The International Monetary Fund has approved US $94.2 million disbursement and program extension under the Extended Credit Facility (ECF) following the completion of the fourth ECF review by its executive board. The board also approved Ghana’s request for waivers of non-observance of performance criteria, and modification of one performance criterion; and the extension of the arrangement by one year.
In a statement available to this paper from the Communications Department of the IMF, it noted that completion of the fourth ECF review enables the disbursement of SDR 66.42 million (about US$94.2 million), bringing total disbursements under the arrangement to SDR 398.52 million (about US$565.2 million), with the remainder being tied to the remaining reviews.
“Ghana’s three-year arrangement for SDR 664.20 million (about US$918 million or 180 percent of quota at the time of approval of the arrangement) was approved on April 3, 2015. It aims to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending,”.
The Deputy Managing Director and Acting Chair for the Executive Board, Mr. Tao Zhang, noted that Ghana’s macroeconomic performance over the years has been mixed.
He said policy slippages have compounded the adverse impact of shocks and resulted in significant external and domestic imbalances and acknowledges government commitment to macroeconomic stability, fiscal discipline, and an ambitious reform agenda. “Decisive implementation of these policies and reforms would allow Ghana to reap its economic potential and achieve higher and more inclusive growth rates. These efforts will be supported by the continued implementation of the ECF program,”
“The authorities have taken some encouraging steps and the economy is showing signs of recovery. As risks remain tilted to the downside, careful fiscal management will be required to achieve the 2017 program targets and reverse the unfavorable debt dynamics. Additional efforts are needed to address revenue shortfalls, while expenditure control measures should be fully enforced to contain current spending, and prevent the recurrence of domestic arrears. Ongoing fiscal consolidation and implementation of the medium-term debt management strategy will be key to further reducing domestic refinancing risks,” the statement said.
Ghana has shown mixed macroeconomic performance in recent years, with significant shocks being amplified by policy slippages and resulting external and domestic imbalances. Growth in 2016 was 3.5 percent, the lowest level in two decades. A recovery of growth is expected in 2017-18, owing to an increase in oil production, declining inflation, and lower imbalances with the right policy implementation.
Following a sizeable fiscal slippage in 2016, the authorities are targeting a significant fiscal consolidation in 2017, which will require sustained revenue collections and spending controls. Inflation has continued to decline and the exchange rate has been broadly stable. The external position has continued to improve, supported by strong foreign investors’ participation in the domestic debt market.
Over the medium term, both the fiscal deficit and the current account deficit are projected to decline gradually.
The Directors further noted that Ghana faces long‑standing challenges, including exposure to external shocks, budget rigidities, and economic inefficiencies, which have amplified the impact of past policy slippages on domestic and external imbalances.
They emphasized that strong implementation of program policies and reforms is critical to address the risks and secure macroeconomic stability. Directors also cautioned about program implementation risks given the revenue underperformance that occurred in the first half of the year, and urged the authorities to expeditiously adopt corrective measures, as needed, to preserve the program targets.
It then welcomed the deceleration in inflation and encouraged the Bank of Ghana (BoG) to remain vigilant and take action to bring it back to target. They also called for measures to further strengthen the credibility of the inflation targeting framework, which would benefit from efforts in the development of the foreign exchange market and continuation of BoG’s policy on zero financing of the government.