## _cr15103

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### Executive summary and context
- Large fiscal and external imbalances in recent years led to a slowdown in growth and put Ghana’s medium-term prospects at risk.
- Government consolidation efforts since mid-2013 were undermined by policy slippages, external shocks, and rising interest cost.
- Net international reserves weakened and the exchange rate depreciated sharply until mid-2014; situation stabilized after a US$1 billion Eurobond issued in September 2014 and a short-term loan contracted by the Cocoa Board, but public debt continued to rise at an unsustainable pace.
- Growth decelerated in 2014 to an estimated 4.2 percent, driven by a sharp contraction in industry and services and increasing power outages.
- Wage bill pressures linked to the Single Spine (SS) pay structure and arrears from delays in moving staff to the SS.

### Key macro-fiscal indicators and projections (as presented)
- Total revenue: 16.5 (Pre-oil 2007-10 average) ; 19.3 (Oil 2011-14 average) ; 20.4 (2015 Prog.) ; 21.2 (2016 Prog.) ; 22.4 (2017 Prog.)
- Oil revenues: 0.0 (Pre-oil) ; 1.9 (Oil) ; 1.0 (2015 Prog.) ; 1.6 (2016 Prog.) ; 2.5 (2017 Prog.)
- Non-oil tax revenues: 11.6 (Pre-oil) ; 13.6 (Oil) ; 14.8 (2015 Prog.) ; 14.7 (2016 Prog.) ; 14.7 (2017 Prog.)
- Total expenditure: 20.9 (Pre-oil) ; 29.2 (Oil) ; 28.4 (2015 Prog.) ; 27.5 (2016 Prog.) ; 26.7 (2017 Prog.)
- Compensation of employees: 7.6 (Pre-oil) ; 11.3 (Oil) ; 10.1 (2015 Prog.) ; 9.4 (2016 Prog.) ; 8.9 (2017 Prog.)
- Interest payments: 2.6 (Pre-oil) ; 4.8 (Oil) ; 7.7 (2015 Prog.) ; 6.7 (2016 Prog.) ; 6.4 (2017 Prog.)
- Overall balance: -4.4 (Pre-oil) ; -9.9 (Oil) ; -8.0 (2015 Prog.) ; -6.3 (2016 Prog.) ; -4.3 (2017 Prog.)
- Primary balance: -1.8 (Pre-oil) ; -5.0 (Oil) ; -0.4 (2015 Prog.) ; 0.4 (2016 Prog.) ; 2.1 (2017 Prog.)
- Central government debt (range): 31 - 46.5 (Pre-oil avg) ; 42.6 - 64.8 (Oil avg) ; 67.8 (2015 Prog.) ; 66.5 (2016 Prog.) ; 62.3 (2017 Prog.)
- Stock of arrears: 7.9 - 9.8 (Pre-oil avg) ; 8.7 - 5.5 (Oil avg) ; 3.5 (2015 Prog.) ; 1.6 (2016 Prog.) ; 0.0 (2017 Prog.)

### Macroeconomic developments, inflation, and monetary stance
- Headline CPI inflation: 17.0 percent (y-o-y) at end-2014; reported at 16.5 percent for February 2015.
- Bank of Ghana (BoG) medium-term inflation target: 8 +/-2 percent; end-2015 target: 12 percent.
- Policy interest rates hiked in 2014 up to 21 percent.
- Currency depreciation: 31 percent depreciation of the currency during 2014 (in US$ per Cedi).
- Broad money growth: 37 percent (12 months to end-December 2014); credit to private sector up 42 percent (12 months to end-December 2014).
- BoG operations and limits:
  - BoG gross financing to the budget in 2015 limited to 5 percent of previous year’s revenue.
  - Central bank financing timetable: 5 percent limit in 2015 and zero financing from 2016 onward (with adoption of a new Bank of Ghana Act).

### Fiscal position, public debt, and arrears
- Cash fiscal deficit: 9½ percent of GDP in 2014; programmed path: 7.5 percent of GDP in 2015; close to 3½ percent of GDP in 2017.
- Primary balance (commitment basis) path: deficit of 3.5 percent in 2014 -> surplus of 0.9 percent in 2015 -> surplus of 3.2 percent in 2017.
- Total public debt projected to decline to about 50 percent of GDP within a decade under envisaged consolidation and hydrocarbon production.
- Government debt exceeded pre-HIPC levels; central government debt (gross) 67.6 percent of GDP in 2014.
- Stock of domestic arrears estimated at about 5.5 percent of GDP at end-2014; plan to eliminate all domestic arrears by end-2017 with about a quarter repaid in 2015.

### External sector and reserves
- Current account deficit: 9.2 percent of GDP in 2014; projected improvement to about 5 percent of GDP in 2017.
- Balance of payments for 2014 broadly balanced; gross reserves fragile and partly supported by large BoG short-term liabilities.
- Gross international reserves (millions of US$): 4,587 (2013), 4,349 (2014), 4,734 (2015 prog), 5,822 (2016 prog), 7,544 (2017 prog).
- Projected gross reserves adequacy: build up to 4.2 months of imports of goods and services by 2017.

### Growth outlook and composition
- Non-oil GDP growth projection: 2.3 percent in 2015; 5.5 percent by 2017.
- Total GDP growth projection: 3.5 percent in 2015; 9.2 percent in 2017 (driven by hydrocarbon production).
- Hydrocarbon assumptions:
  - Crude oil production projected: 37 million barrels per year in 2014 -> 76 million in 2017; average 82 million barrels during 2018–20.
  - Oil price assumptions: around US$50-55 in 2015; recover to around US$70 per barrel by 2019.
- Long-run steady-state growth rate: 6.5 percent (program projection).

### Financial sector soundness and vulnerabilities
- Aggregate financial soundness indicators suggest sector relatively robust; capital, liquidity and profitability held up.
- Key vulnerabilities:
  - High cedi interest rates (e.g., 25–26 percent for short-term domestic debt) make many projects high risk.
  - FX lending to unhedged borrowers exposes banks to credit risk if cedi depreciates.
  - Potential FX liquidity risks given shallow FX market.
  - Forbearance used in some cases to delay capital provisioning; varying loan classification and provisioning practices may mask weaknesses.
- Supervisory measures:
  - Special diagnostic audit of loan classification, provisioning and restructured loans to be completed by September 2015.
  - BoG to develop new regulations on loan classification and provisioning by December 2015.
  - Draft Banks and Specialized Deposit-Taking Institutions Bill and Ghana Deposit Protection Bill to be presented to Parliament in 2015.

### Program objective and main policy pillars (three-year ECF)
- Program objective: a three-year ECF-supported program anchored on GSGDA II aiming at a sizeable and frontloaded fiscal adjustment to restore debt sustainability, rebuild external buffers, and eliminate fiscal dominance of monetary policy, while safeguarding financial sector stability and protecting growth and social spending.
- Fiscal consolidation pillar:
  - Mobilize additional revenues; restrain wage bill and other primary spending; make space for priority spending.
  - Prudent borrowing policy prioritizing concessional financing where possible.
- Structural and institutional reforms:
  - Strengthen public financial management and expenditure controls (payroll clean-up, GIFMIS, HRMIS).
  - Improve revenue collection through tax policy and tax administration reforms (GRA Strategic Plan 2015–17; TRIPS rollout).
  - Revise PFM legal framework and adopt medium-term debt management strategy by end-June 2015.
- Monetary and exchange rate reforms:
  - Restore IT framework: eliminate fiscal dominance; use two-week fixed rate BoG bills as main liquidity instrument; move to market-based daily reference exchange rate; eliminate compulsory FX surrender by mid-2016.
- Social protection:
  - Expand targeted social safety nets, protect basic health care; LEAP to almost double coverage to 150,000 households in 2015.

### Revenue and expenditure measures (selected)
- Revenue measures:
  - Special Petroleum Tax of 17.5 percent (implemented November 2014); estimated yield GH¢1,490 million (1.1 percent of GDP).
  - VAT on fee-based financial services.
  - 5 percent flat rate on real estate (implemented January 2015).
  - Extension to 2017 of special import levy of 1–2 percent and National Fiscal Stabilization Levy.
  - Estimated impact of new revenue measures about 2 percent of GDP; total estimated yield GH¢2,573.3 million (about 2 percent of GDP) in 2015.
- Expenditure measures:
  - Limit nominal increase in total wage bill to 10 percent via a package including a 13 percent wage increase over 2013 nominal basic wage agreement, discontinuation of 10 percent Cost of Living Allowance, and strict limits on net hiring (freeze except education and health).
  - Full elimination of subsidies for utilities and petroleum products via quarterly utility tariff adjustments and bi-weekly petroleum price adjustments.
  - These measures estimated to yield savings of about 2 percentage points of GDP.
- Arrears clearance:
  - Clear outstanding stock of arrears over three years via cash payments and possible securitization to SOEs; about a quarter of outstanding arrears to be repaid in 2015; suppliers’ arrears to be audited first.
- Mitigating oil-price revenue shortfall:
  - Shortfall estimated at 2 percent of GDP; measures include reducing goods and services by 0.3 percent of GDP, domestically-financed capital spending by 0.7 percent of GDP, reducing transfers to other government units by 0.2 percent of GDP, and drawing from oil stabilization fund under PRMA.

### Public financial management, payroll, and civil service reforms
- GIFMIS and HRMIS:
  - Commit to extend GIFMIS coverage, integrate payroll and revenue transactions, and publish monthly budget performance reports from June 2015.
  - Rollout HRMIS: five pilot MDAs by December 2015; all MDAs by December 2016.
- Payroll clean-up actions and targets:
  - Remove employees with no bank account; suspend payments to employees without SSNIT numbers; biometric validation of all mechanized payroll employees by June 2015; migrate subvented agencies to mechanized payroll by December 2015.
  - Target to bring wage bill-to-revenue ratio down from 53 percent in 2014 to 35 percent over the medium term (ECOWAS target).
- PFM legal reforms:
  - Submit comprehensive PFM reform strategy to Cabinet by August 2015; draft bills to amend PFM laws by December 2015.

### Debt management and domestic debt market reforms (Annex I highlights)
- Domestic financing patterns:
  - Net domestic financing peaked in 2012 at almost 80 percent of total deficit financing.
  - Monetary financing averaged about 2 percent of GDP through 2014; BoG financed the government by 6.6 percent of GDP between 2010 and 2014.
- Yields and maturity risks:
  - Real interest rate around 8 percent as at end-2014 (headline inflation 17 percent).
  - Redemption profile risk: 16 percent of GDP coming due in 2015 (as at end-December 2014).
  - Share of short-term marketable securities increased (remaining maturity measures shortened).
- Recommended market deepening reforms:
  - Build benchmark securities by rationalizing outstanding issues and reopening securities.
  - Reduce auction frequency; introduce repo market; review primary dealers framework; introduce trading platform; synchronize auction calendar with cash flow needs.
- Debt management operational measures:
  - Develop sinking funds, strengthen on-lending portfolio management, and reduce contingent liabilities; create Debt Service (Sinking Fund) Account.

### Program financing, IMF support, and conditionality
- Authorities requested a three-year ECF in amount of SDR 664.20 million (180 percent of quota).
- Staff supports request; proposed access level equivalent to 180 percent of quota (US$915 million at current exchange rates).
- Disbursement ceilings for the three-year arrangement:
  - Not to exceed equivalent of SDR 249.075 million during first 12 months.
  - Not to exceed equivalent of SDR 415.125 million during first 24 months.
- Initial disbursements scheduled:
  - First disbursement: SDR 83.025 million upon approval at Ghana’s request.
  - Second disbursement: SDR 83.025 million on or after July 15, 2015, subject to conditions.
  - Third disbursement: SDR 83.025 million on or after November 15, 2015, subject to conditions.
- Performance criteria and structural benchmarks:
  - Quantitative PCs include floor on primary cash fiscal balance, ceiling on gross credit to government by BoG, floor on net international reserves, ceiling on Net Domestic Assets of BoG, ceiling on wages and salaries, ceiling on net change in stock of domestic arrears, non-accumulation of external and domestic arrears, and ceiling on contracting new external nonconcessional debt.
  - Structural conditionality focuses on PFM, payroll cleanup, revenue collection, civil service rationalization, debt management, and monetary policy framework.
  - Prior actions completed include adoption of 2015 Budget, MOU limiting BoG financing to 5 percent, rules-based BoG exchange rate, petroleum price cost-recovery, announcement of medium-term inflation target, and payroll validation and clean-up actions.

### Risks, stress tests, and debt sustainability
- Key downside risks:
  - Delayed or partial implementation of policies, including pre-election risks.
  - Persistent electricity crisis and energy-sector reform delays.
  - Additional negative commodity price shocks (oil, gold, cocoa).
  - Changes in global financial conditions raising financing costs as concessional resources dry up.
  - Residual Ebola-related impacts.
- Upside risks:
  - Rapid restoration of fiscal and monetary credibility could reduce domestic interest rates and restore investor confidence.
  - Stronger rebound in commodity prices would facilitate development projects.
- DSA conclusions:
  - Ghana assessed at a high risk of debt distress due to breaches in debt-service to revenue ratio over 2015–17 and after 2021.
  - Baseline: total public debt projected to decline from 70 percent in 2014 to 58 percent in 2019 (after initial increase to 72 percent in 2015) and to 39 percent in 2034 under program assumptions.
  - Stress tests show high sensitivity to nominal exchange rate shocks and net non-debt creating flow shocks; indicators could breach thresholds under adverse scenarios.

### Data provision, monitoring, and reporting
- Program exchange rate for monitoring: GH¢ 3.40 per US$1.
- Program monitoring dates: end-April 2015, end-August 2015, and end-December 2015.
- Authorities to provide monthly data for variables subject to performance criteria with specified reporting lags (e.g., central budget operations monthly within six weeks; net international reserves monthly within two weeks).
- TMU defines variables, adjustors, and reporting requirements; adjustors include oil revenue and program grants/loans adjustments to fiscal ceiling and NIR floors.

### Selected numeric targets and benchmarks (selected)
- Bank of Ghana gross financing to the budget in 2015: 5 percent of previous year’s revenue.
- Inflation targets: medium-term: 8 percent; end-2015: 12 percent.
- Wage bill-to-revenue ratio: 53 percent in 2014; target 35 percent over the medium term.
- Donor support expected over 2015–17: US$900 million; donors committed US$500 million in support for 2015.
- Proposed Fund access: 180 percent of quota (US$915 million at current exchange rates).
- Fund credit outstanding combined peak: SDR 863 million in 2018.
- Selected 2015 program aggregates (percent of GDP unless otherwise noted):
  - Revenue: 19.2 percent;
  - Expenditure: 25.4 percent;
  - Overall balance: -5.8 percent;
  - Central government debt (gross): 67.5 percent;
  - Current account balance: -11.7 percent (2013), program projects improvement to -9.2 percent (2015) and -4.9 percent (2017).

*IMF staff report — March 20, 2015.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and recent developments
- Large fiscal and external imbalances in recent years have led to a slowdown in growth and put Ghana’s medium-term prospects at risk.
- Government consolidation efforts since mid-2013 have been undermined by policy slippages, external shocks, and rising interest cost.
- Until mid-2014, the net international reserves position had further weakened and the exchange rate depreciated sharply, fueling inflationary pressures; the situation stabilized after the Eurobond issued in September and a short-term loan contracted by the Cocoa Board, but public debt continued to rise at an unsustainable pace.
- Growth decelerated markedly in 2014, to an estimated 4.2 percent, driven by a sharp contraction in the industry and services sectors due to currency depreciation, declining domestic demand, and increasing power outages.
- The wage bill has been a major source of expenditure pressure; the introduction of the “Single Spine (SS)” pay structure in 2010 led to a substantial increase in employees’ compensation and contributed to arrears from delays in moving staff to the SS.
- The fiscal deficit remained elevated in 2014 despite gradual consolidation: higher oil revenues, improved tax collection, and some containment of the wage bill were offset by delays in implementing measures and unbudgeted wage allowances, resulting in a higher-than-budgeted cash fiscal deficit in 2014 of 9½ percent of GDP (against a budget target of 8.5 percent). Additional domestic arrears accumulated, in particular on social security contributions.

