There is the need for prudent fiscal adjustment in Ghana in order to cure fiscal imbalances as a result of lower than targeted revenue performance, the Executive Board of the International Monetary Fund (IMF) have stressed.

In line with that the board welcomed the targeted efforts being made to reverse the debt dynamics and reduce financing needs. It further underscored the need for extra efforts to address revenue shortfalls and enforcement of expenditure control measures to contain current spending and prevent the recurrence of domestic arrears accumulation.

In a release issued late Wednesday after its meeting to complete the fourth review of Ghana’s performance under the Extended Credit Facility (ECF) the Directors stressed that credible fiscal consolidation and implementation of the medium‑term debt management strategy will be key to further reducing domestic refinancing risks.

“Ghana’s macroeconomic performance over the years has been mixed. Policy slippages have compounded the adverse impact of shocks and resulted in significant external and domestic imbalances,” Tao Zhang, Deputy Managing Director and Acting Chair observed.

He projected that “a recovery of growth is expected in 2017-18, owing to an increase in oil production, declining inflation, and lower imbalances with the right policy implementation.”

Although the Ghanaian authorities have taken some encouraging steps and the economy is showing signs of recovery, IMF pointed out that risks remain tilted to the downside, hence careful fiscal management will be required to achieve the 2017 program targets and reverse the unfavorable debt dynamics.

“Fiscal consolidation efforts will need to be anchored on wide-ranging structural fiscal reforms, so that consolidation gains can be sustained over the medium term,” the statement added.

The Directors noted that “Ghana faces long‑standing challenges, including exposure to external shocks, budget rigidities, and economic inefficiencies, which have amplified the impact of past policy slippages on domestic and external imbalances.

Strong implementation of program policies and reforms is therefore critical to address the risks and secure macroeconomic stability, said the directors.

Some of the measures the IMF prescribed for Ghana include measures to broaden the tax base, and enhance tax compliance and public financial management, especially considering the large unpaid commitments accumulated in 2016.

The Fund welcomed the deceleration in inflation and encouraged the Bank of Ghana (BoG) to remain vigilant and take action to bring it back to target. They also called for measures to further strengthen the credibility of the inflation targeting framework.

The Directors also commended the progress made in the strengthening the banking system, in particular through the approval of time bound recapitalization plans for undercapitalized banks and the recent resolution of two insolvent banks.

The IMF however called for further steps to strengthen the supervisory and regulatory framework to address liquidity risks and rising levels of Non-Performing Loans (NPLs). Directors also encouraged action to further strengthen the AML/CFT framework.

“Wide-ranging structural reforms remain important for achieving higher and inclusive growth. Reform efforts should include further enhancing the business environment, improving infrastructure, including tackling the inefficiencies in the energy sector, and improving access to finance,” the Directors emphasized. Enditem

Source: Xinhua/


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