IMF urges further fiscal consolidation for Ghana

The International Monetary Fund (IMF) country team for Ghana urged the country to take steps to sustain the fiscal consolidation it has achieved so far under its Extended Credit Facility (ECF).

Addressing the media here on Wednesday after the conclusion of the third review mission to Ghana, Joël Toujas-Bernaté, leader of the team, said the laudable achievements chalked by the government notwithstanding, a further fiscal consolidation would help reduce the country's debt burden.

"Now, looking ahead, we still continue to see the need for continued fiscal consolidation. Indeed, in view of the still high debt, the fiscal position needs to be brought down," Toujas-Bernaté stated.

While the country achieved an overall growth of nearly four percent in the economy in 2015, it was able to bring down fiscal deficit to 6.7 percent from the previous 10.6 percent.

The 2016 budget has set a two percentage point reduction in inflation, which the IMF team says is critical for the country's future debt sustainability.

The team leader said some spending would need to be reviewed to offset the shortfall in oil revenue in view of lower oil prices.

"As a result, we expect fiscal consolidation to remain on track for 2016 and we project the overall deficit to come down below five percent in 2016.

"Assuming this objective is indeed achieved as we expect, this will allow for the first time a slight decline in the debt-to-GDP ratio.

"This is very important and this will be a turning point with regard to the debt dynamics and, on that basis, we will expect that in future years the debt ratio will further come down and come to more sustainable levels," he stressed.

One year into the implementation of the program which was approved in February 2015, the team rated Ghana's performance as broadly satisfactory, as most of the targets and performance criteria at the end of 2015 had been achieved.

"Inflation remains high but we have seen some decline in core inflation and also we are glad that the inflation which was released today for the month of April also indicated decline for the previous month," Toujas-Bernaté noted.

Minister of Finance Seth Terkper said the improvement in fiscal deficit position was welcome news.

"You know where we were, nearly to 12 percent in 2013, at the time of the launching of the home grown policy before we went into the IMF program. So if you consider where we are now, it is an improvement," the minister pointed out.

According to him, for the first time in almost a decade, the primary balance was also improving to enhance Ghana's ability to service its debts.

Under the IMF program, the limits to Bank of Ghana financing of the government's budget was reduced from 10 percent to five percent for last year. Enditem