The International Monetary Fund’s Resident Representative to Ghana, Dr. Albert Touna-Mama, defended his outfit’s mixed assessment of Ghana’s economy during the July 2021 Article IV consultations, which said Ghana’s economic outlook was improving.
Speaking on the Citi Breakfast Show, Dr. Touna-Mama, explained that the assessment that preceded the dire economic downturn in Ghana was based on projections.
Ghana has now turned to the IMF for support.
Such assessments are “made on a forward-looking basis, and we take into consideration the plans and policies that the authorities want to put in place to address whatever vulnerability,” he said.
The IMF had noted, among others, that Ghana’s monetary policy stance was “broadly appropriate.”
The IMF also welcomed the fiscal adjustments envisaged in the 2021 budget, while stressing that fiscal consolidation was needed to address debt sustainability and rollover risks.
Dr. Touna-Mama conceded that there had been drastic changes on the global scene.
“Last year there was still a debate globally on whether the amount of fiscal stimulus push by bigger economies, the US specifically, would generate inflation.”
Since then, he said that “it has become clear, inflation is a factor and will remain with us for a long time.”
He also noted red flags started to appear after the 2022 budget was revealed by the government.
“That budget was really scrutinized given the direction and whether Ghana would be able to address those vulnerabilities.”
After the 2022 budget statement, he recalled that Ghana’s Euro bond spread widened and “investors started requesting a higher premium in order to lend to Ghana.”
“This was a signal that the direction they were seeing in the budget was unfortunately not convincing for them,” Dr. Touna-Mama added.
This notwithstanding, he said the government was given a more blunt warning about the pitfalls ahead for Ghana’s economy last year.
While the Article IV consultation features diplomatic wording, Dr. Touna-Mama said, “the report that we [the IMF] leave with the top policymakers is very candid and very direct.”
Ghana’s economy has faced turbulent times in 2022, with inflation reaching a 19-year high of 29.8 percent.
The cedi has also been regarded as the worst performing currency against the dollar after depreciating over 20 percent in 2022.