Ghana on track with IMF programme

A mission from the International Monetary Fund (IMF) Tuesday said the fund’s extended credit facility (ECF) programme for Ghana to stabilise its economy was on track.

It said it had carried out a review of the government’s fiscal expenditure, which it described as balanced, and urged the government to show more commitment to sustain the progress.

It, however, said the ceiling on the central bank’s financing to the government was missed by a small margin.

“The mission welcomes the commitment by the government and the Bank of Ghana (BoG) to all the performance criteria for the fund’s programme, such as the commitment to the ambitious fiscal consolidation and structural reforms programme, in particular in addressing payroll irregularities, enhancing public finance management and transparency and liberalising the oil distribution sector,” the mission said.

At a press conference in Accra yesterday, the head of the IMF team, Mr Joel Toujas-Bernate, said more needed to be done to further enhance tax administration and eliminate tax exemptions to improve the revenue performance over the medium term.

“Inflation is higher than expected, on the back of a larger-than-projected depreciation of the cedi and rising oil prices, and I hope the Bank of Ghana will use its monetary clout to reduce inflation to eight per cent.

“The ability to bring inflation down towards its medium-term target will also contribute to stabilising the cedi,” he stated.

Second tranche

The IMF team is on a 14-day tour of the country to conduct discussions on the first review of Ghana’s financial and economic programme supported by the fund’s ECF.

The mission is to present its review to the IMF Headquarters in Washington, DC, for the Executive Board to tentatively review Ghana’s performance in August.

Based on what assessment will be made in Washington, DC, Ghana stands to receive the second tranche of about $100 million from the fund in August 2015.

Address energy crisis

Mr Toujas-Bernate said economic growth in 2015 was expected to remain broadly as expected around 3.5 per cent, with low cocoa and gold production but increasing hydrocarbon production.

He said electricity production was weighing negatively on economic activities and lauded the government’s efforts to address electricity shortages, particularly by bringing on board new private financed power plants in the coming months.

That, he said, would be critical to support a rebound in growth next year.

According to him, fiscal consolidation was on track as of the end of April, even excluding the payment of dividend by the BoG, which amounted to 0.4 per cent of GDP in March this year.

“With higher projected oil revenues, the overall cash deficit is expected to be slightly lower than programmed for the year as a whole,” Mr Toujas-Bernate said.

He stated that additional revenue above the budget projections would help cover additional spending related to the recent flooding and larger arrears clearance, as additional arrears as of the end of 2014 were identified in audits of claims from oil importers and reviews of cross debts among utility companies.

Moderate spending

The leader of the mission said the success of the programme critically hinged on continued spending in moderation, in particular the wage bill, with stricter control of the payroll being put in place and renewed efforts to improve revenue collection.

He stated that making public the strategy for the 2016 budget and wage negotiation consistent with the framework would go a long way in restoring market confidence and lowering financing costs.

“The Bank of Ghana has taken significant steps to improve the effectiveness of its monetary policy framework and in moving the policy rate towards the interbank market rates.

“Budget support from development partners — which has started to be disbursed, the financing of the next cocoa crop, the new Eurobond and the gradual switch to gas in the production of electricity should also reduce pressures on the foreign exchange market and allow the central bank to rebuild its external reserves to a higher level than programmed by year-end,” Mr Toujas-Bernate added.

‘We’ll sustain performance’

When reached for his comment, an obviously elated Minister of Finance, Mr Seth Tekper, said what the IMF was saying was just a continuation of the consolidation that Ghana had engaged in over the past two years put in the 2015 budget as part of the negotiation with the fund.

“The important thing is to sustain the performance going forward as agreed with the fund. The ownership and commitment of the reforms underlying the programme are still strong. What we are seeing is a consolidation that will roll into the growth phase of the economy which also coincides with the gas era,” Mr Tekper said.