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Wednesday, February 17, 2010

IMF boss defends 'no subsidies' stance

Mr John Lipsky is the Managing Director of the International Monetary Fund (IMF)
Mr John Lipsky is the Managing Director of the International Monetary Fund (IMF)

The Deputy Managing Director of the International Monetary Fund (IMF) has defended the institution’s position against government subsidies.

Mr John Lipsky, who was speaking on the Super Morning Show on Wednesday, said subsidies tend to benefit the rich to the detriment of the poor.

“Is it a good idea for Ghana to take tax money and instead of using it to spend on health, to spend on education, it should be spent on subsidies for people who are well-to-do? I don’t think that is generally a good idea.

“For example let’s take the electricity sector. There is a lifeline programme that... is designed to produce low tariffs for small consumers, yet the sector operates at a large loss and so spending tax money that could go to health, could go to education, could go to training, could go to some important useful programme is instead being used to provide subsidies – not to small users but to big users. That can’t make sense.

“You starve the economy of the efficient investment that it needs and starve the government of the resource that could be put to use for the good of the people. All in this funny idea of ‘we are the subsidised’... We need to watch that kind of rhetoric and look at the reality behind it,” he said.

Mr Lipsky’s comments come amidst criticisms that the IMF often kicks against government subsidies for electricity supply and other utilities.

But according to him, the large businesses which end up benefiting from such subsidies must rather be made to contribute meaningfully to the development of the economy.

“Shouldn’t they be contributing to the wellbeing of the country and not the other way round?” he asked.

Mr Lipsky, who is on a tour of some African countries, said state enterprises must enter into productive investments.

“The state enterprises have to produce important investments and when they operate at large losses it’s usually difficult for them to make those investments,” he indicated.

Mr Lipsky played down criticism that the IMF puts pressure on Ghana to take up its policies; he said the fund operates on a “cooperative relation” with it’s members.

“The IMF has no powers to compel its members to do anything. We also operate in a cooperative way,” he said.

He said the agency was set up to foster international cooperation and integration.

“And one of the important issues in our success in fostering economic progress is to make sure that our members feel that they have a fair stake in the institution and a fair say in its governance,” Mr Lipsy said.

The IMF plans on adjusting regional quotas on its board to given emerging economies, including those in sub-Saharan Africa, to ensure that their voice is not drowned by the big economies. This starts in January 2011, the IMF boss said.

Listen to excerpts of the interview on the Super Morning Show

Story by Fiifi Koomson/Myjoyonline.com/Ghana

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