The International Monetary Fund (IMF) has extended Ghana’s program with the Fund.
The extension will see Ghana end the program in April 2019 instead of April 2018.
President Akufo-Addo during his maiden encounter with senior journalists at the Flagstaff House recently stated that government will not extend the programme after it ends on December 2018.
However discussions between government officials and that of the fund in Washington yesterday led to an approval for an extension which was requested for by Ghana.
The disbursement of 94.2 million dollars was also approved making it the fourth disbursement under the extended credit facility program.
Total disbursements under the arrangement is about US$565.2 million with the remainder to be disbursed after other reviews.
The Board of the Fund also approved Ghana’s request for waivers of non-observance of performance criteria, and modification of one performance criterion; and the extension of the arrangement by one year.
Speaking to Citi Business News on the issue, the Chairman of Parliament’s Finance Committee, and Member of Parliament for New Juaben South, Dr. Mark Assibey-Yeboah explained that the first quarter of 2019 will present the IMF board an opportunity to assess the impact of the overall programme.
“You recall that immediately following the press conference, the Finance Ministry released a statement that what the president actually meant was that when the programme ends in 2018 there will be no further extension. The extension to my understanding is to end in December 2018, but the fund will need a period after that to assess the entire programme,” he said.
Dr. Assibey-Yeboah stated that the assessment will not be comprehensive if it is undertaken in the last quarter of 2018 since the budget cycle will end in December 2018.
Touching on freeze of public sector employment, Dr. Assibey-Yeboah observed that all the conditionalities including the freeze on public sector recruitment holds.
Meanwhile, the Fund has announced that completion of the fourth Extended Credit Facility review has enabled the disbursement of $94 million.
Ghana’s three year arrangement for US$918 million was approved on April 3, 2015.
It aims to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.
IMF’s Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal. They commended the corrective actions taken by the new government to bring the program back on track following the large fiscal slippages in 2016. However, 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.
They emphasized that strong implementation of program policies and reforms is critical to address the risks and secure macroeconomic stability. Directors also cautioned about program implementation risks given the revenue underperformance that occurred in the first half of the year, and urged the authorities to expeditiously adopt corrective measures, as needed, to preserve the program targets.
Directors emphasized the need for prudent fiscal adjustment and welcomed the targeted efforts being made to reverse the debt dynamics and reduce financing needs. They underscored that efforts are needed to address revenue shortfalls, while enforcing expenditure control measures to contain current spending and prevent the recurrence of domestic arrears accumulation.
Directors stressed that credible fiscal consolidation and implementation of the medium‑term debt management strategy will be key to further reducing domestic refinancing risks.
Directors welcomed the wide‑ranging reforms in revenue administration and public financial management, noting that these will be essential to make consolidation gains sustainable over the medium term and create fiscal space for priority spending programs. Addressing the shortcomings in spending controls will be essential to deliver lasting adjustment and anchor the credibility of government’s budget policies.
Directors emphasized the need to tackle energy sector inefficiencies, particularly improving the management of the state‑owned enterprises (SOEs). They also advised that ongoing debt restructuring efforts are helpful but are no substitute to stemming the SOEs’ financial losses.
Directors 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, which would benefit from efforts in the development of the foreign exchange market and continuation of BoG’s policy on zero financing of the government.
Directors commended the progress made in the strengthening the banking system, in particular through the approval of timebound recapitalization plans for undercapitalized banks and the recent resolution of two insolvent banks. They called for further steps to strengthen the supervisory and regulatory framework to address liquidity risks and rising levels of NPLs. Directors also encouraged action to further strengthen the AML/CFT framework.
Directors emphasized that wide‑ranging structural reforms remain important for achieving higher and inclusive growth. They highlighted that the reform effort should include further enhancing the business environment, improving infrastructure, including tackling the inefficiencies in the energy sector, and improving access to finance. It is expected that the next Article IV consultation with Ghana will take place in accordance with the Executive Board Decision on consultation cycles for members with Fund arrangement.
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By: Lawrence Segbefia/Pius Amihere Eduku/citibusinessnews.com/Ghana