IMF Backs Ghana’s Growth Policies, Macroeconomic Stability
By Dipo Olowookere
The International Monetary Fund (IMF) has promised to work “closely with the new government” of Ghana “in their efforts to design the required policies for restoring macroeconomic stability, high and sustainable growth and job creation.”
This assurance was given after a team from the world financial institution led by Mr Joël Toujas-Bernaté, visited Accra from February 6-10, 2017 to take stock of the 2016 economic developments and the outlook for 2017.
During the visit, the team engaged in a dialogue about the new government’s economic plans, and discuss prospects for program engagement with the IMF.
The IMF team met with the country’s Vice President Dr Mahamudu Bawumia; Senior Minister, Yaw Osafo-Maafo; Finance Minister, Kenneth Ofori-Atta; Minister of Food and Agriculture, Dr Owusu Afriyie Akoto; Bank of Ghana Governor, Dr Abdul-Nashiru Issahaku; other senior officials; and Ghana’s development partners.
In his assessment, Mr Toujas-Bernaté said “Ghana’s economy continues to face challenges. While the estimated economic growth of 3.6% in 2016 exceeded our target of 3.3%, the decline in inflation has been slower than expected. The current account deficit narrowed to 6 ½ percent of GDP, contributing to a small build-up of foreign exchange reserves.”
According to him, “In 2016, the 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 program.
“The large deviation was mainly due to poor oil and non-oil revenue performance and large expenditure overruns. As a result, the government debt-to GDP ratio increased further to close to 74 percent of GDP at end-2016.
“The new government has expressed its intent to continue with the current program 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.”
He said further that, “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.
“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.
“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 the actions that can strengthen banks’ balance sheets and contribute to a gradual reduction of the level of nonperforming loans.