Roundup: Success of support program for Ghana hinges on strict compliance: IMF

The International Monetary Fund (IMF) said forceful and sustained implementation of the fund's three- year support program for Ghana will be essential to address the country's macroeconomic imbalances and enhance investor confidence in view of downside risks.

According to a detailed IMF report reaching Xinhua on Saturday, the implementation would bring some initial and temporary hardships to Ghanaians.

The main pillars of the program include a sizeable and frontloaded fiscal adjustment to restore debt sustainability, structural reforms to strengthen public finances and fiscal discipline by improving budget transparency, restoring the effectiveness of the inflation targeting framework to help bring inflation back into single digit territory, and preserving financial sector stability.

After a long period of remarkable growth spanning early 1990s and 2013, the emergence of large fiscal and external imbalances, compounded by severe electricity shortages, has put Ghana's prospects at risks.

There has been a ballooning wage bill, and what experts describe as poorly targeted subsidies and rising interest payments which have outpaced rising oil revenue leading to double digit fiscal deficits with provisional figures putting 2014 growth at 4. 2 percent against a 9.5 percent fiscal deficit.

Consequently, the country which had between 2010 and 2012 experienced single digit inflation, started experiencing a rise in Consumer Price Index with inflation reaching 17 percent in December 2014.

These have been compounded by a decline in reserves, a significant depreciation of Ghana's Cedi currency and high interest rates, weighing on growth and job creation.

The government therefore introduced a reform program named Home Grown policy in 2014 and is being supported by the three-year program by the IMF to support growth and help reduce poverty by restoring macroeconomic stability, hinged on sustained fiscal consolidation, a prudent debt management strategy with improved fiscal transparency, and an effective monetary policy framework.

The IMF report which is released in the name of Zhu Min, IMF deputy managing director, said "the frontloaded nature of the fiscal consolidation and expected financial support from development partners should help to mitigate program risks, and foster broad-based, inclusive growth in the medium term."

The IMF acknowledged that the government's structural reform agenda appropriately focuses on strengthening public financial management and enhancing transparency in budget preparation and execution.

"Achieving key fiscal objectives will require strict containment of expenditure, in particular of the wage bill and subsidies," Zhu said, adding the government's efforts to mobilize additional revenues will also help create more space for social spending and infrastructure investment.

The report also said that an enhanced transparency in the public finances will be critical to garner broad support for reforms.

But the international credit rating agency Fitch had said earlier that an IMF program was not a guarantee to overcoming Ghana's economic challenges.

However, the government said here in a statement after the approval by IMF that the objectives as well as policy measures underlying the program were consistent with government's Home Grown Program and the 2015 Budget. Endit