### Key fiscal and macro statistics (as presented)
- Total revenue: 16.5 (Pre-oil 2007-10 average) ; 19.3 (Oil 2011-14 average) ; 20.4 (2015 Prog.) ; 21.2 (2016 Prog.) ; 22.4 (2017 Prog.)
- Oil revenues: 0.0 (Pre-oil) ; 1.9 (Oil) ; 1.0 (2015 Prog.) ; 1.6 (2016 Prog.) ; 2.5 (2017 Prog.)
- Non-oil tax revenues: 11.6 (Pre-oil) ; 13.6 (Oil) ; 14.8 (2015 Prog.) ; 14.7 (2016 Prog.) ; 14.7 (2017 Prog.)
- Non-oil non-tax revenues, incl. social contributions: 2.0 (Pre-oil) ; 2.7 (Oil) ; 3.1 (2015 Prog.) ; 3.6 (2016 Prog.) ; 4.2 (2017 Prog.)
- Grants: 2.8 (Pre-oil) ; 1.1 (Oil) ; 1.5 (2015 Prog.) ; 1.3 (2016 Prog.) ; 1.0 (2017 Prog.)
- Total expenditure: 20.9 (Pre-oil) ; 29.2 (Oil) ; 28.4 (2015 Prog.) ; 27.5 (2016 Prog.) ; 26.7 (2017 Prog.)
- Compensation of employees: 7.6 (Pre-oil) ; 11.3 (Oil) ; 10.1 (2015 Prog.) ; 9.4 (2016 Prog.) ; 8.9 (2017 Prog.)
- Other non-interest current expenditures: 5.4 (Pre-oil) ; 8.0 (Oil) ; 5.8 (2015 Prog.) ; 6.3 (2016 Prog.) ; 6.3 (2017 Prog.)
- Capital expenditure: 5.2 (Pre-oil) ; 5.1 (Oil) ; 4.9 (2015 Prog.) ; 5.2 (2016 Prog.) ; 5.1 (2017 Prog.)
- Interest payments: 2.6 (Pre-oil) ; 4.8 (Oil) ; 7.7 (2015 Prog.) ; 6.7 (2016 Prog.) ; 6.4 (2017 Prog.)
- Overall balance: -4.4 (Pre-oil) ; -9.9 (Oil) ; -8.0 (2015 Prog.) ; -6.3 (2016 Prog.) ; -4.3 (2017 Prog.)
- Primary balance: -1.8 (Pre-oil) ; -5.0 (Oil) ; -0.4 (2015 Prog.) ; 0.4 (2016 Prog.) ; 2.1 (2017 Prog.)
- Non-oil primary balance: -1.8 (Pre-oil) ; -6.9 (Oil) ; -1.3 (2015 Prog.) ; -1.3 (2016 Prog.) ; -0.4 (2017 Prog.)
- Central government debt (range): 31 - 46.5 (Pre-oil avg) ; 42.6 - 64.8 (Oil avg) ; 67.8 (2015 Prog.) ; 66.5 (2016 Prog.) ; 62.3 (2017 Prog.)
- Stock of arrears: 7.9 - 9.8 (Pre-oil avg) ; 8.7 - 5.5 (Oil avg) ; 3.5 (2015 Prog.) ; 1.6 (2016 Prog.) ; 0.0 (2017 Prog.)

### IMF engagement and requested support
- The Ghanaian authorities requested a three-year arrangement under the Extended Credit Facility (ECF) in an amount of SDR 664.20 million (180 percent of quota) to support their medium-term economic reform program.
- The IMF staff supports the authorities’ request for IMF support; forceful and sustained implementation of the program will be essential to address macroeconomic imbalances.
- Discussions on the authorities’ economic and financial program took place in Accra during September 14-25, 2014, October 14-16, 2014 (in Washington DC), November 6-20, 2014, and February 19-26, 2015.
- IMF staff team included Joël Toujas-Bernaté (head), Wendell Daal, Javier Arze del Granado, Francesco Arizala, Alexander Raabe (all AFR), Nicolas Million, Keiichi Nakatani (all SPR), Salvatore Dell’Erba (FAD), Eriko Togo (MCM), and Samir Jahjah (Resident Representative). Alexander Raabe and Jean Vibar provided research and administrative support, respectively. Mr. Mojarrad (Executive Director) and Mr. Abradu-Otoo (OED) participated in part of the discussions.
- IMF teams met with President Mahama; Vice-President Kwesi Amissah-Arthur; Dr. Kwesi Botchwey, Chairman of the National Development Planning Commission; Finance Minister Seth Terkper; Bank of Ghana Governor Kofi Wampah; the Finance Committee of the Parliament, other senior officials, and representatives of the private sector, the donor community and civil society.

### Program framework and main policy pillars
- Program objective: A three-year ECF-supported program, anchored on the second Ghana Shared Growth and Development Agenda (GSGDA II), aiming at a sizeable and frontloaded fiscal adjustment to restore debt sustainability, rebuild external buffers, and eliminate fiscal dominance of monetary policy, while safeguarding financial sector stability.
- Fiscal consolidation:
  - Substantially strengthen the fiscal position by mobilizing additional revenues, restraining the wage bill and other primary spending, while making space for priority spending.
  - The government is taking additional adjustment measures to help offset lower-than-budgeted oil revenue.
  - A prudent borrowing policy will complement fiscal consolidation efforts to restore debt sustainability.
- Structural and institutional reforms:
  - Strengthen public financial management and expenditure controls, in particular cleaning-up the payroll and enhancing wage bill control.
  - Improve revenue collection through tax policy and tax administration reforms.
  - Restore the effectiveness of the inflation-targeting (IT) framework by eliminating fiscal dominance and enhancing monetary policy operations.
- Financial sector stability: Safeguard financial sector stability while implementing macroeconomic consolidation.
- Growth and social protection: Maintain focus on growth and social protection agenda alongside consolidation (program contains a dedicated section on The Growth and Social Protection Agenda).

### Risks and contingencies
- Key program risks include:
  - Delayed or partial implementation of policies, including risks in the run-up to elections.
  - A slower growth recovery if the electricity crisis is not addressed quickly.
  - Additional negative commodity price shocks.
- The program notes that forceful and sustained policy implementation is essential to address macroeconomic imbalances.

### Program modalities and documentation
- The report includes detailed annexes and appendices: background and recent developments; policies under a three-year ECF arrangement (A. Program Objectives and Macroeconomic Framework; B. Fiscal Policy; C. Structural Reforms; D. Monetary Policy and Exchange Rate Regime; E. Financial Sector; F. Growth and Social Protection Agenda); program modalities, financing assurances, and risks; staff appraisal; and technical annexes (including a Memorandum of Economic and Financial Policies and a Technical Memorandum of Understanding).

*IMF staff report — March 20, 2015.*

### 5.5 percent of GDP at end-2014). On a commitment basis, the overall fiscal deficit remained close

### _cr15103 - 5.5 percent of GDP at end-2014). On a commitment basis, the overall fiscal deficit remained close

### Macroeconomic developments and inflation
- Headline CPI inflation reached 17.0 percent (y-o-y) at end-2014.
- Bank of Ghana (BoG) inflation target: 8 +/-2 percent.
- Policy interest rates hiked in 2014 up to 21 percent.
- Currency depreciation: 31 percent depreciation of the currency during 2014 (in US$ per Cedi).
- While headline inflation declined marginally in early 2015, core inflation continued to increase.
- Growth in broad money and credit to the private sector remained elevated.

### Fiscal position and public debt
- On a commitment basis, the overall fiscal deficit remained close to 10 percent of GDP.
- Primary balance (commitment basis) programmed to turn from a deficit of 3.5 percent in 2014 into:
  - a surplus of 0.9 percent of GDP in 2015, and
  - a surplus of 3.2 percent of GDP in 2017.
- Total public debt projected to decline to about 50 percent of GDP within a decade (with envisaged consolidation and hydrocarbon production).
- Overall cash deficit path:
  - 9½ percent of GDP in 2014,
  - 7.5 percent of GDP in 2015,
  - close to 3½ percent of GDP in 2017.
- Government debt now exceeds pre-HIPC levels (figure context).

### Financing pressures and markets
- A new US$1 billion Eurobond was issued in September 2014, but at higher interest rate than other SSA issuers.
- Spreads on Ghana’s Eurobond remained elevated at 600–700 bp.
- Government resorted increasingly to short-term domestic debt carrying interest rates at around 25–26 percent.
- Significant monetary financing of the fiscal deficit contributed to pressures.

### External sector and reserves
- External position weakened through mid-2014; net international reserves reached low levels in the third quarter.
- Current account deficit ended at 9.2 percent of GDP in 2014.
- Balance of payments for the year was broadly balanced, allowing fragile stabilization in international reserves, with gross reserves partly supported by large BoG short-term liabilities.
- Projected improvement in current account deficit over the medium term:
  - from about 9 percent of GDP in 2014 to about 5 percent in 2017.
- Projected gross reserves adequacy: build up to 4.2 months of imports of goods and services by 2017.

### Growth outlook and composition
- Non-oil GDP growth projection:
  - decelerate to 2.3 percent in 2015,
  - reach 5.5 percent by 2017.
- Total GDP growth projection:
  - 3.5 percent in 2015,
  - 9.2 percent in 2017 (driven by large increases in hydrocarbon production).
- Commencement of gas production in 2015 expected to lower electricity generation cost and reduce oil imports.
- Increase in oil exports and compressed aggregate demand expected to support external improvement.

### Financial sector soundness and vulnerabilities
- Aggregate financial soundness indicators suggest the financial sector is relatively robust.
- Supervisory analysis indicates resilience to shocks may be weaker than aggregate indicators suggest and credit risk from lower growth is rising.
- Key vulnerabilities:
  - High cedi interest rates imply many projects are inherently high risk.
  - Lending in foreign currencies to unhedged borrowers exposes banks to credit risks in case of cedi depreciation.
  - Potential foreign exchange liquidity risks given the shallow foreign exchange market.
  - Forbearance has been used to delay capital provisioning requirements in some cases.
  - Widely varying practices in loan classification, provisioning and loan restructuring may result in an optimistic picture of profitability and mask weaknesses.

### Program objectives and macroeconomic framework (three-year ECF arrangement)
- Program aims:
  - frontloaded fiscal adjustment to restore debt sustainability,
  - rebuild external buffers,
  - eliminate fiscal dominance of monetary policy,
  - restore the effectiveness of the inflation targeting framework.
- Social policy:
  - expand social safety net programs to restore real income of the poor and mitigate adverse impacts of fiscal consolidation.
- Public finance strategy:
  - strengthen public financial management and revenue administration,
  - implement a prudent borrowing strategy relying on concessional borrowing to the extent possible and prioritizing borrowing for highly productive development projects.

### Risks to the outlook
- Downside risks:
  - If the electricity crisis is not swiftly addressed and energy sector reform is delayed, growth may be lower than projected in 2015 and rebound more slowly thereafter.
  - Deceleration in 2015 may weaken the financial sector with increasing NPLs, limiting its ability to support private sector activity and budget financing.
  - Run-up to the 2016 elections may lead to social tensions and policy reversals; previous election cycles have seen fiscal overruns.
  - Exposure to terms of trade shocks given export concentration in commodities; a further decline in oil prices would have a substantial negative fiscal impact in the medium term.
  - Changes in global financial conditions could increase financing costs as concessional resources are drying up for Ghana.
  - Residual risks from the Ebola outbreak could have short-term impacts on trade, budget spending, and inflation.
- Upside risks:
  - Rapid regain of credibility in fiscal discipline and monetary policy could lead to a faster decline in domestic interest rates and restore investor confidence.
  - A stronger rebound in commodity prices, including oil, would facilitate accelerating some development projects.

### Fiscal policy stance and near-term measures
- The program seeks to expand revenue collection, restrain the wage bill and other primary expenditures, make space for priority spending, and clear all domestic arrears.
- Despite lower-than-projected oil revenues over the program period, expected fiscal consolidation combined with higher hydrocarbon production is the path to debt sustainability.
- The 2015 budget approved by Parliament is described as ambitious and includes significant measures to achieve strong fiscal consolidation (MEFP ¶27–28); on the revenue side, measures included the imposition of Special Petroleum Tax (text truncated in source).

*Source: IMF staff report content from the provided PDF content and figures (canonical source URL: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15103.pdf).*

### 17.5 percent (implemented in November 2014) to bring Ghana’s petroleum taxes more in

### _cr15103 - 17.5 percent (implemented in November 2014) to bring Ghana’s petroleum taxes more in

### Revenue measures and tax policy
- Implementation of a 17.5 percent measure (implemented in November 2014) to bring Ghana’s petroleum taxes more in line with international practice.
- Implementation of the VAT on fee-based financial services.
- Introduction of a 5 percent flat rate on real estate (implemented in January 2015) to broaden the tax base.
- Extension to 2017 of the special import levy of 1–2 percent on some imported goods and the National Fiscal Stabilization Levy on selected sectors.
- The impact of the new revenue measures is estimated at about 2 percent of GDP.

### Expenditure measures and fiscal consolidation
- Limit the nominal increase in the total wage bill to 10 percent, supported by:
  - (i) an agreement with trade unions on a 13 percent wage increase over the 2013 nominal basic wage;
  - (ii) discontinuation of the 10 percent Cost of Living Allowance granted in 2014;
  - (iii) strict limits on net hiring in the public sector (which will be frozen except in education and health).
- Full elimination of subsidies for utilities and petroleum products through strict implementation of tariff and price adjustment mechanisms:
  - Quarterly adjustments for utility tariffs.
  - Bi-weekly adjustments for petroleum products prices.
- All these measures would lead to savings of about 2 percentage points of GDP.

### Social protection and priority spending
- Use part of the resulting fiscal space to safeguard social and other priority spending under the program, including expanding targeted social safety nets.
- Expansion of the flagship cash transfer program Livelihood Empowerment Against Poverty (LEAP):
  - LEAP will almost double its coverage to 150,000 households in 2015.
- Protection of basic health care coverage.

### Arrears clearance
- Authorities will clear the outstanding stock of arrears over the coming three years through cash payments and possible securitization of arrears to SOEs with marketable financial instruments.
- About a quarter of outstanding arrears would be repaid in 2015.
- Outstanding arrears to suppliers will be audited first.

### Mitigating the oil-price-related revenue shortfall
- Government adopted additional measures to mitigate the budget revenue shortfall due to the substantial decline in oil prices since the budget was adopted.
- Shortfall estimated at 2 percent of GDP.
- To ensure total debt accumulation remains in line with the level approved in the budget, the government will:
  - (i) reduce goods and services and domestically-financed capital spending by the equivalent of 0.3 and 0.7 percent of GDP, respectively—these reductions have already started by cutting spending allotments to ministries in line with lower oil revenues;
  - (ii) reduce transfers to other government units by 0.2 percent of GDP in line with lower revenues;
  - (iii) finance the remainder of the shortfall by drawing from the oil stabilization fund (in line with the Petroleum Revenue Management Act (PRMA)).
- Authorities stand ready to adjust their policies further in the event of any further budget shortfall.

