The International Monetary Fund (IMF) Board yesterday approved the disbursement of $116.6 million to Ghana.
A statement issued by the IMF said the approval followed the completion of the first review of Ghana’s economic performance under the programme supported by an Extended Credit Facility (ECF) arrangement “Completion of the review enables the disbursement of $116.6 million, bringing total disbursements under the arrangement to about $233.1 million,” it said.
The statement said in completing the review, the Executive Board granted waivers for the non-observance of performance criteria regarding gross credit to the government and non-accumulation of external arrears, based on their minor and temporary nature and the corrective measures put in place by the authorities.
Besides, it said, the board approved the authorities’ request for modifications of performance criteria.
Ghana’s three-year arrangement for about $918 million was approved on April 3, 2015. The arrangement aims at restoring debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.
Deputy Managing Director
The statement said following the Executive Board’s discussion on Ghana, the acting Chairman and Deputy Managing Director of the IMF, Mr Zhu, said: “Implementation of the ECF-supported programme by the Ghanaian authorities has been broadly satisfactory, despite an unfavourable economic environment.”
In particular, he said, “the government’s fiscal consolidation efforts are on track and it is encouraging that the government decided to liberalise the prices of fuel products, which bodes well for expenditure control, eliminating the need for fuel subsidies and the incurrence of arrears”.
Mr. Zhu asked the government to firmly continue with its fiscal consolidation efforts to fully restore macroeconomic stability and mitigate financing risk.
In that regard, he said it was crucial to continue the policy of controlling the wage bill by adhering to the net hiring freeze, excluding health care and education, while further implementing the payroll clean-up plan.
“The government should continue to adhere to the domestic arrears clearance plan and avoid incurring any new arrears. Implementing structural reforms to strengthen expenditure control will support these efforts. At the same time, the government should use the resulting fiscal space to enhance its social protection programmes to mitigate the potential impact of the fiscal consolidation on the poor,” he said.
Mr. Zhu said to avoid the risk of fiscal overruns in connection with next year’s elections, it was imperative to identify the full cost related to the elections as early as possible and provision made for it in the 2016 budget, while ensuring that the fiscal targets would be achieved.
He said it was important that the ongoing wage negotiations resulted in a wage agreement consistent with the medium-term wage bill envelope and indicated that further enhancing revenue performance would also be key for continued fiscal consolidation.
He said the government’s medium-term debt management strategy was a welcome step to help reduce near-term financing risks.
He said externally oriented financing envisaged in 2015 would help reduce the pressure on the domestic debt market.
However, he said, the government should complement that strategy by striving to deepen the domestic debt market, as well as seeking to borrow externally on concessional terms as much as possible.
“The monetary policy stance will have to remain tight to help bring inflation down, against the background of exchange rate volatility. The Bank of Ghana (BoG) should stand ready to tighten monetary policy further if inflationary pressures do not recede as expected.
“The decision to introduce new liquidity management instruments is encouraging, as it will improve monetary policy transmission and make the inflation targeting framework more effective. Moreover, prompt implementation of two new banking laws currently under review by Parliament will help safeguard financial sector stability,” Mr Zhu added.
Finance Minister reacts
Reacting to the statement by the IMF, the Minister of Finance, Mr. Seth Terkper said in an interview that, while the disbursement of the second tranche of the IMF package was indicative of the success story being chalked up, it ought not be the reason for complacency
He said it was gratifying that the IMF programme with Ghana was on course, adding that the release of the money at a time when there was economic volatility was welcome news.
Mr. Terkper said the gains made would be jealously guarded towards ensuring that practices in the past, that tended to derail progress were not repeated.