Ken Ofori Atta
The International Monetary Fund (IMF) has warned that Ghana faces long?standing challenges, including exposure to external shocks, budget rigidities and economic inefficiencies which have amplified the impact of past policy slippages on domestic and external imbalances.
The Fund alerted the authorities in its latest review of its Extended Credit Facility (ECF) deal with Ghana, which both parties have agreed to extend by a year.
Though the IMF commended the corrective actions taken by the government to bring the programme back on track following the large fiscal slippages in 2016, it emphasized that strong implementation of programme policies and reforms are critical to address the risks and secure macroeconomic stability.
The directors also cautioned about programme implementation risks, given the revenue underperformance that occurred in the first half of the year and urged the authorities to expeditiously adopt corrective measures to preserve the programme targets.
Fiscal prudence
The IMF emphasized the need for prudent fiscal adjustment and welcomed the targeted efforts being made to reverse the debt dynamics and reduce financing needs.
It also underscored that efforts were needed to address revenue shortfalls, while enforcing expenditure control measures to contain current spending and prevent the recurrence of domestic arrears accumulation.
It said that credible fiscal consolidation and implementation of the medium term debt management strategy should be key to further reducing domestic refinancing risks.
Furthermore, it welcomed the wide-ranging reforms in revenue administration and public financial management, noting that these would be essential to make consolidation gains sustainable over the medium term and create fiscal space for priority spending programmes.
“Addressing the shortcomings in spending controls will be essential to deliver lasting adjustment and anchor the credibility of government’s budget policies.”
Energy sector flaws
The institution stressed the need to tackle energy sector inefficiencies, particularly improving the management of the State?Owned Enterprises (SOEs).
It said that ongoing debt restructuring efforts were helpful but not substitute to stemming the SOEs’ financial losses.
Inflation
It welcomed the deceleration in inflation and encouraged the Bank of Ghana (BoG) to remain vigilant and take action to bring it back on target.
It also called for measures to further strengthen the credibility of the inflation targeting framework which would benefit from efforts in the development of the foreign exchange market and continuation of BoG’s policy on zero financing of the government.
Banking
It commended the progress made in the strengthening the banking system, in particular through the approval of time-bound recapitalization plans for undercapitalized banks and the recent resolution of two insolvent banks.
It moreover called for further steps to strengthen the supervisory and regulatory framework to address liquidity risks and rising levels of Non-Performing Loans (NPLs).
By Samuel Boadi