### Financing and debt management policy
- Program financing mix: external concessional loans, domestic financing, and limited non-concessional external borrowing in line with the Fund’s applicable debt limits policy (MEFP ¶33).
- Debt sustainability analysis (DSA) concludes that Ghana is at a high risk of debt distress, on account of breaches in the debt-service to revenue ratio over 2015–17 and after 2021.
- Authorities committed to limit borrowing plans to loans with a minimum grant element of 35 percent, with possible exceptions in line with the debt limits policy.
- Authorities have already secured significant program grants and loans for 2015 from development partners, most of which had been suspended.

*Source: _cr15103 - 17.5 percent (implemented in November 2014) to bring Ghana’s petroleum taxes more in*

### 2013. In addition, they plan to issue a Eurobond during the second half of the year as a

### _cr15103 - 2013. In addition, they plan to issue a Eurobond during the second half of the year as a

### Debt management and financing
- Plan to issue a Eurobond during the second half of the year as a substitute to domestic borrowing to help repay expensive maturing debt.
- Bank of Ghana gross financing to the budget in 2015 will be limited to 5 percent of previous year’s revenue, using only marketable financial instruments.
- Ministry of Finance developing a comprehensive medium-term debt management strategy to be approved by Cabinet by end-June 2015 (MEFP ¶70).
- Authorities intend to:
  - develop an operational framework for building cash buffers (sinking funds) (MEFP ¶72);
  - strengthen management of the on-lending portfolio;
  - reduce exposure to contingent liabilities (MEFP ¶72).
- Staff sees the 2015 adjustment-financing mix as appropriate, including issuance of a new Eurobond to help replace expensive debt.

### Public financial management (PFM) reforms and fiscal discipline
- Comprehensive PFM reform strategy to be submitted to Cabinet for approval by August 2015 (MEFP ¶48); draft bills to amend weaknesses in existing PFM laws by December 2015 (MEFP ¶49).
- Strengthen the medium-term fiscal framework and revenue forecasting models (MEFP ¶50); communicate the Budget Strategy Paper (BSP) to Parliament by end-July 2015.
- Commitments on budget execution and GIFMIS:
  - only recognize purchases generated by the Ghana Integrated Financial Management System (GIFMIS) as valid commitments of Government (MEFP ¶52);
  - extend GIFMIS to revenue and expenditure transactions of Internally Generated Funds (IGFs) (MEFP ¶53).
- Strengthen Treasury and Cash Management by gradually centralizing cash holding in the Treasury Single Account (TSA) (MEFP ¶62-63); draft jointly with Bank of Ghana a new strategy paper for adoption of the TSA by August 2015.

### Budget transparency and fiscal reporting
- Starting with the 2016 budget, publish as annexes:
  - information on existing tax expenditure, their beneficiaries and their fiscal costs (MEFP ¶40);
  - financial information on all existing subvented agencies (MEFP ¶60).
- Continue to follow Extractive Industry Transparency Initiative (EITI) recommendations regarding natural resource revenues (MEFP ¶41).
- Finance ministry to improve production and timely publication of fiscal data (MEFP ¶88), including:
  - revenues and expenditures of local governments and extra-budgetary funds;
  - financial statements of SOEs;
  - public investment plans and wage bill performance reports.

### Payroll clean-up and wage bill control
- Payroll irregularities identified; reforms begun in 2012 to identify and eliminate ghost workers and centralize civil servant records.
- Inter-ministerial committee issued a Payroll plan in March 2015 (MEFP ¶57). Key elements:
  - removal from payroll of public employees with no bank account;
  - suspension and verification of salary payments to employees with no social security number;
  - implementation of biometric validation of all employees on the mechanized payroll;
  - roll out of electronic wage payment system to ensure monthly validation by department heads before payments;
  - audit of payroll databases merged in 2014 to assess security;
  - new guidelines to strengthen internal control over payroll processes;
  - large scale public audit of payroll management; suspected fraud cases to be prosecuted by the Attorney General.
- Personnel in all subvented agencies to be integrated into existing payroll databases (MEFP ¶57).
- Progressive roll out of Human Resource Management Information System (HRMIS) to improve control over net hiring (MEFP ¶58).
- No new personnel will be added to the payroll without proper financial certification (MEFP ¶28b.).
- Government intends to align, starting in 2015, wage negotiations with the budget cycle and have them cover a 3-year period on a rolling basis (MEFP ¶61).
- Target: bring the wage bill-to-revenue ratio down from 53 percent in 2014 to 35 percent over the medium term (ECOWAS target) (MEFP ¶65).

### Civil service reform and statutory funds
- Design a civil service reform strategy during 2015 to increase productivity and rationalize the size of the civil service (MEFP ¶65); a task force will provide recommendations as part of right-sizing.
- Restructuring Statutory Funds:
  - Statutory Funds receive almost 20 percent of earmarked revenues (PEFA, 2011).
  - Review administrative and legal framework of Statutory Funds by June 2015, with goal of introducing more flexibility and efficiency and new transparency/accountability measures in the 2016 budget (MEFP ¶67).

### Revenue mobilization and tax administration
- Tax exemptions, special regimes and tax holidays amount to perhaps 6 percent of GDP and undermine revenue mobilization; government intends to broaden the tax base and review exemptions (MEFP ¶36–40).
- Review tax treatment of free zones enterprises and SOEs (MEFP ¶38).
- Ghana Revenue Authority (GRA) developed a new Strategic Plan covering 2015–17; plan to be submitted to the GRA Board for approval by March 2015.
- VAT reforms: increase VAT thresholds after new policy for small business is enacted (MEFP ¶44); implement time-bound refunds of VAT credits by September 2015 (MEFP ¶45).

### Natural resource revenue management
- Since 2011, petroleum revenues management framework raised operational issues, including inflexibility in benchmark revenue calculations and transfers to petroleum funds while running large deficits over 2012–14.
- Authorities submitted amendments to the PRMA to give the Minister of Finance discretion to amend benchmark revenues under unexpected circumstances; will work with IMF staff to draft regulations and guidelines.

### Monetary policy and exchange rate regime
- Bank of Ghana announced a medium-term inflation target of 8 percent; inflation would be reduced to 12 percent by end-2015.
- BoG measures:
  - two-week fixed rate BoG-bills made the main instrument for liquidity management;
  - MPC will determine monetary policy rate and a more transparent overnight interest rate corridor.
- Central bank financing elimination timetable:
  - memorandum of understanding limits central bank’s financing to 5 percent of previous year’s revenue in 2015;
  - adoption of a new Bank of Ghana Act will bring financing to zero from 2016 onwards (MEFP ¶74/84).
- BoG will no longer issue OMO bills nor take budget financing auction decisions; only use BoG bills for liquidity operations.
- Strengthen foreign currency interbank market and adopt a market-based daily reference exchange rate; eliminate compulsory surrender requirements by mid-2016 and end BoG practice to secure foreign currency funding for priority sector imports (MEFP ¶78).
- New BoG Act to institutionalize zero limit on government financing from 2016, strengthen governance, ability to respond to banking crises, set annual aggregate limits for BoG guarantees for foreign loans, and ensure full compliance with IFRS (MEFP ¶84).

### Financial sector stability and reforms
- Special diagnostic audit of loan classification, provisioning and restructured loans to be undertaken by BoG and external audit firms; audit planned to be completed by September 2015.
- BoG to develop new regulations to ensure prudent underwriting and adequate provisioning.
- Strengthen oversight of microfinance institutions; created a dedicated department for rural and microfinance supervision.
- Legislation:
  - Banks and Specialized Deposit-Taking Institutions Bill and Ghana Deposit Protection Bill to be presented to Parliament during the second quarter of 2015 (MEFP ¶79).
  - Draft Deposit Protection Bill establishes the Ghana Deposit Protection Corporation with responsibility limited to paying deposits; to be submitted to Parliament by mid-2015.
- Resolution powers to include prompt corrective action, liquidity support instruments, clear triggers for resolution, purchase and assumption capacity and a bridge bank facility.

### Growth and social protection agenda
- Poverty reduction: overall poverty rate declined from 31.9 percent in 2005/06 to 24.2 percent in 2012/13; extreme poverty rate declined from 16.5 percent to 8.4 percent.
- Ghana Shared Growth and Development Agenda (2014–17) priorities:
  - Improving energy generation and distribution, harnessing natural gas for electricity generation, supporting small and medium-scale industries (MEFP ¶16).
  - Social protection programs: National Health Insurance Scheme, LEAP, Labor Intensive Public Works (LIPW), school feeding programs.
  - Establish National Household Registry to improve targeting.

### Program modalities, financing assurances, and risks
- Ghana has significant financing need over the next three years (Table 5) due to elevated current account deficits, limited access to international capital markets, and need to build larger reserves.
- Donor and Fund support expectations:
  - Some US$900 million of donor support expected over 2015–17; donors committed US$500 million in support for 2015, conditional first upon the Fund’s program approval.
  - Staff proposes access level equivalent to 180 percent of quota (US$915 million at current exchange rates) for a new three-year ECF arrangement.
  - There would be two program reviews in each of the first three calendar years.
- Ghana has adequate capacity to meet Fund obligations (Table 6): combined with previous ECF, Fund credit outstanding would reach a maximum of SDR 863 million in 2018 but remain low at 2.5 percent of GDP, 6.8 percent of exports, and 13.8 percent of gross international reserves.
- Program includes prior actions, quantitative indicators and structural measures:
  - Prior actions implemented (MEFP Table 1): fiscal adjustment in 2015, clean-up the payroll, limit monetary financing, strengthen inflation targeting framework.
  - Quantitative performance criteria on primary fiscal balance, the wage bill, net international reserves and net domestic assets of BoG (MEFP Table 2); initial performance criterion on Net Domestic Assets (NDA) of BoG as a safeguards mechanism with potential shift to MPCC conditionality by second review.
  - Structural conditionality focuses on PFM, payroll cleanup, revenue collection, civil service rationalization, debt management, and monetary policy framework (MEFP Table 3).
- Program is front-loaded to mitigate fiscal and monetary laxity risks in run-up to 2016 elections; authorities should be ready to implement additional measures if downside risks materialize.

### Safeguards and central bank autonomy
- Update of 2009 Safeguards assessment noted BoG's autonomy is significantly compromised by monetary financing; absence of clear limits on credit to government in central bank legislation exacerbates this.
- BoG and MoF established an agreement limiting credit to government (prior action); expected amendments to BoG Act (structural benchmark) to enhance BoG autonomy.
- Assessment recommended internal audits of monetary data at test dates to safeguard data reporting to the Fund.

### Staff appraisal (summary of key judgments)
- High fiscal and external vulnerabilities threaten Ghana’s transformation agenda after three consecutive years of high fiscal expansion.
- Staff welcomes authorities’ commitment and program; emphasizes need for forceful and sustained implementation of targeted reforms.
- Ambitious and sustained fiscal consolidation needed; program focuses on mobilizing additional revenue through a special tax on petroleum products, containing the wage bill and subsidies, and protecting social spending.
- Government should pursue a prudent borrowing strategy; strengthen public debt management policy and operations.
- Strong implementation of fiscal structural reforms, payroll cleanup, GIFMIS and HRMIS rollouts, and wage restraint essential.
- Monetary policy must refocus on reducing inflation to the 8 percent medium-term target; eliminate monetary financing by 2016 and use two-week fixed rate BoG Bills to strengthen transmission.
- Actions needed to preserve financial sector stability; prompt response to banking sector diagnostic review and timely passage of banking and deposit insurance legislation are encouraged.
- Staff supports a three-year arrangement under the ECF with access equivalent to 180 percent of quota.

### Key numeric targets and projections (selected)
- Bank of Ghana gross financing to the budget in 2015: 5 percent of previous year’s revenue.
- Inflation targets:
  - medium-term: 8 percent;
  - reduced to 12 percent by end-2015.
- Wage bill-to-revenue ratio: 53 percent in 2014; target 35 percent over the medium term.
- Donor support expected over 2015–17: US$900 million; donors committed US$500 million in support for 2015.
- Proposed Fund access: 180 percent of quota (US$915 million at current exchange rates).
- Fund credit outstanding combined peak: SDR 863 million in 2018.
- Selected macro aggregates (2015 program projections, percent of GDP unless otherwise noted):
  - Revenue: 19.2 percent;
  - Expenditure: 25.4 percent;
  - Overall balance: -5.8 percent;
  - Central government debt (gross): 67.5 percent;
  - Current account balance: -11.7 percent (2013), program projects improvement to -9.2 percent (2015) and -4.9 percent (2017).
- Gross international reserves (millions of US$): 4,587 (2013), 4,349 (2014), 4,734 (2015 prog), 5,822 (2016 prog), 7,544 (2017 prog).

*Italic: Source — IMF staff report content provided in the supplied PDF content unit.*

### Annex I. Deepening the Domestic Debt Market in Ghana

### Annex I. Deepening the Domestic Debt Market in Ghana

### Domestic financing patterns and recent history
- The share of net domestic financing peaked in 2012, when it reached almost 80 percent of total deficit financing.
- Investment by the nonbank sector doubled in 2012 compared to the previous year, from 3.1 to 6.3 percent of GDP, with about half of the increase accounted for by nonresident flows.
- Participation of nonresidents in fiscal financing fell to 0.9 percent and 0.2 percent of GDP in 2013 and 2014, respectively, as the fiscal position deteriorated.
- Monetary financing increased initially between 2010 and 2011, from -0.5 to 2 percent of GDP, and has averaged about 2 percent of GDP through 2014.
- Cumulatively, the Bank of Ghana financed the Government by 6.6 percent of GDP between 2010 and 2014.
- In 2013 and 2014, Eurobond issuances somewhat alleviated pressure on domestic financing.

### Yields, inflation, and real interest rates
- The yield curve shifted up sharply between 2011 and 2012 by about 10 percent, fell by about 5 percent in 2013 (temporary respite from the issuance of the 2023 Eurobond), and shifted up again in 2014 to levels similar to 2012 despite another Eurobond issuance.
- Headline inflation stood at 17 percent, implying a real interest rate of about 8 percent as at end-2014.

### Debt composition, maturity profile, and refinancing risks
- By original maturity, the share of medium-term marketable securities increased from 44 percent at end-2009 to 62 percent at end-2012, then reversed to 46 percent at end-2014.
- Measured in terms of remaining maturity, the share of short-term marketable securities is much higher (duration shortened).
- In 2014, several auctions of 3-year and 5-year notes were cancelled.
- The debt management strategy effectively became one of securing financing needs at minimum cost, increasing refinancing risk.
- Redemption profile risk: 16 percent of GDP coming due in 2015 (redemption profile of total government debt, as at end-December 2014).

### Need to deepen the domestic debt market
- Deepening the domestic debt market is critical to:
  - Enable the Government to secure a stable source of financing without recourse to monetary financing.
  - Implement the medium-term debt management strategy and thereby reduce debt and fiscal vulnerabilities.

### Failures in auction calendar and cash management linkage
- The auction calendar and timing of planned debt issuance have no relation to the timing of the government’s cash flow needs.
- Offered volumes are often insufficient to meet government borrowing requirements, leading to frequent recourse to monetary financing.
- Lack of announcement on target issuance amounts for individual instruments means market-determined composition rather than the medium-term debt management strategy.

### Recommended reforms to restore credibility and deepen the market
- Build benchmark securities by rationalizing the number of outstanding securities into few instruments, and reopening those securities.
- Reduce auction frequency to encourage price discovery through the secondary market.
- Review market conventions including days to settlement, day-count conventions, and form of price quotation.
- Introduce a conventional repo market to facilitate position taking by the primary dealers.
- Review the primary dealers framework, including enhancing exclusivity and profit opportunities while establishing realistic and measurable obligations to:
  - Participate in the primary auction; and
  - Offer firm two-way price quotes at standardized spreads.
- Introduce trading platform to facilitate secondary market trading.
- Improve synchronization between auction calendar and government cash management needs; tune domestic issuance with predictable cash flow forecasts to avoid periods of high tax receipts or cash mismatches.

