Tao Zhang, Acting Chair and Deputy Managing Director, IMF
The International Monetary Fund (IMF) has warned of difficult economic outlook for Ghana despite what it described as broadly satisfactory implementation of the Extended Credit Facility (ECF) programme.
“There has been progress in stabilizing the macroeconomic situation and reducing financial imbalances, but fiscal risks remain elevated,” a statement from the Fund released on Thursday said.
The Executive Board of the Fund completed the third review of Ghana’s economic performance under the ECF programme on Wednesday.
The completion of the review thus enables the disbursement of SDR 83.025 million (about US$116.2 million), bringing total disbursements to Ghana under the arrangement to SDR 332.1 million (about US$464.6 million).
“During the review, adjustments were made to the programme to ensure that it remains on track and to enhance its prospects of success. In this context, the Executive Board also granted waivers, including for minor deviations in a few programme targets,” it said.
According to Tao Zhang, Acting Chair and Deputy Managing Director, further efforts were needed to address revenue shortfalls, while expenditure control measures should be fully enforced to contain the wage bill and other current spending.
Caution
It said the authorities would need to remain cautious in accessing external market financing with due consideration to costs and debt sustainability.
“To ensure that the gains from fiscal consolidation are sustained over the medium term, the government needs to continue its efforts to effectively implement a wide range of ambitious reforms. These include measures to broaden the tax base and enhance tax compliance, strengthen control of the wage bill, and enhance public financial management (PFM). In this regard, the recently adopted PFM legislation is an improvement over previous laws. Steps taken to address SOEs financial problems are welcome, but more work is needed to reduce risks to the economy, the financial sector, and the government budget from their underperformance.
Tight monetary stance
It advised the Bank of Ghana (BoG) to maintain a tight monetary policy stance to bring inflation back to target.
“Recent amendments to the BoG Act have introduced some improvements to central bank governance, but continued scope for central bank financing of the government and government influence on Central Bank operations remain significant shortcomings. The authorities’ commitment to maintaining zero BoG financing of the government under the programme and to introducing additional amendments to the BoG Act in 2017 are welcome.”
It stated that although the adoption of the two new banking sector laws strengthens the authorities’ toolkit, the new legislation warrants further improvements to enable the authorities to effectively safeguard financial stability.”
Ghana’s three-year arrangement for SDR 664.20 million (about US$918 million or 180 percent of quota at the time of approval of the arrangement) was approved on April 3, 2015.
By Samuel Boadi