Min Zhu, Deputy MD, IMF
The Executive Board of the International Monetary Fund (IMF) on Wednesday completed the second review of Ghana’s economic performance under the programme supported by an Extended Credit Facility (ECF), a lending arrangement that provides sustained programme engagement over the medium to long term in case of protracted balance of payments problems.
The completion entitles Ghana to receive SDR 83.025 million (about US$114.6 million), bringing total disbursements under the arrangement to SDR 249.075 million (about US$343.7 million).
Ghana’s three-year arrangement for SDR 664.20 million (about US$918 million or 180 percent of quota) was approved on April 3, 2015.
It aims at restoring debt sustainability and macro-economic stability in the country to foster a return to high growth and job creation, while protecting social spending.
The Executive Board also approved new programme targets for 2016.
However, Min Zhu, Acting Chair and Deputy Managing Director of IMF, commenting on Ghana’s performance, said even though the Fund was broadly satisfied by the implementation of the ECF-supported programme by Ghanaian authorities, “the economic outlook remains difficult with risks tilted to the downside.”
“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. It is also important to continue to adhere to the domestic arrears clearance plan and avoid incurring new domestic or external arrears. The authorities’ commitment to implement corrective measures if fiscal risks materialize is welcome,” he stated.
Further, he said to ensure that gains from fiscal consolidation will be sustained over the medium term, effective implementation of a wide range of ambitious reforms was needed.
These included measures to broaden the tax base and enhance tax compliance, strengthening control of the wage bill and enhancing 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 IMF Deputy MD advised Ghanaian authorities to complement their strategy by stepping up work to deepen the domestic debt market.
Additionally, he said to help bring inflation down towards its medium-term target, 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.”
By Samuel Boadi