10 Highlights of The Recent IMF Review
- Ghana government to run a surplus for 2016: Adding that government is projected to run a larger primary surplus than previously projected. This from a public finance perspective simply means that, tax revenues exceed government spending — if you ignore interest on outstanding debt.
- Government commended: IMF has praised Ghana for making substantial progress in pushing fiscal deficit and debt down.
- Fiscal deficit targets achieved: Team lead for the IMF team to Ghana Toujas – Joel Bernate in an interview said “we project this year, the fiscal deficit to be about 5% of GDP lower than two years ago. This is a major achievement that we don’t see in many countries in such a period of time’. Ghana has seen a reduction in the fiscal deficit from 12 percent in 2012 to about 5 percent currently.
- Expected release of funds: The approval of the review by the Fund is expected to lead to the release of 116 million dollars to Ghana.
- Need for complete enforcement of controls: A statement from the Fund said further efforts are needed to address revenue shortfalls, while expenditure control measures should be fully enforced to contain the wage bill and other current spending.
- Stable Cedi: Along with the stability of the cedi, should contribute to a marked decline in the debt-to-GDP ratio.
- Fiscal and monetary controls helping to stabilize exchange rates: Exchange rate in the past depreciated quite substantially. Over the last year it has been remarkably stable thanks to the tight fiscal policy but also tight monitory policy.
- Declined debt to GDP ratio: The total debt to GDP ratio has declined from 71.6 percent at the end of December 2015 to 65.9 percent at the end of July this year.
- Diminished external debt burden: External component of the debts decreased from 60.7 billion cedis to 60.6 billion cedis between the six month period,
- Increase in domestic component: The domestic component of the country’s debt increased from 40.4 to 49.2 billion cedis from January to June.
Key Program Focus Areas
- Addressing fiscal challenges: The ambitious fiscal consolidation for 2016 remains broadly on track, but revenues are under-performing and the deteriorated financial situation of some SOEs in the energy sector is posing fiscal risks. The authorities will cut spending to offset revenue shortfalls and have taken steps to address the financial situation of SOEs, including with new levies on petroleum products.
- Containing financing risks: Financing constraints have eased but domestic refinancing risks remain challenging in 2017. Ongoing fiscal consolidation and implementation of the medium-term debt management strategy, including liability management operations, will be key to continue to restore market confidence.
- Monetary policy framework: A tight monetary policy stance is needed to help bring inflation back to target. The amended Bank of Ghana Act introduces some additional safeguards and additional changes to the Act will be made in 2017 to strengthen further central bank governance and eliminate central bank financing for government.
- Financial sector stability: The BoG has developed a roadmap to address weaknesses in banking sector provisioning and capitalization and parliament adopted new banking laws to further strengthen BoG’s ability to safeguard financial stability. Some amendments to the laws will be introduced in early 2017 to clear up remaining ambiguities.
- Structural reform effort: Several important laws were adopted by Parliament to strengthen public finance management and the regulatory framework for the financial sector. The authorities are committed to strengthen overall structural reform efforts, including to enhance domestic revenue.
- Outlook remains bright but constrained: According to the IMF, the implementation of that program is broadly satisfactory, but the general outlook for the Ghanaian economy remains quite difficult. Especially when you consider the fact that, the Ghanaian economy is still largely, a commodity based economy, but general global prices for some Ghana’s biggest commodity export earners such as Gold, Oil, etc. remain depressed. This means that, government revenues will remain under pressure at least in the short and medium term.
- Commodity price shocks: Oil and Gold prices are finally beginning to show slight signs of recovery and that could potentially help give the Ghana government a much needed lift in the medium to long-term.
- Fiscal consolidation: The priority will be to meet the fiscal targets, and that will require maintaining strict control of spending, especially wage spending, in the run‑up to the elections. And there are big fiscal pressures.
- Perennial election year budgetary overruns: Avoiding any election season related spending overruns that have happened in the past, we should remain on track towards full recovery . This is all important for market confidence, which has improved, but there is still a range of financing constraints.