### Key factual indicators and historical macro context (as presented)
- Real GDP growth history: from 3.7 percent in 2000 to 8.9 percent in 2012; slowed to 7.2 percent in 2013; revised/preliminary estimate for 2014 is 4.2 percent.
- Per capita GDP increased from US$1,358 in 2010 to US$1,879 in 2013, placing Ghana into a Lower Middle-Income Country (LMIC) status.
- Poverty indicators: overall poverty rate declined from 31.9 percent in 2005/06 to 24.2 percent in 2012/13; extreme poverty declined from 16.5 percent to 8.4 percent over that period.
- Macroeconomic stresses since 2012 included double digit fiscal and external current account deficits, currency depreciation, increasing inflation and high interest rates on rising public debt, and disruptions in energy production.
- 2013 year-end inflation: 13.5 percent.
- 2013 cash fiscal deficit reached about 10½ percent of GDP (initial 2013 target was 9 percent of GDP).
- External current account deficit about 12 percent in 2013.

### ECF program financing and disbursement framework (selected provisions)
- For a period of three years from approval, Ghana has the right to obtain disbursements equivalent to SDR 664.2 million, subject to PRG Trust resource availability.
- Disbursement ceilings:
  - Not to exceed the equivalent of SDR 249.075 million during the first 12 months of the arrangement.
  - Not to exceed the equivalent of SDR 415.125 million during the first 24 months of the arrangement.
- Initial disbursements scheduled:
  - First disbursement: SDR 83.025 million, available upon approval at Ghana’s request.
  - Second disbursement: SDR 83.025 million, available on or after July 15, 2015, at Ghana’s request and subject to specified conditions.
  - Third disbursement: SDR 83.025 million, available on or after November 15, 2015, at Ghana’s request and subject to specified conditions.
- Conditions that may block second and third disbursements include failure (as of specified data dates) to observe:
  - The floor on the primary cash fiscal balance of the government; or
  - The ceiling on wages and salaries; or
  - The floor on the net international reserves of the Bank of Ghana; or
  - The ceiling on net domestic assets of the Bank of Ghana; or
  - The ceiling on the net change in the stock of domestic arrears as set out in Table 2 of the MEFP and further specified in the TMU.
- Additional program-wide conditions that may prevent disbursements at any time include nonobservance of:
  - The ceiling on gross credit to government by the Bank of Ghana; or
  - The ceiling on non-accumulation of new external arrears; or
  - The ceiling on non-accumulation of domestic arrears; or
  - The ceiling on the contracting or guaranteeing of new external nonconcessional debt (as set out in Table 2 of the MEFP and further specified in the TMU); or
  - Imposition or intensification of restrictions on payments and transfers for current international transactions; or
  - Introduction or modification of multiple currency practices; or
  - Conclusion of bilateral payments agreements inconsistent with Article VIII; or
  - Imposition or intensification of import restrictions for balance of payments reasons.
- When disbursements are blocked under the above provisions, they may be made available only after consultation between the Trustee and Ghana and understandings have been reached.

*Source: Annex I, "Deepening the Domestic Debt Market in Ghana", and attached program documents as provided in the source content.*

### 3.9 percent, respectively. The slower growth in the services sector is attributable to a contraction in

### _cr15103 - 3.9 percent, respectively. The slower growth in the services sector is attributable to a contraction in

### Economic performance and macro indicators (2014)
- Real sector:
  - Services growth slowed due to contraction in the trade, real estate, and health sectors; communication, hotel and transport sectors experienced markedly slower growth.
  - Industry growth weakened driven by a significant contraction in the manufacturing sector.
  - Mining and electricity sectors are estimated to grow at about half the rate of 2013.
  - Agriculture is projected to grow at 5.2 percent.
- Fiscal and public debt:
  - Fiscal deficit expected to reach about 9½ percent of GDP in 2014.
  - Government debt expected to increase to 65 percent of GDP at end-2014.
- External sector and reserves:
  - Current account deficit in 2014 narrowed due to a substantial contraction in imports but remains elevated.
  - Financial account surplus projected to be lower than last year; overall balance of payments broadly balanced.
  - Net international reserves stable between end-2013 and end-2014.
- Prices, money and exchange rate:
  - Inflation rose to 17.0 percent in December 2014, drifting away from the 8 +/-2 percent medium term target range of the BoG.
  - Broad money (including foreign currency deposits) grew by 37 percent in the 12 months to end-December 2014.
  - Credit to the private sector grew by 42 percent in the 12 months to end-December 2014.
  - Official exchange rate depreciated by 31 percent from end-December 2013 to end-December 2014 (in US$ per cedi terms).
  - Bank of Ghana increased the policy rate by 500 basis points from 16 percent in January 2014 to 21 percent in November 2014.
- Financial system:
  - Capital, liquidity and profitability held up despite shocks from cedi depreciation and slowdown in demand; overall confidence is high.

### Government medium-term objectives and policy framework (GSGDA II, 2014–2017)
- Priorities:
  - Improve energy generation and distribution, infrastructure development and services, and support for small and medium-scale industries (SMEs).
  - Institutional reforms including those under the Millennium Challenge Account Compact to transform the energy sector and accelerate private investments.
  - Reforms to improve service delivery in sanitation, health, and education under accelerated decentralization; distribution of a Service Delivery Standards manual to district assemblies.
- Fiscal consolidation and public sector reforms:
  - Aim to attain macroeconomic stability and strong growth through fiscal discipline, prudent public expenditure management, enhanced domestic revenue mobilization, public sector staff rationalization, and better control over the wage bill.
  - Encourage PPPs and improve public financial and debt management.
- Fiscal targets and macro goals (2015 budget approved December 2014):
  - Average real GDP growth (including oil) of 6.4 percent over the program period with growth increasing from a projected 3.5 percent in 2015 to 9.2 percent in 2017.
  - Average non-oil real GDP growth of 4.2 percent over the program period with growth increasing from 2.3 percent in 2015 to 5.5 percent in 2017.
  - Inflation target of 8 percent with a band of ±2 percent.
  - Gross international reserves above 4 months of import cover by 2017, including scheduled unwinding of SWAPS and Bridge loan facilities.
  - Fiscal deficit of about 3½ percent of GDP (cash basis) by 2017.
  - Elimination of the stock of budgetary arrears by end-2017 (stock estimated at about 5.5 percent of GDP at end-2014).
- External account projection:
  - External current account expected to improve from about 9.2 percent of GDP deficit in 2014 to around 4½ percent of GDP in 2017, supported by initial import compression and projected increasing oil exports and new gas production reducing oil import dependency.

### Macroeconomic program for 2015
- Fiscal objective:
  - Reduce fiscal deficit from a provisional outlook of 9.5 percent of GDP in 2014 to 7½ percent (cash basis) in 2015, reflecting the impact of lower oil revenues.
- Growth and inflation projections:
  - Real GDP growth for 2015 targeted at 3.5 percent.
  - Year-end inflation expected to decelerate to 12 percent.
  - Current account deficit projected at 6.6 percent of GDP in 2015.
  - Reserve cover expected to remain at around 3 months of imports of goods and services.
- Budget aggregates (2015 Budget projections):
  - Total Revenue and Grants projected to increase from 18.4 percent of GDP in 2014 to about 21 percent in 2015.
  - Total Expenditure programmed to decline slightly from 27.8 percent of GDP in 2014 to 27.4 percent in 2015.

### Revenue measures underpinning 2015 budget
- Estimated yields and measures:
  - Special Petroleum Tax of 17.5 percent: estimated to yield GH¢1,490 million (1.1 percent of GDP).
  - Extension to 2017 of special import levy of 1-2 percent on some imported goods: estimated to yield GH¢521 million (0.4 percent of GDP).
  - Extension to 2017 of National Fiscal Stabilization Levy of 5% of profit before tax for specified sectors: estimated to yield GH¢246 million (0.2 percent of GDP).
  - Implement VAT on fee-based financial services and 5 percent flat rate on real estate: estimated to yield GH¢201 million (0.15 percent of GDP).
  - Increase in withholding tax on Director's fees from 10 percent to 20 percent; withholding tax on goods and services from 5 percent to 7.5 percent; 50 percent increase in Vehicle Income Tax: estimated to yield GH¢111 million (0.08 percent of GDP).
  - Review corporate income tax for Free Zones and other Free Zones tax issues: estimated to yield GH¢4.0 million.
  - Total estimated yield from the above revenue measures: GH¢2,573.3 million or about 2 percent of GDP in 2015.

### Expenditure measures and public sector staffing
- Agreed measures:
  - Salary adjustment for public sector workers: wage increase for 2015 of 13 percent from the 2013 levels (consistent with the wage bill in the 2015 budget).
  - Net freeze on employment in all public services (excluding education and health); no replacement of departing employees in overstaffed departments until HR exercise completes in mid-2015; overall civil servant numbers to increase by no more than 2.7 percent in 2015.
  - Enforce financial certification requirement for MDAs before hiring or placing persons on government payroll.
  - Strict implementation of automatic price adjustment mechanisms for utility tariffs and fuel prices to eliminate subsidies (except items benefiting from cross subsidy in petroleum price build-up and life line consumers).
  - Expand targeted social safety nets and enhance social protection.
  - Realign expenditures of Statutory Funds to government priorities for district-level infrastructure and social intervention programs.
- Ghana Infrastructure and Investment Fund (GIIF):
  - GIIF established in 2014; operationalization conditional on governance, capacity, and controls.
  - Funding sources currently set as 25 percent of the petroleum receipts’ Annual Budget Funding Amount (ABFA) and 2.5 percent of net VAT receipts; government intends to explore removing this earmarking by 2016.
  - In view of lower oil revenues in 2015, GIIF funding limited to execution of a few commercially viable investment projects.

### Fiscal adjustment in response to lower commodity prices (post-budget)
- Revenue shortfall and compensatory measures:
  - Projected 2015 fiscal revenues about 2 percentage points of GDP lower than budgeted due to lower commodity prices, notably oil.
  - Government measures to address shortfall:
    - Finance part of the shortfall using non-debt creating resources from the oil stabilization fund as allowed under the Petroleum Revenue Management Act (PRMA).
    - Reduce transfers to other government units by 0.2 percent of GDP.
    - Additional measures to reduce goods and services and capital spending by the equivalent of 0.3 and 0.7 percent of GDP, respectively.
  - Resulting 2015 overall fiscal cash deficit expected to reach 7½ percent of GDP, reflecting an adjustment of about 4½ percentage points of non-oil GDP in the non-oil primary deficit from 2014.

### Budget execution and controls
- Expenditure controls:
  - New limits on Goods and Services and Capital expenditures approved by Cabinet and enforced through quarterly budget allotments for MDAs.
  - Priority areas in energy and social sectors will be protected; ongoing capital projects prioritized.
  - Strengthened requirement for Specific Warrants and Commencement Certificates under GIFMIS to ensure capital expenditures within new limits.
  - Planned Mid-Year Review to reflect implementation effects and propose revised budget allocations to Parliament.

### Petroleum revenue management and amendments
- After four years of implementing the Petroleum Revenue Management Act, 2011 (Act 815), amendments are being considered to correct operational challenges and inconsistencies.
- One amendment under consideration: allow the Minister for Finance to go to Parliament for a downward review to the certified Benchmark Revenue (BR) when material evidence shows petroleum prices and/or output targets will not be achieved.
- Regulations for implementing amendments will be prepared with assistance of IMF experts.

### Financing strategy for 2015 deficit
- Limited access to concessional foreign financing; financing mix:
  - Foreign financing to be covered by project disbursement; authorities intend to issue a new Eurobond to help replace expensive debt.
  - Remaining financing gap to be covered by development partners, including the World Bank and program support from bilateral partners.
  - If foreign program grant and loan financing shortfall occurs, offset by spending cuts and increased domestic financing.
  - Gross central bank financing limited to 5 percent of previous year’s revenue, through marketable financial instruments.
  - Rest of domestic financing from deposit money banks and non-banks via treasury bills and bonds.
  - Government will analyze absorption capacity of domestic financial market and seek IMF Technical assistance to deepen the domestic bond market and guide budget financing and debt management strategy.

### Monetary policy stance for 2015
- Objective:
  - Re-anchor inflation expectations and restore effectiveness of the inflation-targeting (IT) framework.
- Strategy:
  - Disinflation supported by fiscal consolidation, including lower central bank financing of the budget deficit, and greater foreign exchange market stability.
  - Bank of Ghana aims for progressive convergence toward the medium-term inflation target range, with inflation projected to decline to a 12-month rate of 12 percent by end-2015.

### Structural reform agenda — Public financial management and tax reforms
- Overarching need:
  - Strengthen fiscal institutions, public expenditure management, and revenue mobilization; implement real sector and financial sector reforms to support monetary policy.
- Tax administration and policy reforms:
  - Strengthen Ghana Revenue Authority headquarters and finalize a strategic plan for 2015-2017.
  - Integrate VAT Service and Internal Revenue Service under a single domestic tax revenue division.
  - Modernize tax processes with electronic platforms and shift to a functional form of administration in all tax offices.
  - Complete reenactment of tax laws, notably income tax and revenue administration Bills.
- Tax policy measures:
  - Rationalize the tax regime and reduce tax exemptions; strengthen natural resources revenue management.
  - Commitments include eliminating vehicle tax exemptions to free zones; reduce exemption on corporate income tax for free–zone companies by increasing corporate income tax from 8 percent to 25 percent after tax holidays; freeze issuance of new permits pending parliamentary approval.
  - Reviews to be conducted by September 2015 to identify exemptions to be eliminated with the 2016 Budget:
    - Ghana Investment Promotion Center (GIPC) law to eliminate its role in granting exemptions.
    - Tax exemptions granted to SOEs, including VALCO and VRA.
    - Overall tax treatment of Free Zone Enterprises.
  - Publication of an inventory of all tax expenditures and associated fiscal costs as an annex to the 2016 Budget.

*International Monetary Fund — Ghana: selected sections from IMF staff report content unit _cr15103*

### annex will indicate: the public policy purpose of each provision, its duration, the intended

### _cr15103 - annex will indicate: the public policy purpose of each provision, its duration, the intended

### Resource Revenues Management
- Government intends, with IMF technical assistance, to improve performance in resource revenues management to increase receipts from natural resources.
- Commitment to ensure that natural resource revenues and their use are fully and transparently included within the budget.
- Continued adherence to Extractive Industries Transparency Initiative (EITI) framework and recommendations.

### Tax Administration
- Ghana Revenue Authority (GRA) Strategic Plan for the 2015-2017 period with five strategic goals to strengthen revenue administration; preparations complete and approval by the GRA Board expected before March 2015.
- Significant full-time resources assigned to priority reforms over the three year lifespan and strengthening of project management skills.

- TRIPS (Total Revenue Integrated Processing System):
  - Purpose: automate GRA processes and provide critical information for taxpayer compliance management.
  - System development and testing complete; roll out phase started.
  - Rollout status:
    - Most functions completed for the large taxpayer office (LTO) and for two medium taxpayer offices (MTOs) located in Accra.
    - Rollout for the remaining 6 MTOs in Accra will be completed by end-December 2015.
  - LTO and Accra-based MTOs collect the bulk of GRA’s domestic revenue collections.
  - TRIPS rollout process to be evaluated with donors’ assistance.

- Taxpayer segmentation and thresholds (targeted by end-August 2015):
  - New Income Tax law (before Parliament) will include a new turnover-based presumptive tax scheme for small taxpayers.
  - VAT threshold to be increased from GHc 120000 to GHc 200000.
  - Turnover threshold for large taxpayers to be raised to GHc 10 million.
  - Communication to taxpayers by September 2015; strict application starting January 2016.

