Business & Economy

Ghana reforms get IMF thumbs-up

The IMF commended the authorities for successful implementation of reforms, which underlines that progress is being made in restoring economic stability.
The IMF published its initial findings following its first review of the financial and economic programme supported by a $918 millionn Extended Credit Facility (ECF) that was approved in early April 2015.
‘The program is on track, with all performance criteria met except for the ceiling on central bank financing to the government which was technically missed by a small margin. The mission welcomes the commitment reiterated by the authorities 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 team notes, however, that more needs to be done to further enhance tax administration and eliminate tax exemptions to improve the revenue performance over the medium term,’ the IMF said in a statement.
Fiscal consolidation is on track, the public sector wage bill has been contained, revenue performance was good, and no new arrears were accumulated (and past arrears were repaid).
Helpfully, revenue above budget projections will help cover additional spending related to the recent flooding and larger arrears clearance.
Now that the first 3-month review has been completed successfully, focus now turns to implementation of the programme in the months ahead and the policies that will continue to be needed to restore debt and macroeconomic stability, and a return to high growth and job creation.
Specifically, major efforts are still required to reform the following issues:
Public sector payroll irregularities, public financial management weaknesses, opacity in the financing of the oil distribution sector, tax administration enhancements, and elimination of tax exemptions.
As the Bank of Ghana has improved the effectiveness of its monetary policy framework and in moving the policy rate towards interbank market rates (raised 100bp to 22 percent in May), essential, preliminary work has been made in helping to stabilise the Ghana cedi and slow inflation.
With the progress that has been made so far, albeit at an early stage of the reform process, analysts believe the cedi will end the year around 4.75 to the dollar. Donor support has started to be disbursed, the annual syndicated loan for financing the next cocoa crop is being concluded, a new Eurobond is planned, and the gradual switch to gas in the production of electricity (reducing reliance on oil product imports) should all help reduce foreign exchange pressures, helping the Bank of Ghana (BoG) boost reserves.

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