IMF Commends Ghana

The International Monetary Fund (IMF) has indicated that even though Ghana’s growth prospects remain strong, supported by robust oil and cocoa production, it has been affected by the volatile environment for emerging and frontiers markets which has exerted pressure on the currency, hence the recent depreciation of the cedi.

An IMF Team, led by Annalisa Fedelino, which visited Accra from 17-27 September, 2018, to conduct the seventh review of Ghana’s economic programme supported by the Extended Credit Facility (ECF), said inflation has remained in single-digits.

Citing S&P upgrading of Ghana’s ratings from B- to B with a stable outlook in September 2018, the team commended government for continuing to intensify efforts to address financial sector vulnerabilities, with the recent purchase and assumption of five banks.

“Programme performance has been affected by external and domestic factors. Available fiscal data through end-July point to much expenditure front-loading on goods and services and lower-than-programmed revenue, especially VAT and import duty. On this basis, achieving end-December fiscal targets hinges on strengthening both expenditure discipline and tax compliance, beyond measures adopted in the mid-year budget review. The authorities remain strongly committed to the programme targets.

“The 2019 Budget would need to address persistent revenue shortfalls and start tackling decisively the issue of exemptions. Continued progress on fiscal structural reforms, particularly on public financial management and oversight over state-owned enterprises, is instrumental to anchor expenditure control and lasting fiscal discipline. Access to new financing arrangements and longer-term debt instruments would help fund Ghana’s pressing development and infrastructure needs; such arrangements would need to be implemented transparently, deliver value for money and be consistent with debt sustainability considerations.”

The team welcomed the continued prudence on the monetary policy easing cycle, adding that inflation was expected to remain within the target bands until the end of the year.

It added that the recent exchange rate pressures reinforce the call for fiscal discipline.

Going forward, improved communication and coordination would help foster deeper and more liquid FX Market.

“Recent bank resolutions underscore the authorities’ commitment to financial stability and will help improve medium-term prospects for economic growth. While costly for Ghanaians taxpayers, they are nonetheless necessary to address long-standing weaknesses and create a resilient financial system, improved access to credit and financial inclusion. The overall financial system is adequately capitalized, but weaknesses in some institutions, including high levels of non-performing loans, can adversely impact financial stability, hamper credit growth and investment, and create contingent liabilities for the government. The Bank of Ghana (BoG) is introducing reform measures to address remaining financial sector weaknesses with the view of improving the availability and affordability of credit to the private sector.

The IMF Team met Vice President Dr Mahamudu Bawumia; Finance Minister Ken Ofori-Atta; Deputy Ministers Charles Adu Boahen; Kwaku Kwarteng and Abena Osei Asare; Dr Ernest Addison Governor of the BoG and his two deputies, among others.

The discussions are expected to continue in Washington DC, particularly on the impact of the rebased GDP and on the 2019 Budget and reforms.