IMF Executive Board Concludes 2019 Article IV Consultation with Ghana
IMF News, December 12, 2019
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- Published: December 12, 2019
Overview
- Executive Board concluded the Article IV consultation with Ghana on December 6, 2019.
- The outlook for Ghana is described as favorable, with growth and inflation projections provided below.
- Key near-term drivers: new potential oil discoveries and mining.
Macroeconomic outlook and inflation
- Growth:
- 2018: 6.3 percent
- 2019 (expected): 7 percent
- Average over the next few years: around 5 percent
- Consumer price inflation:
- Has stayed close to the center of the target band in recent months despite pass-through from Cedi depreciation and higher utility tariffs.
- Expected to decline to around 6 percent over the medium term.
- International reserves:
- Remain stable, helped in part by external borrowing.
Fiscal position, deficits, and debt
- Government headline deficit:
- Projected to reach 4.7 percent of GDP in 2019 (driven by lower-than-expected revenues, spending on flagship programs, and unexpected security outlays).
- Overall deficit (including energy and financial sector costs):
- Corresponds to 7 percent of GDP in 2019.
- Central government debt:
- Expected to increase to 63 percent by end-2019 (driven in part by exceptional energy and financial sector costs).
- 2020 budget projections:
- Headline deficit (excluding energy and financial sector costs): 4.9 percent of GDP.
- Equivalent overall deficit: 6.4 percent of GDP.
- Medium-term projection at current policies:
- Overall deficit projected to stabilize to about 5 percent of GDP.
Downside and upside risks
- Downside risks to baseline:
- Spending pressures in the context of the 2020 election.
- Financing challenges—possibly triggered by tighter global conditions.
- Larger-than-expected energy and financial sector costs.
- Upside possibilities:
- New oil discoveries.
- Higher cocoa prices.
- Rapid diversification driven by the authorities’ industrialization efforts.
- Potential domestic revenue mobilization reforms.
Executive Board assessment and policy guidance
- Commendations and overall view:
- Directors agreed with the thrust of the staff appraisal and commended authorities for strong macroeconomic performance and laying foundations for sustained and more inclusive growth.
- Fiscal policy and debt management:
- Directors welcomed commitment to fiscal discipline and the fiscal rules introduced by the 2018 Fiscal Responsibility Act.
- Emphasized that rigorous implementation of the 2020 budget law is key to maintaining macroeconomic stability.
- Expressed concern about Ghana’s high risk of debt distress.
- Highlighted the need to strengthen the fiscal rules and phase out off‑budget operations.
- Most Directors urged authorities to avoid new collateralized borrowing to help reduce public debt and improve fiscal transparency.
- Recommended a more ambitious fiscal stance based on a comprehensive domestic revenue mobilization strategy to:
- Anchor debt dynamics on a clearly declining path.
- Contain financing needs.
- Create buffers for contingent liabilities.
- Support a stronger external position.
- Welcomed Fund capacity development efforts to bolster fiscal reforms.
- Several Directors suggested adoption of a formal debt anchor for medium-term debt sustainability.
- Monetary policy and reserves:
- With inflation close to the central target of the Bank of Ghana, Directors agreed monetary policy stance seems appropriate.
- Tighter policies would be warranted if inflationary pressures materialize.
- Need to increase international reserves by limiting central bank intervention.
- Entrench monetary financing limits in domestic law to protect the Bank of Ghana’s balance sheet and strengthen the inflation targeting framework.
- Over the medium term, Directors recommended lowering the inflation target range.
- Energy sector:
- Welcomed recent steps to move the energy sector back to financial health.
- Implementation of the Energy Sector Recovery Program (supported by the World Bank and key stakeholders), adherence to the automatic pricing formula for electricity tariffs, and reinstituting private sector participation are crucial to limit costs to the government and the public.
- Financial sector:
- Welcomed progress in clean‑up and recent improvements in banking sector performance.
- Urged completion of financial sector restructuring while mitigating fiscal costs by:
- Implementing upfront reimbursement caps.
- Addressing weaknesses in a state‑owned bank.
- Accelerating measures to reduce the NPL overhang.
- Completing regulatory reforms.
- Stepping up recovery of funds from complicit directors and shareholders of failed institutions.
