in the world. Health
care spending in the 42 poorest African countries fell by
50 percent during the 1980s. As a result, health care
systems have collapsed across the continent creating near
catastrophic conditions. Between 1986 and 1996, per capita
education spending in Africa fell by 0.7 percent a year on
average. 40 percent of African children are out of school
and the adult literacy rate in Sub-Saharan Africa is 60
percent, well below the developing country average of 73
percent. More than 140 million young Africans are
illiterate.

But, as Ghana?s long-awaited u-turn shows, there is hope
for countries that stayed disciplined and remained true to
the social contract with the people. Debt relief has
played a major part. Beyond that, Ghana was among 20
developing countries that have now benefited under the
IMF?s own Multilateral Debt Relief Initiative, which came
into effect at the beginning of this year.

Ghana today has a flexible exchange rate regime, a sound
macroeconomic framework, and sustainable levels of public
sector debt. The challenge is to make the economy flexible
enough to maximise its growth potential in the face of
technological change and to respond to changing
competitive pressures, according to a leading
international economist.