- VAT refund regime reforms:
  - Centralize control and monitoring of VAT refunds by March 2015.
  - Issue new directives for VAT refund processing to LTO and MTO offices.
  - Legislative changes to extend the period for processing refund claims from one to three months.
  - Ensure payment of interest according to the current law by March 2016.
  - Seek technical assistance and progressively prepare strategy by September 2015 for full deployment in the 2016 Budget.

- Customs priorities for 2015 (dependent on external funding/support):
  1) Establishment of a modern Valuations and Classifications Unit.
  2) Implementation of an effective post-clearance audit capacity.
  3) Strengthening of risk management capabilities.
  - Support from the Dutch and Danish governments and the World Customs Organization.

### Reforms to Improve Public Financial Management (PFM)
- Reform components include: a new PFM reform strategy and revised legal framework; measures to strengthen budget credibility; continued implementation of GIFMIS; comprehensive payroll reform; comprehensive public sector reform.

- PFM Reform Strategy:
  - New comprehensive PFM reform strategy and action plan to address weaknesses identified in diagnostics (including PEFA reports).
  - Key objectives: restore budget credibility; enhance comprehensiveness and transparency; improve predictability and control in budget execution; improve accounting recording and reporting; strengthen internal and external controls; improve treasury and cash management.
  - To be presented for Cabinet approval by August 2015.

- Revised PFM Legal Framework:
  - Review covers: Financial Administration Act (FAA), Financial Administration Regulations (FAR), Loans Act, Petroleum Revenue Management Act, and other relevant laws.
  - Aim: clarify scope and institutional arrangements; strengthen budget formulation and execution; improve treasury management, accounting and reporting; introduce provisions on fiscal responsibility and debt management.
  - Review to be completed by June 2015.
  - Draft bills to be presented to Cabinet and approved by December 2015; related bills to be submitted to parliament for approval in 2016.

- Strengthening budget credibility:
  - Integrate MTFF and MTEF with Hyperion Budget Preparation System; pilot phase launched by September 2016.
  - Salary costs fully integrated in MTEF and PBB; Controlling Officers to be responsible for entire budgets.
  - Adopt revised calendar for 2016 Budget preparation: share Budget Strategy Paper (BSP) with Parliament by end-July.
  - Review revenue forecasting system for better integration and robustness of forecasting models.

### Strengthening GIFMIS
- GIFMIS aims to provide an ICT financial platform to improve PFM.
- Status as of end-2014:
  - GIFMIS rolled-out to 205 spending units in Accra, 350 at the Regional MDAs and 7 pilot MMDAs on the Consolidated Funds.
  - Harmonized Chart of Account (COA) developed and used to prepare the 2013, 2014 and 2015 budgets.
  - Payroll upgraded and integrated with GIFMIS in June 2014 and is used to pay salaries.
  - Budget software module (Hyperion) installed and used by all MDAs for the 2015 budget.
  - Electronic Funds Transfer (EFT) implemented and used by MDAs and MMDAs.
  - Fixed Assets module piloted at 5 MDAs in 2014.
- Government committed to continue strengthening GIFMIS.

- Budget execution controls:
  - Shift focus from cash stage to commitment stage to prevent accumulation of arrears.
  - All purchase orders (including contract awards) to be made using the Procure-to-Pay (P2P) module of GIFMIS.
  - Administrative order issued: only duly authorized purchase orders from GIFMIS recognized as valid commitments.
  - Review existing legal framework to introduce these requirements into revised PFM law.

- Extending GIFMIS coverage:
  - Include transactions related to revenues and expenditures of Internally Generated Funds (IGFs) in GIFMIS for 5 MDAs (headquarters and regional levels) by September 2015.
  - Extend to all 33 MDAs (headquarters and regional levels) by June 2016.

- Budget performance reporting:
  - Publish monthly budget performance reports on the Ministry of Finance website from June 2015.

- Accounting standards:
  - Shift budget and financial accounting from cash to accrual basis over a period of five years from January 2016.
  - Develop strategy for phased transition focusing on most material liabilities first.
  - Aligned with adoption of International Public Sector Accounting Standard (IPSAS).

### Payroll and Human Resource Management
- Single Spine Pay Policy (SSPP) background:
  - SSPP announced in 2008, came into force in 2010.
  - Wage bill in 2014 absorbed about 50 percent of total tax revenue.
  - Payroll upgraded and integrated with GIFMIS financials.

- Payroll Management and Controls — cleaning of the payroll database (actions and dates):
  - Removal from payroll of public employees with zero bank account who did not come forward following suspension of payments made in September and October (End-February 2015, prior action).
  - Audit of all newly created bank accounts as part of validation of employees previously with zero bank account (End-March 2015).
  - Extend suspension of salary payments to employees without SSNIT numbers by April 2015.
  - Complete rollout of the E-SPV system nationwide; heads of MDAs to validate monthly payroll lists and eliminate duplicates by June 2015.
  - Full biometric validation of all employees on the mechanized payroll by June 2015.
  - Migrate employees of subvented agencies into the mechanized payroll by December 2015.

- Improve system security (actions and dates):
  - Merge existing payroll databases into a unique and properly secured database; process to be certified by an audit by mid-May 2015.
  - New payroll management guidelines/policy adopted by end-March 2015 to establish accountability standards.
  - Integrate payroll with GIFMIS financial accounting, budget and HRMIS systems.
  - Further enhance private sector support for Government’s payroll program.

- Sanctions and asset recovery:
  - Large scale public audit of payroll management by Internal Audit Agency with Public Service Commission and Controller and Accountant General’s Department; audit to be completed and published online before June 2015 with follow-up before end-2015.
  - Review and strengthen administrative sanctions regime, including asset recovery where appropriate.
  - Evidence of officials entering false data to be referred to enforcement authorities for prosecution.

- Reporting and oversight:
  - Ministry of Finance started issuing monthly wage bill reports with details by MDAs.
  - Inter-ministerial Committee established to drive and monitor the payroll clean-up plan; Committee to publicize plan and prepare quarterly implementation reports starting in March 2015.

- Human Resource Management (HRMIS rollout):
  - Roll out GIFMIS HRMIS to five pilot MDAs (including Ministries of Health and Education) by December 2015 and to all MDAs by December 2016.
  - Independent evaluation post-rollout to assess security controls and guideline compliance.
  - Integrate GIFMIS Payroll, financial HRMIS and Hyperion in Health and Education by June 2016.

- Hiring controls:
  - Recruitment to occur only after Ministry of Finance approval; effective date of recruitment not to precede financial clearance date.
  - Sanctions under law to be applied to non-compliant controlling officers.

- Weaning off subvented agencies from Government payroll:
  - Identified 3 Subvented Agencies (Energy Commission, Environmental Protection Agency, Driver and Vehicle Licensing Authority) with capacity for financial independence based on IGFs.
  - Nine other agencies under review.
  - Steps: publish financial information on all agencies as annex to 2016 Budget; Committee to make recommendations for weaning off agencies from payroll.

- Pay reform:
  - Starting in 2015, public sector salary and salary-related negotiations to be completed by September, before budget finalization and submission to Parliament in November.
  - Negotiations to cover a 3-year period on a rolling basis.

### Treasury and Cash Management
- Treasury Single Account (TSA):
  - TSA implementation completed and functional for 633 Government accounts at the Bank of Ghana since October 2013.
  - As of June, 2014 over 11,500 bank accounts identified across all government institutions for rationalization.
    - Of these: 2,000 have been closed; 700 earmarked for the TSA; remaining 8,800 include Commercial Bank accounts used for IGFs, Donor Funds and statutory funds across MDAs and MMDAs.

- TSA strategy and Cabinet approval:
  - Concept paper to be presented for Cabinet approval by August 2015 covering inclusion of IGFs for all 33 MDAs using GIFMIS, interfaces for cash and debt management among Ministry of Finance, Bank of Ghana, and Controller and Accountant-General’s Department.

- Preparation for zero financing from Bank of Ghana starting January 2016:
  - Ministry of Finance to enhance cash planning and management capacity, possibly with IMF technical assistance.

### Civil Service Reform
- Comprehensive plan to rationalize size and increase efficiency of civil service and allied services on payroll; strategic plan ready in December 2015.
- Actual rationalization of staff expected to begin in 2017.
- Supporting elements: full implementation of GIFMIS Phase II, HR modules interfacing with payroll under GIFMIS Phase I, organizational and functional reviews of all MDAs, decentralization strategy covering administration and legal reforms.

### Restructuring Statutory Funds
- Rigidities in budget arise from statutory funds with fixed shares of revenues, limiting government discretion and contributing to arrears.
- Review of administrative and legal framework guiding Statutory Funds by June 2015 as part of PFM legal framework review.
- Goal: introduce flexibilities and efficiencies and enhance transparency and accountability in the 2016 budget.

### Arrears Clearance Strategy
- Causes of arrears build-up identified: inadequate overall budgetary resources and ceilings due to revenue constraints; fiscal rigidities; cash flow constraints from revenue shortfalls; weaknesses in budgeting; weak position management; absence of sound budget and accounting systems; cash accounting framework not tracking commitments and liabilities.
- Allocations in 2015-2017 budgets to clear stock of arrears over a three-year period in almost equal installments.
- Mechanism to report all commitments and outstanding payments across MDAs (salaries, goods and services, debt repayments, tax refunds).
- Systems and processes under GIFMIS, Chart of Accounts and Accounting Standards to be upgraded.
- PFM laws to be updated and basis of accounting changed from cash to accrual.

### Debt Management Policy
- Objectives: safeguard debt and fiscal sustainability; meet financing needs and payment obligations at lowest possible cost over medium to long run, consistent with prudent risk.
- Develop a comprehensive medium-term debt management strategy based on cost and risk analysis; Cabinet approval by end-June 2015.
- Future borrowing to be consistent with agreed envelope of non-concessional borrowing limits under the program.
- New PFM legal framework to include provisions articulating debt management objectives, requirement to prepare medium-term debt management strategy, approval process, reporting requirements, and measures to strengthen transparency.

- Debt management risk framework to address:
  - Refinancing risk:
    - Extend maturity of domestic public debt by replacing short-term domestic debt with longer-term debt.
    - Maximize concessional loans with long final maturities and grace periods.
    - Tap international capital markets to refinance and/or pre-finance maturing external debt notably the 2017 Eurobond.
    - Engage in liability management operations consistent with international best practices.
  - Interest rate risk:
    - Manage expected increase in global interest rate by minimizing external variable rate debt.
  - Exchange rate risk:
    - Develop domestic debt market: introduce benchmark securities; promote a more active money market; broaden investor base; develop market infrastructure; stimulate secondary market for government securities.

- Operational support measures:
  - Build cash buffers; strengthen management of on-lending portfolio; reduce exposures to contingent liabilities.
  - Creation of a Debt Service (Sinking Fund) Account as required under the Financial Administration Act, 2003, Act.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 654. The Ministry of Finance is using part of the funds from the excess on the Ghana

### _cr15103 - 654. The Ministry of Finance is using part of the funds from the excess on the Ghana

### On-lending policy, Sinking Fund, and sovereign guarantees
- The Ministry of Finance is using part of the funds from the excess on the Ghana Stabilization Fund (PRMA, 2011, Act 815) to accomplish this goal. The Sinking Fund will be used to manage Ghana’s Sovereign Bond commitments.
- Strengthening the management of the on-lending portfolio:
  - Government is implementing an on-lending policy for all commercial and semi-commercially-viable projects, following approval by Cabinet and Parliament.
  - Government loans will be passed on as on-lending facilities under the Financial Administration Act, 2003, Act 654 to the entities implementing and running these projects.
  - Implementing entities will be obligated to repay on-lent amounts to the government according to the debt service schedule, using revenues generated by the commercial projects.
  - Objective: limit exclusive reliance on the taxpayer for servicing commercial loans.
  - Government has been recovering loans under this policy already (examples given: thermal plants, power grid lines, and Bui dam).
  - Evaluation of projects will be on a case-by-case basis, based on:
    - economic rate of return,
    - impact on debt sustainability including reverse impact from loan recovery accounts,
    - other alternatives to achieve the same developmental goals.
  - Government will provide to the Fund a semi-annual listing of projects being considered for market-related foreign financing, with a first report provided at the time of the first program review.
- Minimizing the use of sovereign guarantees:
  - Government intends to minimize use of sovereign guarantees that are contingent liabilities to the Government balance sheet, consistent with the agreed debt limits framework.
  - Government has started discussions with the World Bank and African Development Bank on the use of partial risk guarantees by these institutions for commercial projects, especially those with high positive returns financed by the private sector.

### Monetary policy framework and Bank of Ghana (BoG) operations
- Inflation-targeting framework:
  - BoG announced a medium-term inflation target of 8 percent, supported by the Ministry of Finance in the 2015 budget.
- Limits on BoG financing of government and public institutions:
  - BoG financing will be limited to 5 percent of previous year’s budget revenue (continuous ceiling for 2015), only using purchasing Treasury-bills in non-competitive bidding.
  - All existing overdraft balances at the end of each quarter will be securitized and registered in the BoG’s claims on the central government account.
  - A new Loan and Fiscal Agency Memorandum of Understanding (MoU) with the Ministry of Finance formalizes this limit on BoG financing of the central government (prior action).
  - From 2016 onwards, a zero financing of government from the BoG will be in effect in anticipation of the amendment of the BoG Act.
- Monetary policy operations and instruments:
  - Monetary policy liquidity operations will be guided by the Monetary Policy Committee (MPC) decisions on the reference interest rate and the corresponding standing facilities interest rate band.
  - Operations aim to converge interbank and monetary policy rates within the corridor around the monetary policy reference rate.
  - BoG will run all liquidity operations using BoG bills, eliminating OMO bills (T-bills issued for monetary operations purpose) to increase transparency and distinguish monetary operations from placement of public debt bonds.
  - The currently existing two weeks BoG bills will be maintained, and the introduction of a 2 months BoG bill will be required to target more structural liquidity conditions.
  - Budget financing targets and auction decisions are to be taken solely by MoF, with BoG acting only as the agent.
- Program safeguards and performance criteria:
  - The program will be initially guided by targets on monetary aggregates alongside a floor on net international reserves (PC).
  - A ceiling for Net Domestic Assets of the BoG will be initially set as a performance criterion (PC) as a quantitative safeguard.
  - This could be replaced by a monetary policy consultation clause during the program once inflation declines towards the program inflation targets and after successful implementation of reforms in monetary operations.
  - A performance criterion (PC) on net international reserves will support efforts to maintain adequate external buffers.
- Exchange rate and foreign exchange market reforms:
  - BoG will strengthen the interbank foreign exchange system and has adopted a strictly rules-based method using market transactions to determine its daily official exchange rate (prior action).
  - The reference rate will be a weighted average of interbank rates, and rates of corporate and retail transactions executed across the banking industry.
  - BoG began implementing an online foreign exchange trade tracking system since January 2014 to enhance transparency and price discovery.
  - BoG will present and adopt by end-April 2015, after consultation with IMF staff, a time-bound plan to eliminate by June 2016 the compulsory surrender requirements of foreign exchange.
  - BoG will stop providing foreign currency funding for priority sector imports in line with this reform (adoption of the plan is a structural benchmark by end-April 2015).

