The Executive Board of the International Monetary Fund (IMF) on August 30th 2017 completed the fourth review of the arrangement under the Extended Credit Facility (ECF) for Ghana and enables the disbursement of US$94.2 million.
- Completion of the fourth ECF review enables the disbursement of SDR 66.42 million (about US$ 94.2 million).
The program 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 Executive Board also completed the 2017 Article IV Consultation with Ghana. A related press release will be issued separately.
Completion of the fourth ECF review enables the disbursement of US$94.2 million, bringing total disbursements under the arrangement to US$565.2 million, with the remainder being tied to the remaining reviews. 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.
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 (see Press Release No.15/159). 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.
Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:
Ghana’s macroeconomic performance over the years has been mixed. Policy slippages have compounded the adverse impact of shocks and resulted in significant external and domestic imbalances. The new government has committed 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.
“Fiscal consolidation efforts will need to be anchored in wide-ranging structural fiscal reforms, so that consolidation gains can be sustained over the medium term. These include measures to broaden the tax base, and enhance tax compliance and public financial management, especially considering the large unpaid commitments accumulated in 2016.
“The authorities should tackle energy sector inefficiencies, particularly improving the management of the state-owned enterprises (SOEs). Ongoing debt restructuring efforts are helpful but are no substitute to stemming the SOEs’ ongoing financial losses and put them on a sustainable financial path.
“As inflation continues to decelerate, the Bank of Ghana (BoG) should remain vigilant in order to bring inflation back to target. The BoG should continue to strengthen the credibility of the inflation-targeting framework, which would benefit from efforts in the development of the foreign exchange market. The central bank should also continue its policy on zero financing of the government.
“The authorities have made significant progress in the implementation of the banking system roadmap, in particular through the approval of timebound recapitalization plans for banks found to be undercapitalized, and the resolution of two insolvent banks. Further steps to strengthen the supervisory and regulatory framework, reduce outstanding liquidity assistance, and buttress the microfinance sector will help build a more robust financial sector that is well positioned to support growth and promote financial inclusion.”
The Executive Board also completed the 2017 Article IV Consultation  with Ghana.
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.