Accra, Feb. 26, GNA – Government has agreed a three-year programme with the International Monetary Fund (IMF) worth $940 million dollars aimed at overcoming the country’s economic challenges, supporting stronger economic growth and lower inflation.
The deal follows months of negotiations after government announced in August last year that it would seek assistance from the IMF.
The agreement will now go before the IMF board for final approval in April.
Mr. Joel Toujas-BernatÃ©, Division Chief African Department IMF told a press conference that the main priority of the programme is to restore debt sustainability through a sustained fiscal consolidation, and to support growth with adequate capital spending and a reduction in financing costs.
The programme rests on three pillars – restraining and prioritizing public expenditure with a transparent budget process; increasing tax collection; and strengthening the effectiveness of the central bank monetary policy.
‘The programme explicitly accommodates for the expansion and the safeguard of priority spending, in particular social protection programmes such as the Livelihood Empowerment Against Poverty (LEAP),’ Mr Toujas-Bernate said.
He said total GDP growth is expected to decline further in 2015 to 3.5 per cent on the back of a severe energy crisis and fiscal consolidation.
‘Growth is expected to rebound over the medium term on account of an improved macroeconomic environment and cost effective solutions to address the energy crisis, he said.
Inflation should decelerate substantially, while the stronger fiscal consolidation will stabilize the debt ratio to GDP.
The external current account deficit is projected to decline to 7 per cent of GDP in 2015, which, together with increased donor support, should contribute to start rebuilding reserves.
The IMF mission, he said, welcomed government efforts to enhance fiscal discipline, including the safeguards put in place to ensure that ministries’ spending commitments remain within the new ceilings.
Mr Toujas-Bernate said the government’s ambitious reform agenda will support fiscal discipline and economic growth over the medium term.
He said swift implementation of measures in the 2015 budget, especially the elimination of distortive and inefficient energy subsidies, the new tax on petroleum products, and stronger containment of the wage bill should contribute to a significant reduction in the fiscal deficit over the medium term.
Fiscal deficit is projected to decline from 9.5 per cent of GDP in 2014 to 7.5 per cent in 2015 and about 3.5 per cent in 2017, including the repayments of all arrears outstanding at end-2014.
Mr Seth Tekper, the Finance Minister, said the balance of payment support would help in stabilizing the economy. GNA
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