IMF Executive Board Completes Third ECF Review for Ghana, and Approves US$116.2 Million Disbursement

IMF News, September 29, 2016

Source details

Canonical URL: IMF Executive Board Completes Third ECF Review for Ghana, and Approves US$116.2 Million Disbursement

On September 28, 2016 the Executive Board completed the third review of Ghana’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement.
Completion of the review enables the disbursement of SDR 83.025 million (about US$116.2 million).
Total disbursements under the arrangement after this review: SDR 332.1 million (about US$464.6 million).

Ghana’s three-year arrangement: SDR 664.20 million (about US$918 million or 180 percent of quota at the time of approval).
Arrangement approval date: April 3, 2015.
Program aims:
- Restore debt sustainability.
- Restore macroeconomic stability.
- Foster a return to high growth and job creation.
- Protect social spending.

During the review, adjustments were made to the program to ensure it remains on track and to enhance its prospects of success.
The Executive Board granted waivers, including for minor deviations in a few program targets.

Implementation of the ECF-supported program by the Ghanaian authorities is described as “broadly satisfactory,” but the economic outlook remains challenging.
Progress noted:
- Stabilizing the macroeconomic situation.
- Reducing financial imbalances.
Persistent risks:
- Fiscal risks remain elevated.
- Revenue shortfalls need to be addressed.
- Expenditure control measures should be fully enforced to contain the wage bill and other current spending.
Fiscal projection and implications:
- The government is projected to run a primary surplus this year.
- The projected primary surplus, together with stability of the cedi, should contribute to a marked decline in the debt-to-GDP ratio.
- Ongoing fiscal consolidation and implementation of the medium-term debt management strategy are key to further reducing domestic refinancing risks in 2017.
- Authorities should remain cautious in accessing external market financing with due consideration to costs and debt sustainability.

Fiscal policy and public financial management:
- Broaden the tax base and enhance tax compliance.
- Strengthen control of the wage bill.
- Enhance public financial management (PFM).
- Note: The recently adopted PFM legislation is an improvement over previous laws.
State-owned enterprises (SOEs):
- Steps taken to address SOEs financial problems are welcome.
- More work is needed to reduce risks to the economy, the financial sector, and the government budget from SOE underperformance.
Monetary policy and central bank governance:
- The Bank of Ghana (BoG) should maintain a tight monetary policy stance to bring inflation back to target.
- Recent amendments to the BoG Act have introduced some improvements to central bank governance.
- Continued scope for central bank financing of the government and government influence on central bank operations remain significant shortcomings.
- Authorities’ commitment to maintaining zero BoG financing of the government under the program and to introducing additional amendments to the BoG Act in 2017 are welcome.
Financial sector policies:
- Full and timely implementation of the BoG’s roadmap for the banking system is essential to address financial sector risks.
- Adoption of two new banking sector laws strengthens the authorities’ toolkit.
- The new legislation warrants further improvements to enable authorities to effectively safeguard financial stability.

IMF Press Release No. 16/439 (September 29, 2016).