The International Monetary Fund (IMF) has announced it is broadly satisfied with the bailout programme with Ghana but said “the economic outlook remains difficult with risks tilted to the downside.”
This was after the Executive Board of IMF completed the second review of Ghana’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement.
The completion of the review will now allow the disbursement of another US$114.6 million, bringing total disbursements under the arrangement to about US$343.7 million.
The IMF was encouraged that the government’s fiscal consolidation efforts are on track and that electricity production capacity is being gradually increased. It however warned government to “resolutely continue their fiscal consolidation efforts. With government debt continuing to increase and financing remaining a challenge, the 2016 budget rightly aims at a stronger consolidation than originally envisaged.
In this regard, it is essential that the government sticks firmly to its policy of strict expenditure controls, by maintaining the wage bill within the budget limits, while controlling discretionary spending and protecting priority spending.”
The Minister of Finance, Seth Terkper in the 2016 budget statement, told Parliament that based on the revenue and expenditure estimates, there will be an overall budget deficit of GH¢8,47 million, equivalent to 5.3 percent of GDP.
The IMF also advised that to ensure that gains from fiscal consolidation will be sustained over the medium term, effective implementation of a wide range of ambitious reforms is needed.
These include measures to broaden the tax base and enhance tax compliance, strengthen control of the wage bill, and enhance public financial management.
The difficult financial situation of several state- owned enterprises in the utilities sector also calls for strong actions to avoid additional pressures on the budget. The Ghana Statistical Service on Wednesday, announced that inflation had hit 17.7% as at the end of December 2015.
The IMF suggested that to help bring inflation down towards its medium-term target, the Bank of Ghana (BoG) should stand ready to further tighten monetary policy if inflationary pressures do not recede as expected.
The preparation of an amended Bank of Ghana Act and BoG’s commitment to gradually deepen the foreign exchange market will help make the inflation targeting framework more effective.
“Financial sector stability will need to be monitored closely in a context of deteriorating asset quality. The BoG should take immediate steps to increase resilience and address weaknesses in asset classification.
Prompt implementation of the new banking laws currently under review by Parliament is also essential to safeguard financial sector stability,” the IMF said.