IMF Executive Board Completes Fifth and Sixth Reviews Under the Extended Credit Facility, and Approves US$191 Million Disbursement for Ghana

April 30, 2018

  • Completion of the reviews enables the disbursement of US$191 million, bringing total disbursements under the arrangement to US$764.1 million.
  • Ghana’s program aims to restore debt sustainability and macroeconomic stability to foster high growth and job creation, while protecting social spending

On April 30, 2018 the Executive Board of the International Monetary Fund (IMF) completed the fifth and sixth reviews of Ghana’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement. Completion of the reviews enables the disbursement of SDR 132.84 million (about US$191 million), bringing total disbursements under the arrangement to SDR 531.36 million (about US$764.1 million).

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

Ghana’s three-year arrangement was approved on April 3, 2015 (see Press Release No.15/159) for SDR 664.20 million (about US$955.2 million or 180 percent of quota at the time of approval of the arrangement). It aims to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending .

Following the Executive Board’s discussion on Ghana, Mr. Tao Zhang, Acting Chair and Deputy Managing Director, said:

“Implementation of the ECF-supported program has significantly improved in 2017. Growth has rebounded, the fiscal deficit has declined, leading to a primary surplus for the first time in fifteen years, the external position has strengthened, generating a build-up of external buffers, and key steps have been taken to address fragilities in the financial sector. Reforms should continue to entrench these hard-won gains.

“ The authorities’ commitment to fiscal discipline and the expenditure restraint shown in 2017 to meet the end-year deficit target are commendable. The government should continue to implement its fiscal consolidation program, with the adjustment focused mainly on increased domestic revenue mobilization. The recent announcement to enact revenue measures in the context of the mid-year budget review in July is welcome. Such measures will be critical to ensure that Ghana’s fiscal policies can be sustained over time.

“Gains from fiscal consolidation and macroeconomic stability need to be underpinned by continued efforts to implement wide-ranging and ambitious reforms. The public financial management regulations recently submitted to Parliament should help strengthen budget formulation and execution. Stronger oversight over the management of public finances should continue to be pursued, also in line with recommendations from the audit of unpaid bills.

“As the debt burden remains elevated, continued prudence in debt management is essential to reduce the risks associated with market-based borrowing. It will be important as intended, to undertake liability management operations with part of the proceeds from the planned Eurobond to help mitigate foreign-exchange roll-over risk and smooth the debt maturity profile.

“Monetary policy should continue to be focused on achieving the inflation target. In this context, while the decision to extend and publish the memorandum of understanding on zero financing of the government by the Bank of Ghana is welcome, additional amendments to the Bank of Ghana Act would be a more robust way to eliminate the prospect of fiscal dominance.

“The authorities should continue addressing fragilities in the financial sector. Further actions to tackle the overhang in non-performing loans and more progress on regulatory reforms and in strengthening oversight and cleaning up the microfinance sector will help support credit to the private sector. The recent bank intervention should be followed up with decisive action to restore the bank’s solvency and financial viability.

“The Fund is looking forward to the successful completion of the ECF arrangement in the coming year and stands ready to continue to support Ghana in the future.”



Table 1. Ghana: Selected Economic and Financial Indicators, 2016–20

2016

2017

2018

2019

2020

Prog.

Prov.

Prog.

Proj.

Proj.

Proj.

(Annual percentage change; unless otherwise indicated)

National accounts and prices

GDP at constant prices

3.7

5.9

8.4

8.9

6.3

7.6

5.5

Non-oil GDP

5.0

4.0

4.0

5.0

5.0

6.0

6.0

Oil and gas GDP

-16.9

42.5

95.9

64.9

20.0

22.4

1.3

Real GDP per capita

1.1

3.3

5.7

6.1

3.6

4.9

2.9

GDP deflator

17.8

14.2

12.7

9.6

11.1

8.2

8.0

Consumer price index (annual average)