### Financial sector supervision, diagnostics, and legislation
- Overall system resilience and prudential measures:
  - The Ghanaian financial system has weathered difficult economic conditions well; capital, liquidity and profitability have held up despite cedi depreciation and slowdown in demand.
  - Forward-looking measures will be implemented to ensure continued strength and stability under subdued conditions.
- Legal and institutional reforms:
  - After further consultation with the IMF, the Banks and Specialized Deposit-Taking Institutions Bill and the Ghana Deposit Protection Bill will be submitted to Parliament (Structural Benchmark by mid-May 2015).
  - These laws aim to clarify the legal framework and provide BoG with strong, comprehensive and flexible tools for regulation, supervision and resolution in line with best international practices.
- Asset quality, diagnostics, and provisioning:
  - Non-performing loan ratio has slightly declined over the past year (to 11.3 percent).
  - Many firms have come under financial stress and loan restructurings have increased; banks’ corporate customers’ capital and financial buffers have weakened in some cases.
  - BoG and external audit firms will undertake a special diagnostic audit to review asset classification and valuation, provisioning and loan restructuring practices in commercial banks.
  - BoG will agree terms of reference with the IMF by April 2015, and implement the diagnostic by September 2015.
  - BoG will develop guidelines and regulations on loan classification and provisioning practices by December 2015.
  - Where necessary, BoG will advise banks exhibiting lower Capital Adequacy Ratios (CAR) to raise their capital, including by suspending dividend payments if needed.
- Deposit insurance and supervisory cooperation:
  - Drafting of the enabling act for establishment of a deposit insurance scheme in Ghana by May 2015 (Structural benchmark) has progressed.
  - BoG continued participation in the College of Supervisors of the West African Monetary Zone (CSWAMZ), including information exchange and joint examinations.
  - BoG is initiating memorandums of understanding (MOUs) with counterpart regulators to strengthen information exchange and cross-border bank resolution.
  - BoG will intensify collaboration with central banks in the sub-region and counterpart domestic regulators to strengthen cross-border and cross-sector supervision.
- Microfinance oversight:
  - BoG will continue to strengthen oversight of microfinance institutions:
    - Minimum capital requirements have been raised and will be enforced, complemented by intensified onsite supervision.
    - A dedicated department for rural and microfinance supervision has been created.
    - BoG will equip umbrella associations with logistics to help monitor microfinance institutions.
- Bank of Ghana Act review:
  - BoG is reviewing the Bank of Ghana Act and will prepare a new Act to be submitted to Parliament by end-December 2015.
  - The new Act will aim to:
    - strengthen the functional autonomy of the bank from the government;
    - establish the duration of the appointments of both the Governor and the other members of the Bank of Ghana’s Board;
    - introduce explicit rules to preserve the personal autonomy of the Board and audit committees;
    - set clear rules and mechanisms for emergency lending to banks in distress;
    - institutionalize zero-limits on BoG monetary financing to the central government and to public institutions (including SOEs);
    - ensure full compliance with IFRS.

### Risks and contingencies
- Key downside risks to the program include:
  - an abrupt increase in global financial market volatility leading to lower private capital inflows,
  - a sustained decline in key commodity prices (gold, cocoa and oil),
  - economic slowdown in main trading partners,
  - a deepening of the energy crisis currently affecting Ghana.
- If these risks materialize, the government stands ready to adjust its policies, in close consultation with IMF staff, to ensure achievement of a sustainable external position by the end of the program period.

### Data provision and national accounts improvements
- The government commits to continue enhancing the quality of its national account statistics and to produce national accounts data in line with the System of National Accounts (SNA), and to justify any deviations from SNA.
- Ghana Statistical Service (GSS) will collaborate with AFRITAC West 2 advisers providing technical assistance on national accounts.
- GSS released in January, 2015 a revision of the national accounts historical data and projections, reflecting improved quality data sources and an improved methodology to compute Net Indirect Taxes.

*International Monetary Fund — Ghana: selected program measures and reforms as described in the source content.*

### 87.      GSS is currently updating its Statistical Development Plan (expected release in 2016). GSS

### _cr15103 - 87.      GSS is currently updating its Statistical Development Plan (expected release in 2016). GSS

### Statistical development and data improvements
- GSS is updating its Statistical Development Plan (expected release in 2016).
- Ongoing and planned actions:
  - Rebase of the Annual National Accounts (ANA).
  - Develop a strategy to produce ANA (both production and expenditure approaches) on an ongoing basis independent of the Quarterly National Accounts (QNA).
  - Estimate QNA by the expenditure approach (expected release in 2015).
  - Price statistics: reweighting of the CPI (expected release in 2016).
  - Focus on improving data sources on an ongoing basis.
  - Advising the Ministry of Labor on development of labor statistics.

### Information dissemination and transparency measures
- Ministry of Finance commitments:
  - Publish monthly central government fiscal outturns on its website with a maximum lag of six weeks, starting in June 2015.
  - Develop a framework in 2015 to enable publication from 2016 of:
    - Fiscal data on local governments;
    - Revenues and expenditure of extra-budgetary funds and subvented agencies;
    - Financial statements of state owned enterprises;
    - Public Investment Plans;
    - Monthly wage performance reports by MDAs and MMDAs.

### Nonconcessional financing reporting
- Ministry of Finance will provide a listing and status report for projects being considered for nonconcessional financing for end-June and end-December of each year.

### Program monitoring and institutional responsibilities
- Ultimate responsibility for program monitoring and coordination: Ministry of Finance and Bank of Ghana.
- Monitoring approach:
  - Consult with CAGD, GRA, GSS and NDPC within the Economic Policy Coordinating Committee (EPCC) framework.
  - Oversight responsibility for ensuring public spending compliance with budget limits.
- Reporting and safeguards:
  - Program monitored via periodic performance criteria, continuous performance criteria and indicative targets as at end-April 2015, end-August 2015 and end-December 2015 (see Table 2).
  - Structural benchmarks to monitor reform progress (see Table 3).
  - Detailed definitions and reporting requirements are in the Technical Memorandum of Understanding (TMU).
  - During the program period, the government will not introduce or intensify restrictions on payments and transfers for current international transactions or introduce or modify any multiple currency practice without the IMF’s prior approval; will not conclude bilateral payments agreements incompatible with Article VIII; will not introduce or intensify import restrictions for balance of payments reasons.
- Review schedule:
  - Completion of the first review expected on or after July 15, 2015 with end-April 2015 as test date.
  - Completion of the second review expected on or after November 15, 2015 with end-August 2015 as test date.
- Government obligations:
  - Provide information needed to assess program progress as specified in the TMU.
  - Consult with Fund staff on measures as needed.
  - Intends to make the letter and the TMU available to the public and authorizes the IMF to post them on the Fund’s website subsequent to Executive Board approval.

### Financing request and prior actions
- Request:
  - Board approval of policies in the MEFP and disbursement of the first loan installment totaling SDR 83.025 million, out of a total three-year arrangement of SDR 664.20 million.
- Prior actions (status: Completed):
  - (i) Adoption of a 2015 Budget consistent with the agreed front-loaded fiscal consolidation path, including the agreed revenue measures underpinning it (i.e., a budget deficit of GHc. 7,117 million (equivalent to 5.3 percent of GDP) on a commitment basis). — Completed
  - (ii) Adoption of an agreement establishing a ceiling of 5 percent of previous year's budget revenue for monetary financing of the budget through government overdrafts or loans from Bank of Ghana in 2015 (continuous ceiling). — Completed
  - (iii) Institution and implementation of a strictly rules-based method using market transactions to determine BOG's official exchange rate. — Completed
  - (iv) Implement petroleum products price structure reflecting full cost-recovery, including the VAT on petroleum products. — Completed
  - (v) Announce a medium-term inflation target, endorsed by MOF. — Completed
  - (vi) Cabinet approval and public announcement of additional adjustment measures amounting to GHc. 1,265 million to mitigate the impact of lower oil prices and keep total public debt accumulation as approved in the 2015 budget. — Completed
  - (vii) Finalize the validation process of public employees with no bank account that will be removed from the payroll and publish a report on the clean up, including the number of public employees suspended or under investigation. — Completed
  - (viii) Publication by the inter-ministerial committee on the payroll of the plan to clean-up the payroll and strengthen its management prepared by the Controller General. — Completed

### Quantitative program targets (Table 2 highlights)
- Scope note: Targets as defined in the attached Technical Memorandum of Understanding (TMU).
- Selected quantitative performance criteria and indicative targets (2014 historical columns and 2015 cumulative targets are presented in the source):
  - Primary fiscal balance of the government (floor in millions of cedis): 2014 Apr. -3,555; Aug. -544; Dec. -380; I -422.
  - Wage Bill (ceiling; in millions of cedis): 2014 Apr. 9,449; Aug. 3,413; Dec. 6,857; I 10,286.
  - Net international reserves of the Bank of Ghana (floor; millions of U.S. dollars): 2014 Apr. 2; Aug. 1,415; Dec. 1,042; I 331; I 1,962. (Program definition excludes foreign currency deposits in BOG. Defined as a level.)
  - Net Domestic Assets of Bank of Ghana (ceiling; millions of cedis): 2014 Apr. 3; Aug. 3,095; Dec. 5,755; I 8,772; I 4,914. (Net domestic assets is computed using the program's exchange rate of GHc 3.40 per U.S.$1 as defined in the TMU. Defined as a level.)
  - Net change in stock of arrears (ceiling, millions of cedis): 2014 Apr. 428; Aug. -424; Dec. -1,001; I -1,561.
- Continuous performance criteria:
  - Gross financing of BoG to the Government and SOEs (ceiling; in millions of cedis): 2014 Apr. 13,603; Aug. 14,614; Dec. 14,614; I 14,614. (Defined as a level.)
  - Non-accumulation of external arrears (ceiling; millions of U.S. dollars): ...000
  - Non-accumulation of domestic arrears (ceiling; millions of cedis): ...000
  - Contracting or guaranteeing of new external nonconcessional debt (ceiling; millions U.S. Dollars): ...0; 1,000; 1,000; 1,000.
- Indicative targets:
  - Program central target rate of inflation (12 month percentage change): 2014 Apr. 17.0; Aug. 15.4; Dec. 13.8; I 12.0.
  - Social Protection (floor, in million of cedis): 2014 Apr. 947; Aug. 388; Dec. 806; I 1,294.

### Structural reform benchmarks for 2015–16 (Table 3 highlights)
- Revenue administration and tax policy:
  - Revenue administration: Adoption of the presumptive income tax, followed by revision of VAT thresholds — Indicative timeframe: August 2015. Economic rationale: To enhance compliance in tax payments. (Paragraph 44)
  - Tax policy: Identify exemptions to SOEs and free zone companies that will be eliminated in 2016, to be included in the 2016 budget, and further eliminate GIPC’s role in granting exemptions — Indicative timeframe: September 2015. Economic rationale: Broaden tax base. (Paragraphs 38-39)
- Public Financial Management (PFM):
  - Human resource management: Finalize roll out the HRMIS to remaining MDAs — Indicative timeframe: December 2016. Rationale: To strengthen the control on net hiring and the wage bill. (Paragraph 58)
  - Integration of the GIFMIS Payroll, financial HRMIS and Hyperion in the Health and Education sectors — Indicative timeframe: June 2016. Rationale: To strengthen the control on net hiring and the wage bill. (Paragraph 58)
  - Payroll management: Audit of the payroll database and security system — Indicative timeframe: May 15, 2015. Rationale: Improve security of the payroll system. (Paragraph 57)
  - Biometric validation of all employees on the mechanized payroll, as well as publication of the public audit of payroll management — Indicative timeframe: June 2015. Rationale: Cleaning of the payroll database. (Paragraph 57)
  - Migrating employees of subvented agencies into the mechanized payroll — Indicative timeframe: December 2015. Rationale: To strengthen control on net hiring and the wage bill. (Paragraph 57)
  - Approval by Cabinet of a new PFM reform strategy and action plan, including a strategy for completion of the Treasury Single Account (TSA) — Indicative timeframe: August 2015. Rationale: To revamp PFM reform effort. (Paragraphs 48/63)
  - Approval by cabinet of drafts of Bills to amend existing PFM legal framework (clarify scope, strengthen budget formulation and execution, treasury management, accounting and reporting; introduce fiscal responsibility and debt management provisions) — Indicative timeframe: December 2015. Rationale: To strengthen the PFM system. (Paragraphs 49/70)
- Public service reform:
  - Adoption by Cabinet of a comprehensive civil service reform strategy designed with assistance of development partners — Indicative timeframe: December 2015. Rationale: To rationalize the size and increase the efficiency of public sector. (Paragraph 65)
- Debt management:
  - Approval by Cabinet of a medium-term debt management strategy with clear risk priorities and plans, and its publication — Indicative timeframe: June 2015. Rationale: To have a clear financing strategy communicated with the market to reduce uncertainty and borrowing costs. (Paragraph 70)
- Monetary policy and financial sector:
  - Bank of Ghana Act: Submit to Parliament a revised Law strengthening BOG autonomy; sets a zero limit on monetary financing; appointment durations for Governor and Board; rules for emergency lending; ensures compliance with IFRS — Indicative timeframe: December 2015. (Paragraph 84)
  - Exchange rate: Adopt a plan to eliminate the compulsory requirement of foreign exchange to BoG and stop provisions of foreign currency funding for priority sector imports — Indicative timeframe: April 2015. Rationale: Support market-based determination of the exchange rate and deepening of the foreign exchange market. (Paragraph 78)
  - Prudential supervision:
    - Submit to parliament a new Banks and Specialized Deposit-Taking Institutions Bill providing BOG authority for prompt corrective action, liquidity support instruments, clear triggers for bank resolution, and a range of bank resolution tools — Indicative timeframe: May 15, 2015. (Paragraph 79)
    - Submit to parliament a Deposit Insurance Bill consistent with the Banks SDI bill; establishes an institution responsible for paying deposits from recovered assets of failed banks; ensures incentives do not undermine market discipline — Indicative timeframe: May 15, 2015. (Paragraph 81)
  - Diagnostic review: Complete an asset quality review of the banks, undertaken by independent third parties, in consultation with IMF staff — Indicative timeframe: September 2015. Rationale: Ensure prudent standards in banks’ underwriting and credit evaluation practices. (Paragraph 80)

### Technical Memorandum of Understanding (TMU)
- The TMU defines variables subject to quantitative targets (performance criteria and indicative targets) as specified in the LOI and MEFP of March 20. The TMU contains detailed definitions and reporting requirements for all performance criteria and defines the scope and frequency of data to be reported for program monitoring purposes.

*Source: Extracts from the IMF staff report content unit _cr15103 (selected sections and tables as provided).*

### 2015. It also describes the methods to be used to assess the program performance and the

### _cr15103 - 2015. It also describes the methods to be used to assess the program performance and the

### Program design and exchange rate
- Program exchange rate: GH¢ 3.40 per US$1 (calculated as the average of buying and selling exchange rates reported by banks to the Bank of Ghana (BOG)). Exchange rates to other currencies calculated as the average of buying and selling exchange rates against the U.S. dollar.
- Program monitoring dates: end-April 2015, end-August 2015, and end-December 2015. Performance criteria, indicative targets, and adjusters are calculated as cumulative flows from the beginning of the calendar year, unless indicated otherwise.

### Quantitative performance criteria (summary)
- Performance criteria under the arrangement include:
  - a floor on the primary cash fiscal balance of the government, measured in terms of financing;
  - a ceiling on gross credit to government by the Bank of Ghana (level);
  - a floor on the net international reserves of the Bank of Ghana (level);
  - a ceiling on net domestic assets of Bank of Ghana (level);
  - a ceiling on wages and salaries;
  - a ceiling on the net change in the stock of domestic arrears;
  - a continuous non-accumulation of domestic arrears;
  - a continuous non-accumulation of new external arrears; and
  - a ceiling on the contracting or guaranteeing of new external nonconcessional debt.
- Indicative targets:
  - an indicative target for the twelve-month rate of consumer price inflation (discussions with the Fund to be held if inflation does not reach the target);
  - a floor on poverty-reducing government expenditures.

