The International Monetary Fund (IMF) has described the country’s economic outlook as favorable after its first assessment of the state of the economy following Ghana’s completion the 4-year bailout programme.
The Fund stated that the favorable outlook is further supported by strong performance of the country’s extractive sector as well as a safer banking system which emerged after the Bank of Ghana’s clean up of the sector.
The assessment was contained in a statement issued by an IMF Mission which was in Ghana to analyse the performance of the economy as part of the Fund’s Article IV programme conducted on member countries.
The team led by Carlo Sdralevich while in the country had discussions with government officials such as Vice President Dr. Mahamudu Bawumia, Ken Ofori-Atta; Finance Minister, Dr. Ernest Addison; Governor of the Bank of Ghana among other officials.
According to the Mission leader, Ghana after its successful completion of the IMF bailout programme, has implemented prudent policies and maintained macroeconomic stability.
The stability noted by the Fund is seen in a relatively stable currency which has depreciated by 10 percent in 2019; inflation at 7.6 percent which is below government’s 8 percent target and a projected economic growth of 7 percent.
That notwithstanding, the Fund noted that the implementation of the 2019 budget has been challenging, owing to lower than expected revenues, frontloading of spending on some government flagship programs, and unexpected security outlays reflecting emerging security challenges from the Sahel region.
The IMF in its statement expressed concerns over take or pay agreements which has seen government spending more than US$200 million on power supplied by independent power producers it does not consume.
These losses in the energy sector, the Fund said, have spilled over to the budget and, together with the cost of the financial sector cleanup, have contributed to the rise of public debt, projected at about 63 percent by year end.
“While 2020 budget preparations are ongoing, the mission underlined the need to adopt an appropriately tight budget to limit financing needs, contain debt build-up, and support the external position. This will likely require both spending and revenue measures,” the IMF said.
The IMF urged government to avoid spending and financing operations outside the budget to enhance budget credibility and transparency.
“In the medium term, raising domestic revenues remains a priority to create fiscal space and buttress fiscal sustainability. The authorities should also forge ahead with the implementation of the Energy Sector Recovery Plan to limit contingent liabilities in the energy sector,” the Fund added.