17.5

11.8

12.4

9.0

9.3

8.0

8.0

Consumer price index (end of period)

15.4

10.0

11.8

8.0

8.0

8.0

8.0

Consumer price index (excl. food, end of period)

18.2

13.1

13.6

8.0

8.0

8.0

8.0

Gross capital formation

14.5

13.7

13.6

14.7

14.1

14.7

15.1

Government

4.9

3.2

3.1

3.3

2.7

2.9

2.8

Private

8.9

9.9

9.9

10.9

10.9

11.4

11.9

National savings

7.8

7.9

9.0

9.2

9.9

10.6

11.2

Government

-4.0

-1.3

-2.0

-0.5

-3.3

-1.3

-1.4

Private1

11.8

9.2

11.0

9.7

13.2

11.8

12.6

Foreign savings

-6.7

-5.8

-4.5

-5.4

-4.2

-4.1

-3.9

Central government budget (cash basis)

Revenue

17.2

18.9

17.5

18.6

17.9

17.9

17.8

Expenditure

26.6

25.2

23.4

22.4

24.3

22.5

22.3

Overall balance2

-9.3

-6.3

-6.0

-3.8

-6.4

-4.5

-4.5

Overall balance excluding financial sector related costs 2

-9.3

-6.3

-6.0

-3.8

-4.5

-4.5

-4.5

Primary balance2

-2.4

0.2

0.7

2.2

0.1

2.0

1.9

Primary balance excluding financial sector related costs 2

-2.4

0.7

2.0

2.0

1.9

Overall balance (from financing)

-8.2

-6.3

-5.9

-3.8

-6.4

-4.5

-4.5

Central government debt (gross)

73.4

70.5

71.8

66.1

70.3

67.0

65.0

Domestic debt3

32.1

32.5

34.8

30.8

34.8

34.4

35.2

External debt

41.3

38.0

37.0

35.3

35.5

32.6

29.8

Money and credit

Credit to the private sector (commercial banks)

14.4

11.0

12.8

14.5

17.8

18.8

18.9

Broad money (M2+)

22.0

22.7

16.7

15.9

20.3

18.8

21.7

Velocity (GDP/M2+, end of period)

3.0

2.9

3.1

3.0

3.0

3.0

2.8

Base money

29.6

26.3

13.1

19.2

21.0

19.5

22.5

Banks' lending rate (weighted average, percent)

31.7

…

29.3

…

…

…

…

Policy rate (in percent, end of period)

25.5

…

20.0

…

…

…

…

(Percent of GDP)

External sector

Current account balance

-6.7

-5.8

-4.5

-5.4

-4.2

-4.1

-3.9

Gross international reserves (millions of US$)

4,862

5,783

5,491

6,319

5,909

6,371

6,962

in months of prospective imports of goods and services

2.6

3.0

2.9

3.1

2.9

3.0

3.1

Net international reserves (millions of US$)

3,431

4,475

4,531

5,035

5,035

5,510

6,195

in months of prospective imports of goods and services

1.8

2.3

2.4

2.4

2.5

2.6

2.8

Total donor support (millions of US$)

778

977

814

755

456

608

327

in percent of GDP

1.8

2.1

1.7

1.5

0.9

1.1

0.5

Memorandum items:

Nominal GDP (millions of GHc)

167,353

202,389

204,610

241,549

241,717

281,457

320,594

Nominal GDP (millions of US$)

42,788

45,464

47,015

49,226

51,619

56,725

60,752

National Currency per U.S. Dollar (period average)

3.9

4.4

4.7

5.0

5.3

GDP per capita (US$)

1,552

1,608

1,663

1,697

1,780

1,907

1,992

Central Government Debt excluding ESLA bond

73.4

70.5

69.5

66.1

67.8

64.9

63.2

Sources: Ghanaian authorities; and Fund staff estimates and projections.

1 Including public enterprises.

2 Excludes discrepancy.

3 Includes ESLA bond.

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