### Government definitions and fiscal aggregates
- Government defined as: central government, all special funds (including the Ghana Education Trust Fund, the Road Fund, the District Assemblies Common Fund, and the National Health Insurance Fund), and all subvented and other government agencies classified as government in the Bank of Ghana Statement of Accounts (SOA). SSNIT and public enterprises (including Cocobod) are excluded.
- Total tax revenue: all revenue collected by the Ghana Revenue Authority (GRA) and recorded on a cash basis; includes Direct Taxes, Indirect Taxes (excises, VAT, National Health Insurance Levy (NHIL), Communication Service Tax (CST)), and Trade Taxes.
- Oil revenue: government’s tax and non-tax net proceeds from the sale of oil, excluding any revenue allocated to GNPC.
- Wage bill: sum of basic wages and allowances paid to public servants on the mechanized payroll and in subvented agencies.
- Program primary fiscal balance: cumulative from the beginning of the fiscal year, measured from the financing side as the sum of net financial transactions of the government—comprising net foreign borrowing (paragraph 14), net domestic financing (paragraph 13), receipts from net divestitures and net drawing out of oil funds—and domestic and external interest payments.

### Domestic payments arrears (measurement components)
- Domestic payments arrears measured as sum of five components:
  1. Arrears to the government’s statutory funds: any delay of more than one month in revenue transfers relative to the normal payment schedule.
  2. Employees compensation arrears: wages and salaries, pensions, gratuities, and social security arrears outstanding after the agreed date for payment.
  3. Debt service arrears: payments of domestic and external interest, amortization, promissory notes due and not settled within the contract grace period.
  4. MDAs expenditure arrears: approved invoices on GIFMIS unpaid three months after the quarter in which approved.
  5. Arrears to SOEs: payments for debt owed to SOEs due and not settled within 30 days after the end of the quarter.

### Poverty-reducing and social protection spending
- Budgeted expenditures on social protection programs taken from each year’s final appropriations bill; include only spending financed by the government or from internally generated funds. Actual spending on social protection programs (including LEAP) supplemented with transfers to the National Health Fund (NHF). Actual poverty spending excludes all donor-supported expenditure.
- Overview of Social Protection programs (as listed):
  - 1. National Health Fund (NHF)
  - 2. Provide free school uniforms
  - 3. Livelihood Empowerment Against Poverty (LEAP)
  - 4. Provide Government's subsidy for Senior High Schools
  - 5. Fertilizer Subsidy
  - 6. Implement progressively free Senior High School Program
  - 7. Basic Education Certificate Examination
  - 8. Provide feeding grant for special schools for the handicapped
  - 9. Capitation grant for Public Basic Schools across the country
  - 10. Printing and Distribution of Exercise Books to Basic School Pupils under the Social Intervention Program
  - 11. Provide 10million free exercise books to Public Basic Schools across the country
  - 12. Implement First Phase of Maths and Science Reforms for 13000 KGS, 14 000 Primary School and 80 00 JHS
  - 13. Provide core textbooks
  - 14. Capitation Grant
  - 15. Establishment supplies for all Public Basic Schools across the country
  - 16. Feeding fee for levels 100 & 200 students of colleges of education across the country

### Financing definitions and monetary aggregates
- Net domestic financing of government: change in net credit to government by the banking system (BoG plus deposit money banks) plus the net change in holdings of treasury bills and other government securities by the nonbank sector, excluding divestiture receipts.
- Net foreign financing of government: sum of project and program loans by official creditors and commercial external borrowing, minus amortization due.
- Outstanding net credit to the government by the Bank of Ghana: sum of claims on government including overdrafts, claims from accrued interest on government securities less government deposits as defined in the monetary template.
- Outstanding net credit by deposit money banks: DMB holdings of government securities at cost, direct loans less government deposits, plus deferred accrued interest on inflation-indexed bonds.
- Nonbank financing: difference between total net cash receipts to the treasury main cash account from sale/repurchase of government securities, less corresponding net cash value received from the BoG and DMBs as indicated on the Debt Registry, plus deferred accrued interest on inflation-indexed bonds.

### Bank of Ghana (BoG) monetary definitions
- Net foreign assets (monetary survey): short- and long-term foreign assets minus liabilities of the BoG contracted with nonresidents. Short-term foreign assets include monetary gold (valued at spot market rate, US$/fine ounce, London), holdings of SDRs, reserve position in the IMF, foreign notes and travelers checks, foreign securities, positive balances with correspondent banks, encumbered external assets, and other positive short-term or time deposits. Short-term foreign liabilities include foreign currency liabilities with original maturities of one year or less, outstanding liabilities to the IMF, deposits of international institutions at the BoG, and swaps with non-resident commercial banks. Long-term assets and liabilities include other foreign assets, investments abroad, other long-term liabilities to nonresidents, and bilateral payment agreements. All values not in U.S. dollars are to be converted to U.S. dollars at the program exchange rate defined in paragraph 2.
- Net international reserves (NIR) of the BoG for program monitoring: short-term foreign assets of the BoG minus short-term external liabilities. Encumbered or pledged assets and assets encumbered by BoG guarantees to third parties are excluded. All values not in U.S. dollars are to be converted to U.S. dollars at the program exchange rate.
  - NIR defined components:
    - Short term assets: Gold; Holdings of SDR; Foreign Notes and Coins; Foreign Securities/Short term dep.; Disposal Balances with Correspondent Banks; Fixed Deposits (excludes encumbered pledged assets); any other short term foreign assets.
    - Minus foreign short term liabilities: Deposits of International Institutions; Liabilities to Int. Commercial Banks; Swap Deal Payable foreign with non-resident banks. Short term liabilities should exclude liabilities with an asset counterpart that is encumbered.
    - Minus all liabilities to the IMF, SAF/ESAF/PRGF.
    - Minus all positive foreign currency deposits at the BoG held by resident deposit money banks, public institutions, nonfinancial public enterprises, other financial institutions, and the private sector.
- Net domestic assets of the BoG: difference between reserve money and net foreign assets of the BoG, converted from U.S. dollars to cedis at the program exchange rate.
- Outstanding gross credit to government by the BoG: total amount of (i) all BoG loans and advances to central government and state-owned enterprises, (ii) all government overdrafts, (iii) absolute value of government deposits reflected as negative values in the monetary survey; (iv) face value for all outstanding Government of Ghana treasury bills, notes and bonds purchased by BoG in primary and secondary markets. Includes called guarantees by BoG for operations between central government or SOEs and a third party. Excludes BoG holdings of government T-bills as collateral from commercial banks and reversible market transactions that don’t result in change of security ownership.

### Non-accumulation of new external arrears
- External payment arrears accrue when undisputed payments such as interest or amortization on debts of the government to non-residents are not made within contractual terms. This performance criterion is monitored on a continuous basis.

### Ceiling on contracting or guaranteeing new non-concessional external debt
- Debt definition: follows point 9 of the Guidelines on Performance Criteria with Respect to External Debt (Executive Board’s Decision No.6230-(79/140), as amended on August 31, 2009 (Decision No. 14416- (09/91)). Debt includes loans, suppliers’ credits, leases, and arrears/penalties arising from failure to make payments under contractual obligations that constitute debt.
- External debt for this ceiling: any debt denominated in foreign currency other than Ghanaian cedis (GH¢). External borrowing is borrowing denominated in foreign currency.
- Nonconcessional external debt: external debt contracted or guaranteed by the government, the BoG, and specified public enterprises on non-concessional terms. External debt and concessionality reported by Debt Management Division, Ministry of Finance and Economic Planning, measured in U.S. dollars at current exchange rates.
- Public enterprises covered by the ceiling: (i) Tema Oil Refinery; (ii) Ghana National Petroleum Company; (iii) Ghana National Gas Company; (iv) Volta River Authority; (v) Electricity Company of Ghana; (vi) GRIDCO; (vii) Ghana Water Company Limited; (viii) GIIF. Ceiling applies to debt and commitments contracted or guaranteed for which value has not yet been received.
- Concessionality rule: a debt is concessional if it includes a grant element of at least 35 percent. Grant element calculated as difference between NPV of debt and nominal value, expressed as percentage of nominal value. NPV calculated by discounting future debt service payments at a 5 percent discount rate. Loans from private entities are not concessional unless accompanied by a grant or grant element from a foreign official entity such that combined grant element is at least 35 percent.
- Exclusions from the performance criterion: use of Fund resources, rollover of BoG’s existing liabilities, normal import-related credits, pre-export financing credits of public enterprises, cocoa loans collateralized by cocoa contracts, and individual leases with a value of less than US$100,000.

### Adjustors to program targets
- Primary fiscal deficit adjustors (2015–17): deficit ceilings adjusted for excesses/shortfalls in oil revenue and program loans and grants relative to program assumptions:
  - i) Downward (upward) by 50 percent of any excess (shortfall) in oil revenue.
  - ii) Downward by 50 percent of any shortfall in concessional program loans.
  - iii) Upward for the full amount of any excess in concessional program loans where used to repay outstanding domestic arrears faster than programmed.
  - iv) Downward by the full amount of any excess of program grants less any use of program grants used to repay outstanding domestic arrears faster than programmed.
  - v) Upward by 50 percent of any shortfall in program grants.
- Net international reserves (NIR) adjustors:
  - NIR floors adjusted upward for any excess of budget grants and loans relative to the program baseline, except where used to repay outstanding domestic arrears faster than programmed.
  - NIR floors lowered by 50 percent of any shortfall in budget grants and loans relative to the program baseline.

### Budget financing and oil revenues, 2015 (as presented)
- Budget Financing and oil revenues, 2015
  - (Ghc millions, cumulative from the start of the calendar year)
  - April 2015 August 2015 December 2015
  - Program grants0750915
  - Program loans 0748789
  - Oil revenues 5168631208
  - 1/ Used to compute adjustors for performance criteria for end-April, end-August, and end-December.

### Data provision and reporting requirements
- Data for variables subject to performance criteria and indicative targets to be provided to Fund staff monthly with a lag of no more than eight weeks (except select data with specified lags). Authorities to transmit promptly any data revisions and consult with Fund staff on relevant information not defined in the memorandum. Prospective external loan agreements to be shared with Fund staff before submission to cabinet and before contracting.
- Table 1: Selected reporting frequencies and lags (highlights):
  - Central budget operations for revenues, expenditures and financing, including clearance of arrears: Monthly, within six weeks of the end of each month.
  - Divestiture receipts received by the budget: Monthly, within six weeks of the end of each month.
  - Stock of domestic payments arrears by sub-category: Quarterly, within six weeks of the end of each quarter.
  - Public investment Plans execution: Monthly, within six weeks of the end of each month.
  - Wage bill monthly reports including breakdown per MDAs: Monthly, within six weeks of the end of each month.
  - Net domestic assets and net international reserves of the BoG: Monthly, within two weeks of the end of each month.
  - Detailed balance sheet of the monetary authorities: Monthly, within four weeks of the end of each month.
  - Monetary survey of commercial banks: Monthly, within six weeks of the end of each month.
  - Weekly balance sheet of the central bank, including gross international reserves, net international reserves: Weekly, within a week of the end of each week.
  - Export and import data by major categories and other balance of payments variables: Quarterly, with a maximum lag of two months.
  - Overall consumer price index: Monthly, within two weeks of the end of each month.
  - Quarterly financial statements of main state-owned enterprises (listed): Quarterly, within three months of end of quarter.
  - Petroleum pricing breakdowns and indicative maximum price: Bi-weekly, within two days of the completion of the pricing review (and monthly reporting for certain commitments).

### Debt sustainability analysis (high-level findings and projections)
- Current assessment: Based on external public debt indicators, Ghana is now at a high risk of debt distress.
- Baseline projection summary:
  - Total public debt projected to decline from 70 percent in 2014 to 58 percent of GDP in 2019 (following an initial increase to 72 percent of GDP in 2015) and 39 percent in 2034.
  - Total public debt service absorbing around 40 percent of government revenue in the long run.
- Drivers and vulnerabilities:
  - Increased vulnerabilities since previous DSA due to large currency depreciation, higher external indebtedness, sharper depreciation in local currency in 2014, higher costs of borrowing consistent with tightened financial conditions and higher inflation, downward revision in real GDP growth near term, and larger fiscal deficit.
  - High levels of gross financing need and the bullet feature of Eurobonds increase roll-over risk and vulnerability to global financial conditions.
- Policy implications:
  - Fiscal consolidation measures under the program expected to stabilize macroeconomic conditions.
  - Continued implementation of fiscal consolidation, a more ambitious medium-term adjustment, and measures to smooth principal repayments would greatly reduce the risk of further worsening debt and debt-service indicators.
  - Any sizable deviation from the fiscal consolidation program would stall the projected decline in the public debt path and increase public debt vulnerabilities.

### Macroeconomic assumptions and background (selected)
- Public debt increase over past decade largely via issuance of local currency-denominated domestic debt; domestic debt market doubled relative to GDP over the decade. Opening domestic market to nonresidents since 2006 increased nonresident holdings of domestic debt.
- External debt increase partly through Eurobond issuances; a large increase in external debt (as percentage of GDP) in 2014 mainly attributable to large depreciation of local currency.
- DSA uses residency criterion for defining external debt (to capture domestic debt held by nonresidents). Public external debt covers external debt of central government (including domestic debt held by nonresidents), main state-owned enterprises, and credit facilities contracted by the central bank for reserve management.

*Prepared by the IMF (African Department, in consultation with other departments) — March 20, 2015.*

### 2.3 percent in 2015 reflecting fiscal and monetary tightening, and power shortages but is forecast to

### _cr15103 - 2.3 percent in 2015 reflecting fiscal and monetary tightening, and power shortages but is forecast to

### Growth outlook
- Real GDP Growth (annual percentage change) projections from the table:
  - DSA -2014: 4.8
  - 2015: 5.4
  - 2015-20: 6.2
  - 2021-34: 4.7
  - Current DSA: 4.2, 3.5, 5.8, 5.7
- Box summary findings:
  - Real growth has declined to a projected 3.5 percent in 2015, due mainly to fiscal consolidation under the program, a significant decrease in oil prices, and power shortages owing to low water levels in hydro power stations and delayed coming on stream of new power plants.
  - Growth is projected to pick up in 2016 onwards.
  - In the long run, real growth is assumed to stabilize at around 5.7 percent, with new oil discoveries and gas production implying significant upside potential.
  - The non-oil sector is projected to grow at an average of 6.4 percent from 2018 onwards.
  - Non-oil growth is set to decelerate (sentence fragment in source).

### Inflation, interest rates, and outlook
- Inflation (GDP deflator) (annual percentage change) projections from the table:
  - DSA -2014: 13.1
  - 2015: 11.2
  - 2015-20: 9.6
  - 2021-34: 6.6
  - Current DSA: 14.7, 13.6, 9.2, 7.0
- Additional projection:
  - Inflation is expected to slowdown to single digits by 2016 and would reach a lower level in the long term.
- Real interest rate (foreign debt) (percent) from the table:
  - DSA -2014: 2.4
  - 2015: 2.3
  - 2015-20: 2.7
  - 2021-34: 3.8
  - Current DSA: 5.0, 3.9, 2.9, 4.7

### External sector
- Current account balance (in percent of GDP) from the table:
  - DSA -2014: -10.6, -7.8, -6.9, -6.0
  - Current DSA: -9.2, -7.0, -5.2, -4.5

### Fiscal sector
- Primary fiscal balance (in percent of GDP) from the table:
  - DSA -2014: -3.6, -2.7, -0.1, -0.3
  - Current DSA: -3.1, -0.3, 1.5, 0.4

### Market access and liabilities
- Nonresidents can purchase domestic bonds with a maturity of 3 years or longer.
- Note on exclusions from liabilities analysis:
  - These BoG liabilities do not include swaps contracted with resident banks.
  - A credit line with BIS has also been excluded from the analysis since it is fully collateralized.