- Structural and governance reforms:
- To sustain development gains, Directors recommended boosting export competitiveness, increasing economic diversification, and accelerating productivity growth.
- Improving the business environment and promoting digitalization were highlighted as opportunities.
- Encouraged strengthening the anti‑corruption framework, enhancing capacity of law enforcement and prosecutorial bodies.
- Welcomed government collaboration with the Financial Action Task Force (FATF) and the Inter‑Governmental Action Group against Money Laundering in West Africa to improve the AML/CFT framework and eventually exit the FATF “grey list.”
Selected economic and financial indicators (highlights from table)
- GDP at constant prices (annual percent change):
- 2017: 8.1
- 2018: 6.3
- 2019: 7.0
- 2020: 5.8
- 2021: 4.0
- 2022: 3.7
- 2023: 6.7
- 2024: 4.4
- Non-oil GDP (annual percent change):
- 2017: 4.6
- 2018: 6.5
- 2019: 6.1
- 2020: 5.9
- Oil and gas GDP (annual percent change):
- 2017: 80.3
- 2018: 3.6
- 2019: 17.1
- 2020: 4.3
- 2021: -7.4
- 2022: -9.9
- 2023: 36.3
- 2024: 0.3
- Consumer price index (annual average):
- 2017: 12.4
- 2018: 9.8
- 2019: 7.7
- 2020: 7.3
- 2021: 6.9
- 2022: 6.4
- Gross capital formation (percent of GDP):
- 2017: 21.5
- 2018: 14.9
- 2019: 16.0
- 2020: 18.4
- 2021: 19.3
- 2022: 20.4
- 2023: 21.7
- 2024: 22.6
- National savings (percent of GDP):
- 2017: 18.1
- 2018: 11.7
- 2019: 12.8
- 2020: 14.8
- 2021: 15.7
- 2022: 17.0
- 2023: 19.2
- 2024: 20.2
- Central government budget (cash basis) — Overall balance:
- 2017: -1.6
- 2018: -5.5
- 2019: -6.1
- 2020: -5.6
- 2021: -4.8
- 2022: -4.4
- 2023: -4.2
- Central government overall balance (percent of GDP) — Excluding financial and energy sector related costs:
- 2019: -4.7
- 2020: -6.4
- 2021: -5.4
- Primary balance (percent of GDP):
- 2017: 0.5
- 2018: -1.4
- 2019: -1.3
- 2020: -0.3
- 2021: 0.6
- 2022: 0.4
- Central government debt (gross, percent of GDP):
- 2017: 57.3
- 2018: 59.0
- 2019: 63.1
- 2020: 63.3
- 2021: 62.3
- 2022: 60.6
- 2023: 60.2
- Gross international reserves (millions of US$):
- 2017: 5,491
- 2018: 5,317
- 2019: 5,116
- 2020: 5,015
- 2021: 5,066
- 2022: 5,362
- 2023: 6,200
- 2024: 6,879
- Net international reserves (millions of US$):
- 2017: 4,557
- 2018: 3,886
- 2019: 3,892
- 2020: 3,881
- 2021: 4,050
- 2022: 4,475
- 2023: 5,447
- 2024: 6,302
- Total donor support (millions of US$):
- 2017: 720
- 2018: 612
- 2019: 838
- 2020: 883
- 2021: 752
- 2022: 879
- 2023: 864
- 2024: 594
- Nominal GDP (millions of GHc):
- 2017: 256,671
- 2018: 300,596
- 2019: 349,193
- 2020: 398,538
- 2021: 445,979
- 2022: 494,665
- 2023: 563,486
- 2024: 625,379
- GDP per capita (US$):
- 2017: 2,038
- 2018: 2,217
- 2019: 2,242
- 2020: 2,280
- 2021: 2,368
- 2022: 2,422
- 2023: 2,534
- 2024: 2,583
- Central Government Debt excluding ESLA bond:
- 2017: 55.4
- 2018: 61.6
- 2019: 62.0
- 2020: 61.9
- 2021: 61.2
- 2022: 59.7
- 2023: 59.3
Source: IMF Communications Department — Press Release No. 19/455 (December 12, 2019).
