IMF Approves $94 Million For Ghana

The International Monetary Fund (IMF) has approved the immediate disbursement of US$94.3 million to Ghana for its development initiatives. The fund has also approved a waiver for the non-observance of the December ending 2010 performance criteria on the overall fiscal deficit and the net change in the stock of domestic arrears. In a release issued by the IMF Executive Board, the Deputy Managing Director and acting-Chair of the fund, Mr. Naoyuki Shinohara, said the decision was reached after the board completed reviews of Ghana’s performance under the economic programme supported by the Extended Credit Facility (ECF). “Ghana’s economy rebounded in 2010, with strong growth and external performance. International reserves increased, the currency remained broadly stable and inflation declined to single digits,” he said. Mr. Shinohara observed that fiscal performance, however, deteriorated with a rise in the cash deficit and accumulation of domestic arrears of the country. “The authorities’ 2011 economic programme focuses appropriately on restoring the momentum of fiscal consolidation. The budget target for this year is ambitious and will require that a portion of Ghana’s initial oil production revenues be saved,” he added. He said contingencies identified by the authorities would be important to ensure that the 2011 fiscal goals could be achieved. He called for structural fiscal reforms to be accelerated. Mr. Shinohara called for the reinforcement of tax administration under the revamped Ghana Revenue Authority (GRA), strengthening of expenditure, monitoring and control, including through a new budget management system, and regularising Ghana’s domestic payments arrears. He urged the country to adopt transparent procedures for oil revenue management as stipulated in the Petroleum Management Act. “The adoption of quarterly electricity tariff reviews is an important step towards addressing risks to the budget from energy pricing. For domestic petroleum products, it will be important to avoid losses to the budget when protection provided by hedging ends,” he stated. “Ghana faces inflation risks from rising global commodity prices, robust domestic growth and rapid liquidity expansion,” he noted, and called on the Bank of Ghana to tighten monetary conditions as needed. He stressed the need for a further build-up in reserve cover, adding that it would be appropriate within a flexible exchange rate regime. He called for steps to be taken to address immediate vulnerabilities in the banking system and review the appropriate extent of state involvement in the banking industry. Mr. Shinohara stressed the need for the strengthening of risk management by banks, the enhancement of their supervisory capacity, enforcement of prudential regulations, as well as the strengthening of corporate governance, accounting standards and creditor rights.