The International Monetary Fund (IMF) has disclosed that Ghana’s economy is still facing challenges.
A team from the Fund, led by Joël Toujas-Bernaté, visited Accra from February 6-10, 2017, to take stock of the 2016 economic developments and the outlook for 2017.
It also engaged in a dialogue about the new government’s economic plans, and also discussed prospects for programme engagement with the IMF.
The team found out that Ghana’s overall fiscal deficit (on a cash basis) deteriorated to an estimated 9 percent of GDP, instead of declining to 5¼ percent of GDP as envisaged under the IMF-supported programme.
It said the large deviation was mainly due to poor oil and non-oil revenue performance and large expenditure overruns, adding that the government’s debt-to-GDP ratio increased further to about 74 percent of GDP at end-2016 as a result.
“Ghana’s economy continues to face challenges. While the estimated economic growth of 3.6 percent in 2016 exceeded our target of 3.3 percent, the decline in inflation has been slower than expected. The current account deficit narrowed to 6.5 percent of GDP, contributing to a small buildup of foreign exchange reserves.
New administration’s position
It said the new government has expressed its intention to continue with the current programme with the IMF.
“Officials outlined bold policies to restore fiscal discipline and debt sustainability and also to support growth and private sector development. The large fiscal slippages observed last year will, indeed, require strong efforts of fiscal consolidation to support debt sustainability. The new government’s intentions to reduce tax exemptions, improve tax compliance and review the widespread earmarking of revenues should help in this regard.
“Significant public spending commitments that bypassed public finance management (PFM) systems were reported. We welcome the new government’s intention to conduct a full audit of outstanding obligations, its commitment to transparency and its readiness to take strong remedial actions to ensure the integrity of the PFM systems going forward.”
SOEs financial imbalances
The team said that the large financial imbalances of state-owned enterprises in the energy sector also need to be addressed with urgency to avoid the buildup of contingent liabilities for the new government.
“We welcome the new government’s commitments to encourage its departments and agencies to implement growth-enhancing reforms in a fiscally sustainable manner.”
Tight monetary policy
“Bank of Ghana’s (BoG) monetary policy has been instrumental in mitigating inflationary pressures in 2016. Adequately tight monetary policy will again be important for containing possible further pressures in 2017. We welcome BoG’s continued roll-out of the Roadmap for the banking sector and look forward to actions that can strengthen banks’ balance sheets and contribute to a gradual reduction of the level of non-performing loans.
“We look forward to working closely with the new government in its efforts to design the required policies for restoring macroeconomic stability, high and sustainable growth and job creation.”
Meanwhile, a Senior Lecturer at the Economics Department of University of Ghana, Dr Eric Osei Assibey, has cautioned government to tread cautiously in renegotiating the programme, saying that “could affect donor confidence, if we do not tread cautiously.”
Ghana has so far received 464.4 million under the programme to help put the country’s economy back on track.
With this review, the IMF Board is expected to approve the next tranche of support.
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