*GHANA — INTERNATIONAL MONETARY FUND*

### 2.3 percent in 2015 and pick up to 4.7 percent in 2016, with a long-run steady-state growth rate of 6.5 percent.

### _cr15103 - 2.3 percent in 2015 and pick up to 4.7 percent in 2016, with a long-run steady-state growth rate of 6.5 percent.

### Growth and Inflation
- Real GDP growth projections:
  - Non-oil GDP: 2.3 percent in 2015; pick up to 4.7 percent in 2016; reach 5.5 percent by 2017.
  - Overall GDP: 3.5 percent in 2015; 6.4 percent in 2016; 9.2 percent in 2017.
  - Long-run steady-state growth rate: 6.5 percent.
- Hydrocarbon sector:
  - Hydrocarbon growth boosted to 22 percent with stable oil production and natural gas onset in 2015.
  - Crude oil production projected to increase from 37 million barrels per year in 2014 to 76 million in 2017, and an average of 82 million barrels during 2018–20.
  - Oil price assumptions: around US$50-55 in 2015; recover to around US$70 per barrel by 2019 and stabilize at that level in real terms.
- Inflation:
  - Inflation reached 17 percent in 2014 and is projected to remain at two-digit levels in 2015.
  - BoG medium-term target: 8 ±2 percent.
  - Inflation rates projected to converge to around 7 percent over the projection period.
  - Constraints: power shortages may weigh on BoG’s efforts to reduce inflation in the near term; fiscal dominance must subside (including elimination of central bank financing to the government by 2016) for inflation targeting to be effective.

### Fiscal Balances and Public Debt
- 2014 fiscal and debt positions:
  - Overall cash fiscal balance: 9.4 percent of GDP in 2014.
  - Interest expenditures: some 6 percent of GDP in 2014.
  - Cash fiscal deficit on a commitment basis remained close to 10 percent of GDP in 2014.
  - Central government debt (gross): 67.6 percent of GDP in 2014.
  - Domestic arrears: rose from GhC. 5.2 billion in 2011 to about GhC. 6.2 billion in 2014; authorities plan to eliminate all domestic arrears by end-2017.
- Program fiscal consolidation:
  - The program envisages an upfront and ambitious fiscal consolidation, including a decline in real wages, strict payroll scrutiny, and limited net hiring, combined with several tax measures.
  - The already-approved 2015 budget envisages adjustments equivalent to some 3 percentage points of GDP.
  - The program aims to turn the primary balance from a deficit of 3.7 percent in 2014 into a surplus of 0.9 percent of GDP in 2015 and 3.2 percent of GDP in 2017.
  - Primary surplus projected to converge close to zero percent of GDP in the long-run (program narrative).
- Public debt dynamics and risks:
  - Total public debt projected to improve under the program; PV of public sector debt remains below public debt benchmark by comfortable margins under baseline.
  - Total public debt service-to-revenue ratio (including external and domestic debt) projected to stabilize at around 40 percent in the long run.
  - Cost and rollover risk increasing: 91 and 182-day treasury bill rates increased by around 700 basis points (to about 26 percent) in 2014.
  - Share of domestic debt with maturities less than 1 year rose from 45 percent as of end-2013 to 56 percent as of end-2014.
  - Gross financing need (GFN) average will peak in 2015 at 26 percent of GDP (benchmark is 15 percent of GDP for EM countries), then decline to 13 percent towards the end of projection.
  - Domestic bonds of Ghc 1.8 billion and 1.3 billion are coming due in 2015 and 2016, respectively.
  - Domestic arrears and SOE vulnerabilities (including USD-denominated obligations possibly exceeding USD 1 billion) are additional risk factors.

### External Sector and Financing Flows
- Current account and reserves:
  - Current account deficit historically around 10 percent of GDP; ended 2014 at 9.2 percent of GDP.
  - With tightening fiscal and monetary policies, current account deficit projected to improve to about 5 percent of GDP in 2017 and decline gradually to some 3 percent of GDP in the long-run given increased oil/gas production and recovery in oil prices.
  - Gross international reserves projected to reach authorities’ target of 4.2 months of imports in 2017 and build up steadily thereafter.
- Financing flows:
  - FDI inflows: reached 8.7 percent of GDP in 2014, mainly driven by the hydrocarbon sector.
  - FDI projected to stay close to 7½ percent of GDP in the medium term, then gradually decline towards around 3 percent of GDP in the long run.
  - Grants projected to decline to less than 1 percent of GDP in the medium to long term.
  - Borrowing expected to become increasingly nonconcessional, used for key infrastructure projects to raise potential growth.
  - Eurobond strategy: series of issuances assumed to rollover maturing Eurobonds; amortization structure assumed rather than single bullet repayment as in 2014 issuance.
- Market conditions and risks:
  - 2014 Eurobond issuance yield: 8.1 percent (spread of around 550bp); spreads peaked over 850bp in December 2014 and declined to around 650bp in February 2015.
  - Central bank dollar-denominated swap operations create additional short-term obligations and risks; BoG plans to unwind these swap operations gradually.

### Debt Sustainability Analysis and Stress Tests
- External DSA baseline results:
  - Under the baseline consistent with the Fund’s program, all indicators but the debt service-to-revenue ratio remain under thresholds comfortably.
  - PV indicators jump in 2015 then decrease to sustainable levels over the projection period; compared with the last DSA, all PV indicators worse at end of projection due to criterion change for external debt.
  - External debt service-to-revenue ratio would breach its indicative threshold in the long term for a protracted period absent proactive amortization smoothing of Eurobonds.
- Sensitivity to shocks:
  - Debt outlook particularly sensitive to nominal exchange rate shocks and net non-debt creating flow shocks.
  - Under a historical scenario with current account deficit around 8 percent of GDP and net FDIs at 5.6 percent of GDP over the projection period, four indicators would breach thresholds and PV debt-to-GDP ratio would exceed the threshold.
  - Stress tests show indicators could be on an explosive path under historical and most extreme shock scenarios, especially with real exchange rate depreciation shocks.
- Public sector DSA highlights:
  - PV of public sector debt (percent of GDP) projected: 66.0 in 2014-19 average; 58.6 in 2024; 37.5 in 2034 (Table data).
  - Debt service-to-revenue and grants ratio: 75.7 in 2014 baseline; projected 44.8 in 2034 (Table data).
  - Key macro assumptions used in DSAs preserved in tables (e.g., Real GDP growth, Effective interest rate, Inflation rate, Grant element assumptions).

### Policy Recommendations and Program Pillars
- Program pillars:
  - A sizeable and frontloaded fiscal adjustment to restore debt sustainability focused on wage restraint, limited net hiring, and revenue mobilization.
  - Structural reforms to strengthen public finances and fiscal discipline: improve budget transparency, clean up and control payroll, right-size civil service, improve revenue collection.
  - Restore effectiveness of inflation targeting framework and eliminate fiscal dominance (including elimination of central bank financing to the government by 2016).
  - Preserve financial sector stability.
- Specific policy guidance and risks:
  - Strict containment of expenditure—particularly the wage bill and subsidies—is required to achieve fiscal objectives.
  - Mobilize additional revenues to create space for social spending and infrastructure investment, especially in the energy sector.
  - Use prudent borrowing strategies to meet financing needs at lowest possible cost; consider debt management tools such as sinking funds and amortizing structures to reduce roll-over risk.
  - Protect social spending and expand targeted safety nets (e.g., LEAP) to mitigate adverse impacts on the vulnerable.
  - Forceful and sustained implementation of the program is essential; any sizable deviation from the ambitious fiscal consolidation would stall projected public debt improvements and raise risks of loss of market appetite, higher interest costs, and exchange rate pressures.

*Source: International Monetary Fund staff report and press release, April 3, 2015.*

### 2014.  Inflation  peaked  at  17  percent  in  December  2014  and  is  reported  at  16.5  percent  for

### Ghana: 2014 Inflation, Macroeconomic Outlook, and Policy Program

### Recent macroeconomic developments
- Inflation peaked at 17 percent in December 2014 and is reported at 16.5 percent for February 2015, reflecting the pass-through of the exchange rate depreciation and large increases in administered prices.
- Import contraction, higher crude oil exports, and recovery in cocoa prices helped narrow the current account deficit; Eurobond issuance allowed some stabilization of international reserves.
- The financial system "has weathered the difficult economic conditions quite well."
- Social outcomes and inclusive growth:
  - Extreme poverty declined from 16.5 percent in 2005/06 to 8.4 percent in 2012/13; the MDG on reducing extreme poverty was achieved in 2013.
  - Overall poverty was "also significantly reduced."
  - Improvements noted in access to education, reduction in gender disparity in primary education, and increased provision of water resources to the poor.
  - Authorities acknowledge remaining gaps in reducing maternal and child mortality rates and increasing access to improved sanitation and intend to devote increased attention to these gaps.

### Outlook for 2015 and the medium term
- Commodity price shock and growth projections:
  - Ghana, like other small oil exporters, was affected by the decline in oil and commodity prices, reducing export receipts and fiscal revenues.
  - Growth is expected to decline to 3.5 percent in 2015 before recovering strongly to reach over 9 percent in 2017.
- Inflation, current account, and reserves:
  - Inflation is expected to decelerate to 12 percent by the end of the year and decline gradually to reach 8 percent in 2017.
  - The external current account deficit should narrow to 7 percent in 2015 and further to 5 percent by 2017.
  - Gross international reserves should recover to the equivalent of more than 4 months of imports in 2017.
- Medium-term supply-side prospects:
  - Coming on stream of new oil and gas fields and expanding services sector expected to significantly increase production.
  - Harnessing natural gas for electricity generation expected to lower costs and boost thermal power generation for higher and more predictable supply.
  - August 2014: authorities signed the second compact of the United States’ Millennium Challenge Account to support power sector transformation and stimulate private investments over the next five years.
  - Exploitation agreement signed with ENI-VITOL for the ‘Sankofa’ Field gas supported by the World Bank.
- Program emphasis: tackling current imbalances and restoring macroeconomic stability is critical for sustaining high and inclusive growth.

### Fiscal policy and structural reforms
- Program strategy: front-loaded fiscal adjustment to restore debt sustainability, rebuild external buffers, and enhance monetary policy effectiveness by limiting fiscal dominance.
- Fiscal deficit trajectory (exact figures preserved):
  - 9 ½ percent of GDP in 2014
  - 7 ½ percent in 2015
  - 3 ½ percent by 2017
- Consolidation drivers: revenue mobilization, improvements in public financial management, cuts in low-priority public spending, and shifting expenditure toward infrastructure investments focused on ongoing projects.
- Arrears management:
  - Program seeks to clear all outstanding arrears over the next three years through cash payments and securitization of arrears to state-owned enterprises (SOE), of which a quarter will be settled in 2015.
- 2015 budget measures to broaden the tax base:
  - Imposition of a 17.5 percent special petroleum tax.
  - A value added tax on fee-based financial services.
  - A 5 percent flat tax on real estate.
- Budget revision measures following fall in oil prices:
  - Eliminating subsidies for utilities and petroleum products.
  - Reducing expenditures on goods and services.
  - Scaling back domestically financed non-priority capital expenditures and transfers to other government agencies.
  - Remainder of the shortfall financed by drawing on the oil stabilization fund.
- Public wage bill and payroll reforms:
  - Priority to tackle public sector wage bill via completion of the Single Spine Salary Structure migration and limiting total nominal increases through a net freeze in public sector employment and addressing payroll irregularities identified through audits.
  - An inter-ministerial committee set up to oversee the payroll clean-up exercise (MEFP ¶57); efforts underway to strengthen payroll management and eliminate “ghost workers.”
  - Government payroll upgraded and integrated with GIFMIS.
  - Authorities intend to publish implementation progress reports, starting in March 2015.
  - Collaboration with development partners to support payroll reform; authorities committed to safeguarding social and other priority spending, including expanding the social safety net.
- Medium-term fiscal structural agenda:
  - Strengthen revenue collection, improve public financial management, and reform the civil service.
  - Reduce exemptions and strengthen tax administration; eliminate exemptions granted to SOEs and Free Zones companies; remove powers of the Ghana Investment Promotion Council (GIPC) to grant exemptions.
  - Revise VAT thresholds to broaden tax base; move tax collection and administration processes to an electronic platform being established.
  - Continue improving management of natural resources revenue with Fund technical assistance and enhance transparency in line with the Extractive Industries Transparency Initiative.
  - Finalize roll out of the Human Resource Management Information System (HRMIS) to remaining ministries, departments, and agencies.
  - Strengthen budget formulation and execution processes and introduce provisions of fiscal responsibility (as highlighted in the MEFP).
  - Prepare a comprehensive civil service reform strategy in 2015 with donor assistance to increase productivity, rationalize the size of the civil service, and reduce the wage bill.
- Debt and debt-management:
  - Updated DSA concludes Ghana is at a high risk of debt distress.
  - Authorities committed to reducing debt burden through fiscal adjustment and limiting borrowing to loans with minimum grant elements in line with the debt limits policy.
  - Authorities will consult fully with staff on projects considered for market financing and will develop a comprehensive medium-term debt management strategy consistent with the program’s macroeconomic framework and available financing sources.
  - Strategy will include creation of a sinking fund account to manage Sovereign Bond commitments and minimize use of government sovereign guarantees.
  - Discussions begun with the World Bank and African Development Bank on use of partial risk guarantees for commercial projects with high positive returns initiated by the private sector.

### Monetary and exchange rate policies
- Monetary tightening and inflation objectives:
  - BoG increased the policy rate in three steps by 500 basis points to 21 percent from February to November 2014.
  - Inflation expected to ease to 12 percent at end-2015 and decline gradually thereafter toward the authorities’ medium-term objective of 8 ±2 percent.
- Central bank financing and MOU limits:
  - Monetary policy to be made more effective in 2015 by limiting central bank financing of the budget and other public institutions (including SOEs), capped, as agreed under a memorandum of understanding (MOU) between the BoG and the MOF, at 5 percent of previous year’s budget revenue, with all existing overdraft balances at the end of each quarter securitized.
  - The MOU sets a zero ceiling for 2016 onwards, in anticipation of adoption of a new BoG Law consistent with a modern IT framework.
- Foreign exchange market reforms:
  - Authorities committed to deepening the foreign exchange market and improving its functioning; BoG moving toward unification of the BoG and interbank exchange rates and enhancing transparency in the foreign exchange market.
  - BoG adopted a strictly rules-based system to determine its reference rate.
  - BoG will adopt by end-April 2015 a plan to eliminate by June 2016 the compulsory surrender requirements and will stop securing foreign currency funding for priority sector imports.

### Financial sector policies
- System resilience:
  - Financial system remains robust; banks’ capital, liquidity, and profitability have held up well to the shocks.
- Diagnostic audit and regulatory strengthening:
  - Central bank, in consultation with the IMF, contracted external firms to undertake a special diagnostic audit to ascertain asset quality, loan classification, adequacy of existing buffers, and compliance with prudential norms across the banking industry.
  - Audit results will help BoG develop needed regulations and strengthen oversight and supervision framework.
- Legal and supervisory reforms:
  - Promulgation of new banking bills related to banks and specialized deposit-taking institutions, and deposit protection, to clarify legal framework and strengthen the central bank’s supervisory and resolution powers in line with international best practices.

### Conclusion and authorities’ stance
- Authorities are determined to address current difficulties under the ECF-supported program, which provides the framework to restore macroeconomic stability and achieve reform and transformation agenda.
- Completion of all eight prior actions under the arrangement and the front-loaded fiscal adjustment support strong program implementation.
- Authorities acknowledge risks to the program and will stand ready to adjust policies as necessary in consultation with the Fund.
- Authorities express gratitude for support from management and the Executive Board and look forward to continued cooperation with the IMF and development partners.

*Source: _cr15103 - 2014. Inflation peaked at 17 percent in December 2014 and is reported at 16.5 percent for*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15103.pdf_