Press Release: IMF Staff Concludes Review Mission to Ghana

IMF News, May 11, 2016

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IMF team led by Joël Toujas-Bernaté visited Accra from April 27-May 11, 2016 to conduct discussions on the third review of Ghana’s financial and economic program supported by the IMF’s Extended Credit Facility (ECF).
The mission focused on: implementation of the program, the medium-term outlook, and policies and structural reforms needed to restore debt sustainability, and a return to high growth and job creation, while protecting the poor.
End-of-mission statement by Mr. Toujas-Bernaté conveyed preliminary findings; staff views do not necessarily represent the IMF’s Executive Board.

“Implementation of the program so far remains broadly satisfactory.”
Most end-December 2015 performance criteria were met, with exceptions: small deviations in the wage bill and net domestic assets of Bank of Ghana (BOG).
Economic growth in 2015 was close to 4 percent, slightly higher than expected, despite lower commodity prices and domestic power shortages.
Inflation remains high at 19.2 percent in March 2016; affected by the increase in utility tariffs, energy sector levies and transportation costs, but core inflation has started to decline in recent months.

Fiscal adjustment progress:
- Overall cash deficit improved from 10.6 percent of GDP in 2014 to 6.7 percent of GDP in 2015.
- Primary balance close to zero in 2015, from a deficit of 4.4 percent of GDP in 2014.
- On a commitment basis, adjustment is stronger reflecting larger-than-programmed repayments of arrears.
Authorities prepared a package of measures to reduce the risk of expenditure overruns, in particular on the wage bill, aiming to keep the 2016 budget outturn consistent with program objectives.
The overall cash deficit for 2016 is now projected at 4.8 percent of GDP.
Within the framework of the Petroleum Revenue Management Act, authorities will reduce expenditures to offset the shortfall in oil revenues.
Relatively large government cash resources available at end-2015 and possible additional donor support in 2016 could allow adaptation of the budget financing strategy to prevailing market conditions.
Progress on fiscal structural reforms: adoption of several new tax laws; strengthening payroll controls and addressing payroll irregularities; advancing public financial management reform, including developing the Treasury Single Account.
Delays: preparation of a new public finance management (PFM) law and an amended BOG Act has been delayed.

The increase in BOG’s policy rate in 2015 has been instrumental in reducing exchange rate volatility.
BOG is building on progress in improving the effectiveness of its inflation targeting framework and remains committed to maintaining an appropriate monetary policy stance to bring inflation down toward its medium-term objective.

A strategy is being developed, underpinned by the recently introduced petroleum and electricity levies, to address the difficult financial situation of state owned enterprises (SOEs) in the energy sector.
The strategy aims to avoid additional fiscal pressures, possible spillovers on the banking system, and to sustain recent improvements in electricity delivery.

The IMF team will continue to support the authorities as they finalize work in the coming weeks on the new PFM law, the amended BOG Act and the strategy for addressing the financial situation of SOEs.
Subject to completion of this work and finalization of required documentation, the IMF Executive Board would be expected to consider the review during the summer.

The mission met with: President John Dramani Mahama; Vice President Kwesi Amissah-Arthur; Finance Minister Seth Terkper; Bank of Ghana Governor Dr. Abdul-Nashiri Issahaku; Minister of Labor Haruna Iddrisu; other senior officials; and the donor community.
The IMF team thanked the authorities for their hospitality, collaboration, and the high-quality and constructive discussions.

The ECF is a lending arrangement for sustained program engagement in case of protracted balance of payments problems.
The arrangement for Ghana in an amount equivalent to SDR 664.20 million (180 percent of quota or about US$918 million) was approved on April 3, 2015 (see Press Release No.15/159).

Press Release No.16/212, May 11, 2016.